Solar panels and the digital meter

There has been a lot of discussion lately about solar panels in Flanders. That's why CORE would like to outline the full story and help you assess the situation accurately.

On January 14, 2021, the Constitutional Court decided that owners of solar panels installed before 2021 could no longer rely on the principle of the reverse meter. Initially, these individuals were promised that they could continue using their reverse meter for 15 more years, which compensated them for the excess electricity they produced as the meter literally rolled back. The electricity injected back into the grid through this process puts an additional burden on the electricity network, which is why the elimination of the reverse meter aims to reward prosumers who impose less strain on the grid.

Even during the rollout of the new digital meter, this was initially possible, as the meter would virtually roll back. Already, 101,000 Flemish households with solar panels have such a digital meter. For these people, the annulment of the regulation concerning the reverse meter was certainly not good news, as they were hoping to continue benefiting from this principle for a long time. The installation of a digital meter makes the purchase of solar panels a lot less attractive for these individuals, or so it seems, at least.

Recently, owners of solar panels without a reverse meter were promised compensation by Minister of Energy Zuhal Demir, ranging from 1300 to 1700 euros for an average installation, totaling around 500 million euros. We believe this decision was rushed and can only be justified for owners with significantly oversized installations. For average households with an annual consumption of approximately 3500 kWh and an installation of 3 to 4 kWp, solar panels remain sufficiently profitable, and this money could have been better utilized for the development of new sustainable energy installations. However, the digital meter requires prosumers to adjust their behavior and align their consumption better with their energy production, with a minimum threshold of 30% self-consumption serving as a rule of thumb for a profitable installation with an acceptable payback period.

The graphs below show the Internal Rate of Return and payback period of an installation with a digital meter. They consider an average household with an annual electricity consumption of 3500 kWh and a corresponding solar panel installation of 3 kWp. The electricity price from the grid is set at 0.26 EUR/kWh, and the feed-in tariff is 0.04 EUR/kWh. The estimated investment cost for the installation is around 5000 EUR. Taking into account that such an installation produces 2700 kWh of solar energy annually, it can be determined that the owner gains a profit of 0.17 EUR/kWh through self-consumption, while a loss of 0.05 EUR/kWh is incurred during injection into the grid. Therefore, every kWh produced by this installation over 20 years has a cost of 0.09 EUR/kWh. 

Both graphs demonstrate that approximately 30% self-consumption is required for a profitable installation with the digital meter. In this case, the Internal Rate of Return (IRR) exceeds 2%, which is higher than what you would typically obtain from your bank account, and the payback period falls below 20 years, which is typically the lifespan of solar panels. Proper sizing is crucial to enable a higher percentage of self-consumption. The base load (standby power, refrigerators, etc.) already accounts for 15-20% self-consumption. For the remaining portion, you need to adjust your consumption behavior and prioritize using electric appliances, such as washing machines, predominantly during the daytime. Additional investments that can significantly increase self-consumption include installing a home battery, energy storage in a boiler or heat pump, and an electric vehicle.

In conclusion, since the abolishment of the reverse meter, solar panels have become slightly less profitable, and the payback period has been extended by a few years. Nevertheless, these installations continue to provide us with environmentally friendly electricity and remain economically advantageous for consumers, provided that proper sizing and a higher percentage of self-consumption are achieved. Ultimately, an increase in renewable energy is what matters most.