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Saturday, December 17, 2011

Grid tied PV cheaper than municipal electricity?

My article that appears on page 16 of the November Energize Magazine.

Under certain conditions grid tie PV with reverse feed is equal to or cheaper than City of Cape Town electricity, three years ahead of schedule! Reverse feed is still "not legal" according to the City of Cape Town. How can we make it legal? The reason for this amazing state of affairs is because the price of City of Cape Town electricity for homeowners has doubled, whilst the cost of grid tied PV has halved.

A 1200 kWh house needs 8 kW to take it off the grid, but with energy efficiency, one can reduce this to 3 kW. This brings the renewable energy price down below R1,60 per kWh. In a year's time if the City of Cape Town increases prices by 25% to R1,60 per kWh and assuming PV doesn't reduce, we are at parity including borrowing from one's bond at 10% per annum. This price is R1,60 per kWh including VAT!! If PV reduces to R20 per watt as we are expecting, then the PV price per kWh will be less than the City of Cape Town price per kWh.

A grid tie system is one where all the output from the photovoltaic (PV) panels, which convert sunlight into electricity, is fed via grid tie inverters into the grid. This is called "reverse feed." A private homeowner in Cape Town using 1200 kWh per month pays R1,28 per kWh including VAT for a total of R1536 per month. If one can sell excess electricity at the same rate of R1,28 per kWh, this is called "Net metering." In a grid tie with net metering scenario, the grid is equivalent to a battery. In five average sun hours the house can make enough electricity for the day. When the sun is down the grid supplies the electricity.

If a house uses 1200 kWh per month, then per day this is 39,5 kWh. Divide 1200 kWh by five for average sun hours per day and we get to 8 kW. If we are in Upington, we can divide by 8,2 and get a 5 kW system. In London, England, the average sun hours is 2,4 which means that an 8 kW system produces 42% of an 8 kW PV system in South Africa.

Germany installs half of the world's PV panels. If they have to install twice as many panels as we need to for the same kWh production and they have been doing this for 20 years, then what is our problem? For the purposes of this discussion, I'm also assuming that we will need to install the full 8 kW whereas in practice, one could reduce electricity demand by as much as 70%, with energy efficiency meaning that only 3 kW of PV might be required. This could reduce the R320 000 system to R180 000. In many situations there might only be enough space for between 2 and 4 kW. The installation will reduce the homeowner's electricity bill whilst at the same time reducing demand on the grid. The economies of scale that selling the PV system at R23 or even R30 per watt would need a minimum order of 60 kW which is 12 x 5 kW houses or 8 x 8 kW houses. The reward for someone being prepared to be part of a group is a much better costing.

The next area to consider is interest rates and repayment times. Considering that the equipment will last for at least 20 years with only the inverter needing replacement in 12 to 15 years, we can borrow money over 20 years. An 8 kW system at R23 per watt is R161 000. Borrowing R161 000 at 7% over 20 years is R1278 per month. At R25 per watt we get to R1583 per month which is almost exactly the same as what the person is paying for their electricity.

So if my numbers are right, and if we can install for R25 per watt, and if we can use capital at 7% over 20 years, then we are already at "grid parity" for homeowners in the City of Cape Town. At 10%, and at R25 per watt, the monthly cost is R1970 for R200 000. In one year, R1536 becomes R1920, so in one year, we are at parity for homeowners who can take money out of their bonds to pay for their own electricity generation.

There are numerous countries which allow reverse feed, some with net metering and some with feed-in tariffs. Considering that our electricity in South Africa is so expensive, we don't need feed-in tariffs for homeowners. But we do need our government to allow people to reverse feed the grid and to take full advantage of the total electricity that their PV panels produces. The problem with a battery only solution or a solution which doesn't allow reverse feed is that the system might only be 30% efficient, thus pushing the cost of the system up per kWh.

Eskom say they can't rely on the grid tie inverter disconnecting from the grid if the grid is shut down and that an electrician working on the power lines might get electrocuted. This problem was resolved in 1999 with two international standards that all good grid tie inverters adhere to. So what are we waiting for? Ke Nako. The time is right for homeowners to take responsibility for the own electricity provision, especially that they can now make their own electricity cheaper than the municipality can provide it.


  1. Since writing this article a few months ago, Nersa have published the "Standard Conditions for Embedded Generation within Municipal Boundaries" document, creating an environment so that Municipalities can allow less than 100kW Embedded Generation, with Reverse Feed, Net Metering AND Time of Use Tariffs. Please let me know if you would like a copy (david at mypowerstation.biz).

    1. Hi David, do you perhaps know whether NERSA has amended the Standard to date?

    2. Hi David. Would you kindly send me a copy to mkhizemw1234@gmail.com thank you.

  2. The NERSA document was published on 22nd September 2011.

  3. "Solar Power Now Cheaper than Generators in India" - AND cheaper than Current City of Cape Town electricity. See CleanTechnica Article at http://cleantechnica.com/2011/12/16/solar-power-in-india-is-now-cheaper-than-diesel/. SolaireDirect, which is also in South Africa, says it can provide Grid Tie electricity at 14 US cents per kwh, cheaper than 25 US cents cost of diesel, in India.

    14 US cents at R8.35 to the US$ is R1.17 per kWh and homeowners using 1,200 kWh per month already pay R1.29 per kWh incl VAT in Cape Town!!

    25 US cents at R8.35 is R2.09 which is similar to our benchmark South African diesel cost of R2.40 per kWh.

  4. Some more information about Grid Parity Calculations at http://cleantechnica.com/2012/01/12/solar-grid-parity-101

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