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Does It Pay to Install More Than 6 Kilowatts of Solar Panels?

Solar Panels

3 kW or 6.6 kW? Is Bigger Always Better?

Here’s a common question: how many solar panels should I install? The simple answer is: as many as you can!

Installing solar panels is one of the smartest long-term investments you can make. If you’ve got the roof space, fill it with solar panels.

3 kW or 6.6 kW?

Today, the cost of installing high-quality solar panels is far cheaper than in the past. So it makes sense to make the most out of the opportunity to get free electricity.

If you don’t consume all the electricity, you can export the excess to the power grid and make money from the solar power you generate.

In the past, the argument was in favour of optimising the size of your solar system in line with your electricity consumption. But the costs associated with installing a home solar system were much higher in those days.

If you have the space on your roof, fill it with solar panels to get the maximum benefit from your home solar system.

But there is still a trend that persists, even among some solar installers, favouring smaller 3-4 kW solar systems. Why is this?

Many people still think that if their electricity consumption is low, they have no need for a large capacity solar system for their home.

It sounds logical, right?

But the truth is that most homeowners interested in solar power will benefit financially in the long-term from installing a bigger home solar system.

TIP: In most cases, you’ll save more in the long term by installing a 6.6 kW solar system than paying less initially to install a smaller 3-4 kW solar system.

Remember It’s a Long-Term Energy Investment

Let’s look at the real costs over 10 years and compare the difference between a small solar system (3 kW) and a larger one (6.6 kW).

While 3 kW solar systems were pretty much the ‘norm’ not that long ago, it’s no longer the case.

There has been a continual movement towards installing bigger solar systems to reap the maximum benefits of solar energy in Australia.

Home solar systems with a capacity of 6.6 kW are far more common these days than smaller solar installations.

Why a 6.6 kW Solar System?

Because for most households in Australia on single-phase electricity, a 6.66 kW solar energy system is the maximum size permitted.

Another reason why a 6.6 kW solar system is good is that the average domestic roof can accommodate up to 20 solar panels. This will give a capacity of around 6.6 kW.

So, how is choosing a 6.6 kW solar system better than a 3 kW system?

There are various factors to consider in order to make a good comparison:

  • Cost of each solar system
  • The annual output of each system
  • Household consumption of solar electricity
  • Cost of electricity and FiT (Feed-in Tariff) rates
  • Maintenance costs of each system

Cost of Each Solar System

For this example, we’ll assume it costs $6,500 to install a 6.6 kW solar energy system. An average price of $1,000/kW is reasonable. This will get you a solar system consisting of good quality solar panels, solar inverter, and work done by an accredited solar installer.

Yes, the latest top-of-the-line solar panels and other components will cost more than $1,000/kW. But we’re looking at an ‘average’ case here.

Initial costs

Let’s clarify something important. A 6.6 kW solar system has more than 200% the capacity of a smaller 3 kW solar system. But it doesn’t cost 200% more!

Why? Certain cost elements don’t vary much with the size of a solar system.

  • Design and shipping costs
  • Sales costs
  • Cost of getting solar installation crew on-site

Yes, you’ll need more solar panels, some extra cabling and a larger solar inverter to install a bigger system.

But many of the underlying costs will be the same for a smaller system. So a simple ‘double the system size = double the system cost’ equation won’t work.

Household Electricity Consumption

You have two options regarding the solar electricity you generate:

  1. Consume it
  2. Export it to the power grid

In most cases, because of FiT rates, it’s better to use as much of the solar electricity in your home as you can.

You’ll get a payment or credit from your energy provider for exporting any electricity to the grid. This will help offset the cost of your regular electricity bills.

TIP: Using your stores of solar electricity will save you even more money than exporting it.

With a larger home solar system, you can self-consume more free electricity. Even if you don’t use 100% of the electricity you generate it’s still better than consuming 100% of the output of a smaller solar energy system.

And you can always export any unused electricity from a larger system.

TIP: You may think that your daytime electricity consumption is very low, so a large solar system doesn’t make much sense. But there are things you can do to counter this.

You can install timers to run your pool pump, washing machine, and other appliances during the day. This will maximise the solar-generated electricity you use.

Self-Consumption Figures

To compare our hypothetical 3 kW and 6.6 kW solar systems, we need to establish how much of the solar electricity a household consumes.

Based on average consumption data for NSW, we can say that households that have 2-4 kW systems consume an average of 45% of the solar electricity they generate.

Domestic users with larger solar systems (6-8 kW) consume an average of 30% of the solar electricity generated.

Solar Electricity Generation

According to PVWatts, a 3 kW solar system installed in Sydney generates about 4,000 kilowatt-hours of electricity annually.

Now, in theory, a 6.6 kW solar system provides more than 200% of the electricity generating capacity of a 3 kW solar system. But in reality, many environmental factors can affect overall output. So let’s assume it produces 200% of the output generated by the 3 kW solar system. That gives us 8,000 kilowatt-hours annually for the 6.6 kW solar system.

So now we have figures for the annual output of the two systems:

  • 3 kW system = 4,000 kWh
  • 6.6 kW system = 8,000 kWh

To compare the savings of both systems, we’ll use two examples:

  1. High FiT case
  2. Low FiT case

Cost of Electricity & Feed-In Tariff Rates

1. Let’s take NSW and Sydney as an example of a high FiT case.

The Solar Optimizer plan from Origin Energy gives users a FiT of 21%.

Most householders in the city can take advantage of such a plan. The plan has the following features:

  • Supply cost (daily) = 86 cents
  • Cost per kilowatt-hour = 30 cents
  • Feed-in Tariff = 21 cents

So what are the savings over 10 years?

It’s unlikely that the FiT rate available now will remain the same for the next 10 years. So we’ll assume a slightly more pessimistic figure of 15% to make our comparison.

Also, you may switch energy supplier during the next 10 years to get a better deal. But let’s work with the following figures:

  • Cost per kilowatt-hour = 30 cents
  • Feed-in Tariff = 15 cents

Cost of Maintenance & Repairs

We can’t forget that a solar system will need some maintenance over the 10 years. We assume you installed a good quality system, as we said at the beginning. So you shouldn’t face any serious repair expenses in the first 10 years.

Most solar panels and inverters come with a warranty that covers them for 10 years or at least 5 years in the case of inverters.

Maintenance should be carried out every 5 years. Based on industry standards, around $500 is typical to cover such maintenance.

The difference in cost for maintenance for a 3 kW and 6.6 kW system is negligible.

Savings for a 6.6 kW Solar System

We can calculate the following for 10 years:

  • Solar electricity generated = 80,000 kWh
  • Self-consumption of solar = 24,000 kWh
  • Electricity exported to grid = 56,000 kWh
  • Savings (self-consumption) = $7,200
  • Income (FiT) = $8,400
  • Maintenance = $500

So the savings will be:

$7,200 + $8,400 – $500 = $15,100

We need to subtract the initial cost of installation ($6,500) which gives us a total of $8,600.

And the system will continue to generate free solar electricity for many more years.

Savings for a 3 kW Solar System

We can calculate the following for 10 years:

  • Solar electricity generated = 40,000 kWh
  • Self-consumption of solar = 18,000 kWh
  • Electricity exported to grid = 22,000 kWh
  • Savings (self-consumption) = $5,400
  • Income (FiT) = $3,300
  • Maintenance = $500

And the savings will be:

$5,400 + $3,300 – $500 = $8,200

The savings come to $8,200 at the end of 10 years. But it cost only $3,000 to install it. So there is an initial saving of $3,500 to consider when compared to the 6.6 kW solar system.

So we can calculate the total savings as:

$8,200 + $3,500 – $3,000 = $8,700

At this point, it seems as though the two systems are almost equal in the amount of savings they offer. The difference becomes more obvious when you extrapolate the calculations over 20 years.

Remember that solar is a long-term investment.

After 20 years, a 3 kW solar system will produce overall savings of $16,400.

Over the same period, a 6.6 kW system will produce overall savings of $23,200.

Conclusion: it pays to go bigger in the long term. And you’ll get even more benefit if you increase your self-consumption. Maximising self-consumption should always be the first goal, whether you have a small or big solar system.

TIP: Does your house operate on single-phase electricity? You might be able to install a solar system larger than 6.6 kW if the amount of electricity you export to the grid is limited. You can benefit from this the most if you have high daytime electricity consumption.

2. Let’s now use WA as an example of a low FiT case.

The majority of households can only access a FiT rate of about 7.0 cents.

Using the same assumptions we used in the previous calculations, we can calculate the savings for each system as follows.

A 3 kW solar system will produce:

Savings (self-consumption) = $5,400
Income (FiT) = $1,540
Maintenance = $500

Therefore the savings are:

$5,400 + $1,540 – $500 = 6,440 (less installation cost $3,000) = $3,440

And a 6.6 kW system will produce:

Savings (self consumption) = $7,200
Income (FiT) = $3,920
Maintenance = $500

Therefore the savings are:

$7,200 + $3,920 – $500 = $10,620 (less installation cost $6,500) = $4,120

You can see how a low FiT affects the overall savings over 10 years. A smaller, cheaper solar system seems to offer more benefit when you add in the initial amount saved on installation. The smaller system comes out the winner.

TIP: It’s still worth going big if you can consume more than the average 30% of the solar electricity your system generates. You can increase self-consumption by using solar battery storage. This will give you more benefit than exporting excess electricity to the grid. But it also has an additional initial cost.

It’s unlikely that installing a home solar system larger than 6.6 kW in WA will be worthwhile.

There is no FiT for larger systems and you probably won’t consume enough of the solar-generated electricity to benefit from the extra capacity.

If it’s a commercial installation, there is also a case to be made for bigger is better.

Final Thoughts

Simply crunching the numbers can sometimes detract from other important questions you should consider.

1. Your Needs

For example, do you anticipate your electricity consumption changing significantly in the next 10 years and beyond? Are you about to retire and spend more time at home? Will you be starting a family soon?

In these cases you will probably benefit from increased self-consumption of solar electricity – so go for the biggest solar energy system that is feasible.

If your children are about to leave home and you’ll become empty-nesters, your electricity consumption will likely decrease. So go for a system that you can optimise for your predicted future electricity consumption. A smaller system may be the best bet in this case.

2. Other Changes

Recent changes in legislation regarding utility-scale solar batteries will eventually affect FiT rates in some areas.

Domestic solar battery storage technology is also becoming less expensive. In the future, this will become even more feasible in terms of optimising a home solar system.

3. Your Attitude to Risk

Some people try to compare investing in solar with investing in the stock market or other similar investment. This is an attempt to justify the initial expense. But it’s almost impossible to do accurately.

We live in uncertain times, and who knows what the future might bring. Stock markets can crash, as we’ve seen recently. An energy crisis could push the cost of electricity even higher.

In contrast, solar power is a very low risk as an investment. And you can be fairly sure that electricity prices will continue to increase, as they have historically. So having access to free solar electricity is just common sense.

Bigger is not always automatically better. But in general, if you have the cash to invest in a 6.6 kW home solar system, go for it.

You’ll save more in the long run, it’s a low-risk investment, and it’s good for the environment.