9th December 2023
Rosemary Grundy is a systems analyst who meticulously calculated when she will break-even on her renewable energy investment in real time, using real usage, electricity and petrol prices.
In December 2021 my family moved into a newly built house on the Sunshine Coast in Queensland. For 21 months I have been monitoring our energy use to calculate a break-even analysis for my home’s investment in renewable energy. A break-even analysis looks at the true costs of the investment against the returns the investment yields.
I was pretty relaxed about this investment because it was highly achievable for us and I was confident it was the right thing to do. But seeing my friends’ raised eyebrows, and comments that “it’ll take 40 years to pay for itself”, made me interested in when it would break-even.
As I was retiring and we were selling our old house, the timing was good – I was able to pay for the solar set-up and EVs out of proceeds of the sale of my old home and money accessed from my super. This means that the cost of finance is not a feature of my analysis. Likewise I didn’t see the point of factoring in any opportunity cost because the purpose of my renewables transition is to do my bit to reduce carbon emissions, rendering the opportunity cost incalculable.
My analysis demonstrates that it can be affordable to make quite a significant private investment in residential renewable energy, namely solar panels, batteries, and electric vehicles.
The Headlines
This graph shows that accumulated over less than 9 years, the savings on petrol and grid electricity completely offset the initial capital outlay for the equipment. Not a quick break-even admittedly, but not beyond the bounds of reason if the cost of inaction is correctly understood.
Cumulative Savings
Savings from petrol-not-bought and grid-power-not-used in 2022 were just over $10,600. Annual Savings as a percentage of the capital outlay (aka the Return On Investment or ‘ROI’) so far is 9.4%.
Our set-up is only 21 months old, so the break-even analysis at this point is mostly forecast. Also, the equipment was acquired in steps and was only completed in late February 2023, meaning that the capacity to reduce costs was not as great at the start as it is now. To me this means the savings thus far are probably less than what they will be going forward.
At this early stage, forecast modelling based on the data available shows a break-even around 8 years.
New Build – all electric appliances
The investment in renewable energy resources was made in the context of a new build. The renewable energy resources we purchased were:
· 41 x 350watt PVC’s (14KwHr capacity)
· 10 x BYD Home Battery Bricks (28KwHr capacity)
· Tesla Rapid Home Charger
· Tesla Model 3 and Tesla Model Y
The fast home charger allows us to adjust the rate of charging so that we don’t use the grid to charge the car, unless we choose to. It also allows me to charge at any rate between 5Amp (very slow) and 16Amp (quite quick).
Electric appliances excluded from the analysis
The acquisition and installation costs of a number of electric appliances are not included in the break-even analysis because we had to purchase them anyway, and they were not materially more expensive than the gas alternative. We also weren’t interested in gas appliances, regardless of our renewables transition.
These were: the hot water system, reverse cycle air conditioner, oven, induction cook top, bathroom heater/exhaust fans, pool chlorinator pump, pool heat pump, washing machine, clothes dryer.
Energy efficiency features of the build
In addition to investing in renewable energy resources we also carried out the following to ensure we maximised the energy efficiency of the house and appliances:
· abundant insulation (internal and external walls, ceilings, roof and under floors)
· 3 meter deep eaves over verandas on the north aspect
· well-sealed doors and windows
· virtually no structural air leaks
· a slatted driveway to reduce the heat sink effect of the western sun on a massive concrete pad
· we preserved all the trees on the property, keeping radiant heat from the road to a minimum
· and we arranged the windows to maximise cross breezes.
Maximum Energy production from the sun
My system uses Fronius inverters. The Fronius equipment comes with a free app to monitor the power production and consumption. This app is central to being able to manage grid power consumption in real time.
In optimal conditions the system can generate 11Kws. The combination of the home battery and the car batteries means we don’t send very much to the grid.
Between the cars and the home battery, we never have any issues with the feed in limit. At 5c per KwHr Feed In Tarriff against 31c per KwHr true cost of power, that’s a good thing.
The Acquisition Process
The renewable equipment was purchased in a series of tranches because some items like the EVs were not initially available. Also because it was a new house and a new lifestyle, I was not able to anticipate our electricity needs and under-specced the set up.
With the benefit of hindsight, the initial installation could have been much more closely matched to actual need by doing a quick analysis of current power use in my previous home. This would have reduced some of the installation costs, however doing the process over 2½ years did make it easier to fund the acquisition of equipment.
New Electric Vehicles Capital Cost
We purchased Electric Vehicles to replace our ICE Cars. This was done at a point when we were going to buy new cars anyway given our vehicles were 8 and 9 years old.
Therefore, I’ve included the cost of the EVs as a Marginal Cost relative to the cost of the internal combustion engine (ICE) cars we might otherwise have purchased. That is to say, we factored the extra we had to pay for the EVs as a cost of the transition to renewables, not the whole cost of the cars.
The only case in which factoring the full cost of the EVs would be appropriate is if you were never going to replace your current ICE vehicle.
Marginal Cost of Teslas
EVs famously have significantly lower maintenance costs than ICE vehicles. Ours are both quite new (21 months and 5months), so we have had no maintenance costs on the vehicles so far.
I modelled some estimates of the costs of services and repairs to our previous ICE Vehicles and the expected costs for the new EVs and found a saving of around $1500 per vehicle per year. But have only factored for $500 per car per year.
Break-even Analysis
To determine the break-even point of our investment I first tallied all the costs and then worked out how much the investment will save each year (aka ‘the annual return’). I then divided the total cost by the annual savings to get the number of years to break-even.
Often in break-even analyses, the return is estimated using a range of assumptions because the analysis is done at the start of the investment when only assumptions about the return can be made. In this analysis the return is being calculated in real time based on real usage, real electricity prices, and real petrol prices.
As previously mentioned, the costs were invested over the period November 2020 to February 2023. However, we didn’t use the assets until 1 December 2021 when we were able to move into the property. So the returns have been analysed from December 2021.
The total costs of the investment came to $101,070. This represents all the items I bought because I wanted to transition to renewables in the new home.
The return on the investment is the difference between what I would have spent had I continued using fossil fuels and what I have actually spent on electricity that was not from the PVC’s and battery. Namely:
· electricity from the grid used at home when there was insufficient sunshine or battery,
· plus electricity from superchargers used when on longer road trips.
True cost of grid power
Having installed the PVCs and batteries, the objective is to not use the grid at all. However, for me the additional cost of extra PVCs and batteries to achieve complete grid independence wasn’t possible. Therefore, the cost of any grid consumption has to be calculated and off-set against the estimates of what the petrol and grid power costs would have been had I not moved to the PVC’s and battery.
The sources of on-going grid consumption are:
· grid power used by the house,
· grid power used when charging the cars at home and
· grid power used when charging the cars at a super charger.
The dollar cost of using a super charger is easily identified by looking at the credit card statement for the card used to pay for the supercharging.
For other uses of grid power, I calculate the cost. To do this I need to know the true cost of the grid power per Kilowatt hour and how much of the home consumption of grid power is used to charge the cars versus how much is used to run the house.
The cost of power is often quoted as something like 22 cents per kilowatt hour. However, this is the cost per kilowatt hour for the electricity consumed and ignores the other costs in the power which are charged on a daily basis. For my break-even analysis I quickly realised I needed to calculate the true cost of power per kilowatt hour i.e. the sum of the usage charges and the charges that are levied on a daily basis (supply and solar metering), divided by the total kilowatt hours actually used.
Because the electricity bill never lines up with calendar months, I need to do two calculations:
· the cost of grid power actually used in the month and
· the alternative cost of power if I didn’t have any PVC’s, Battery or EV’s.
I found that it’s important to use the right $/KwHr for each calculation.
Cost of Grid Power Actually Used
When calculating the cost of the grid actually used by the cars and the house, I use the total grid power actually used as shown on the Fronius app, in combination with the fees shown on the power bill. Consumption based charges are multiplied by the kilowatts actually consumed from the grid. Daily charges are multiplied by the number of days in the month. The two totals are summed and divided by the kilowatts actually used from the grid to get $/KwHr.
Cost of Grid Power that would have been used
To calculate what the total power used to run the house would have cost if we didn’t have a solar power system, I use the fees from the power bill and the total power consumed, as shown on the Fronius App. Consumption based charges are multiplied by the total power consumed by the house in the month, regardless of whether the power came from the grid or the sun.
The daily charges are multiplied by the number of days in the month. The two totals are summed and divided by the total kilowatts consumed. This gives me a $/KwHr for total consumption that doesn’t overstate the cost of the per diem charges.
I set up the fees and charges in a table, below, so that the total cost per kilowatt hour is easily calculated. Each quarter when the electricity bill comes in, I update the data in the break-even analysis so that the actual electricity cost for each month is applied to the power used for the cars and the house. Once set up in the spreadsheet, identifying the right price to link to each month is fairly straightforward.
Car Power Costs compared to Petrol
The cost of super charging is easily obtained from the statement for the credit card used to pay for the supercharging.
To split the total grid power used each day into Used-for-house and Used-for-cars, I use data from the Fronius App to record the total power fed into the grid and the total power used from the grid. This provides the net grid power used for the day.
If the net grid power is negative then zero grid power was used by the cars. For example:
If the net grid power is positive then I need to determine how much of the grid usage was for the cars. For example:
If the net grid power consumed is positive, I look at the power usage on the Fronius App and see if any grid power was used during the time the cars were being charged and assign that to the cars’ grid power usage.
For example on September 8th we used a tiny bit of grid power in the middle of the day. This was not when the cars were being charged.
I enter grid usage into a table every day, both the power sent to the grid and power used from the grid. From the Tesla App I obtain the Kw’s used to charge the cars. From this I can determine what, if any, grid power was used for the cars and by deduction, what was used for the house.
Once I’ve determined the grid power consumption of the car, I multiply this by the true cost of actual grid electricity. This gives me the cost of grid power used for the cars. This cost is then compared to the equivalent cost of petrol, had we been driving ICE vehicles.
Determining the Equivalent Cost of Petrol
To calculate how much we would have paid for petrol, I first determined the litres per km for the ICE vehicles we would have purchased if we hadn’t purchased EVs. This information is readily available for most makes of car. In this analysis the cars we would have purchased have a published litres/100km of 12 litres and 11 litres. These values equate to 0.12L per 1Km and 0.11L per 1km.
I then calculate how many kilometres we travelled between each charging event and what the price of petrol is on the day of each charging event.
From there it is simple maths to multiply the kilometres travelled by the litres per 1km to get total petrol litres that the alternative ICE vehicle would have used. Then I multiply the total litres by the current cost of petrol. Petrol prices are easily available from a couple of different web sites (Petrol Spy and Fuel.io).
The calculation for the savings from EVs
Once I calculate the cost of charging the EV’s and the equivalent cost of petrol for the distances travelled, I am ready to calculate the savings from using an EV instead of an ICE vehicle:
The data for this calculation is accumulated and calculated on a daily basis but to give an indication for the whole year the daily values summed for 2022 are:
House Power Costs compared to what a Grid Only set-up would incur
I calculate the kilowatt hours of grid power used to run the house when I calculate the grid to cars. Total kilowatts from grid, less grid to cars = grid power used by house. Then, I calculate the total charge that the energy provider would have raised if all the power for the house was from the grid.
All the data needed for calculating the true cents per kilowatt hour are available on the electricity bill.
The cost actual and alternative power use for the house is calculated monthly and summed for the year. In 2022 this gave savings on power not used equal to $2,407.
For example, May 2023 was a very wet month!
A Basic Break-Even Calculation
Summing up the monthly calculations for all of calendar year 2022 yielded:
Assuming this saving is achieved every year, the break-even on the $101,070 investment is:
Forecasting the Break-even
As mentioned, I didn’t install the full renewable set-up all at once. Additional elements were added in June 2022, August 2022 and February 2023. This has increased the savings because I have more collection and storage and we have another EV. As a result the break-even is now running at 8.2 years.
In the break-even workbook the actual savings are accumulated for past months and the most recent saving recorded for a given month is passed forward into that month in future years. This ensures the steadily increasing savings as extra components are added and also the seasonality of grid usage is reflected in the forecast.
The extra PVCs and batteries installed since June 2022 have resulted in less grid use in 2023:
Grid use is down because extra PVC’s and Battery were installed in June and August 2022.
The following graph demonstrates that as the benefits of the later additions are bedded in, the savings forecast in future months will increase. In this way the workbook uses the most accurate savings values to forecast the expected savings in future years. This table shows the current actual and modelled savings.
Actual and Modelled Saving
Investing in the future
I personally don’t see that moving off fossil fuels is primarily a financial or economic decision. I don’t advocate that people make purchases they can’t afford but the imperative of everyone doing everything all at once right now to cut greenhouse gas emissions, means that those of us who can manage to get our homes off fossil fuels should act now.
My data is limited to only 21 months and does not yet include a full year of the entire solar power set-up. The current break-even is therefore expected to improve as more savings are achieved with the full installation.
There will always be a shortfall in the colder wetter months and with climate change this is difficult to predict. Under the La Nina’s of 2020, 2021 and 2022 we had very wet and overcast summers. In 2023 we had an unusually wet winter in our locality. Nevertheless, we have achieved significant savings compared to staying fully on grid and on petrol.
I understand that not everyone is in a position to emulate our example but equally I believe there are many people in a similar or better financial position who are holding off because of unhelpful messaging around the feasibility of making a big step away from fossil fuels. I hope that this little study helps people see the proposition in a new light.
Rosemary Grundy is a retired systems analyst. You can also read Rosemary’s background about break-even analyses here.
