Solar panels and the digital meter
CORE outlines the economic situation in 2021
There has been a lot of talk lately about solar panels in Flanders. CORE is therefore pleased to outline the full story to help you assess the situation correctly.
On January 14, 2021, the Constitutional Court ruled that owners of solar panels installed before 2021 could no longer invoke the principle of the reversing counter. Initially, however, these people had been promised that they could continue to use their reversing counter for 15 years, during which time they would be compensated for the excess electricity they produced since this counter literally reverses. The electricity that this puts on the grid is an additional burden on the power grid, so they now want to reward prosumers who put less strain on the grid with this elimination.
This also remained possible initially during the rollout of the new digital meter, with this meter virtually turning back. Already 101,000 Flemish households with solar panels have such a digital meter. For these people, the annulment of the regulations on the reversing meter was obviously not nice news; they had hoped to rely on this principle for a long time to come. The installation of a digital meter makes the purchase of solar panels a lot less interesting for these people, or at least that is how it seems.
For owners of solar panels without a reversing counter, compensation was recently promised by Energy Minister Zuhal Demir between 1300 and 1700 euros for an average installation, amounting to about 500 million euros. A very hasty decision that can only be justified for owners with highly over-dimensioned installations in our opinion. For average households with an annual consumption of around 3,500 kWh with an installation of 3 to 4 kWp, solar panels remain sufficiently profitable and this money could be put to more useful use in developing new renewable energy installations. However, the digital meter does ensure that prosumers have to adjust their behavior to better match their consumption with their energy production, whereby a threshold of at least 30% self-consumption can serve as a rule of thumb for a profitable installation with acceptable payback.
The graphs below show the 'Internal Rate of Return' and payback time of an installation with a digital meter. An average family with an annual electric consumption of 3500 kWh and an accompanying solar panel installation of 3kWp were considered. The electricity price from the grid is fixed at 0.26 EUR/kWh and the injection fee is 0.04 EUR/kWh. The investment cost for the installation is estimated at about 5000 EUR. Taking into account that such installation produces 2700 kWh of solar energy annually, it can be determined that the owner obtains 0.17 EUR/kWh profit during self-consumption while 0.05 EUR/kWh loss is made during injection into the grid. Consequently, every kWh produced by this installation for 20 years has a cost of 0.09 EUR/kWh.
Both graphs show that about 30% self-consumption is required for a cost-effective installation with the digital meter. The IRR in this case rises above 2% - more than is obtained in your bank account - and also the payback time drops below 20 years, usually the lifetime of solar panels. In the first place, correct dimensioning is therefore crucial to enable an increased percentage of self-consumption. Here the base load (standby consumption, refrigerators, etc.) already provides 15-20% self-consumption. For the remaining part, you have to take care of yourself by adjusting your consumption behavior accordingly and switching on electrical appliances, such as washing machines, mostly during the day. Additional investments that can drastically increase self-consumption include the installation of a home battery, energy storage in a boiler or heat pump and an electric car.
In short, we can conclude that solar panels have been slightly less profitable since the abolition of the reversing counter and that the payback period has also been extended by a few years. Nevertheless, these installations have been supplying us with environmentally friendly power all this time, and they also remain economically advantageous for the consumer, provided that they are correctly sized and an increased percentage of self-consumption is achieved. Surely an increase in renewable energy is what ultimately prevails?
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