Sunlight is the primary factor that determines how many units your solar power system is going to produce.
More sunlight means your system is going to produce more units.
“Consider two 5 kW system installed in 2 different locations. The location with more amount of sunlight is going to produce more units.”
It can be implied that you’re going to save more if your location receives a good amount of sunlight.
Well, this is one side of the same coin.
Another side is the grid price and its growth rate (escalation) over the period.
The Grid Price
The high grid price in your region indicates that you’re going to save more when you generate the same unit from your solar power system.
Let us understand it more clearly with the help of an example:
Assuming, we have 2 regions with different electricity prices as:
It is clear that the person living in Region B is going to save 1 cent extra than that of person living in Region A for every unit generated from solar power.
Finding 1: The high electricity price means more solar saving through your solar power system.
Growth Rate (Escalation) in the Electricity Price
Let's consider how the growth in electricity price affects the solar savings.
Let me extend the previous example for you:
If I plot the graph of future saving on the basis of the above rates for their respective regions, it will look something like as shown below:
You can see that the grid price of Region A will overtake the grid price of Region 2 in the 4th year.
Thereafter, the gap will keep widening and your solar saving from Region A will become more than that of Region B.
in year 8, the total solar savings from Region A will overtake than that of Region B.
The Region A, despite having lower electricity price becomes a place of more solar savings because of its higher escalation (electricity growth rate) of 5% than that of Region B (2%).
Finding 2: The high growth rate is favorable and it increases your solar savings.
The Peak Sun Hours (PSH)
Now, let's include all the 3 factors that are Electricity Price, its growth rate, and the Peak Sun Hours (PSH) in our ongoing example and see how they are going to affect your solar savings.
Here are the variables:
A same 5 kW system in the above 2 regions will produce different units due to the difference in Peak Sun Hours values.
Similarly, the solar savings would be different due to the difference in the electricity prices of the 2 regions.
Please check out the above table,
The Region A despite having lower grid price is able to save more due to higher PSH than that in Region B.
Finding 3: Good Sunlight leads to more solar savings.
The Feasibility Score card
If someone asks me to draw a feasibility score card of the solar savings on the basis of the above 3 factors that are Electricity Price, its growth rate, and the Peak Sun Hours
then I'll design something like as follows:
Peak sun Hours: Anything above 4 is considered good. I mean, its going to save you good amount of money. If your region receives PSH > 4 then take it as '1' otherwise '0'.
Electricity Price: If grid price in your region is above the country average then take it '1' otherwise take '0'
I'll take growth rate as '1'in my design chart if its value is above country average otherwise '0'.
(*Your solar savings depend on other factors also like cost of the system, its maintenance, the degradation of the solar panels, and the time value of money.
But I'm taking the impact of the 3 factors only to make the things easier to understand.)
These 3 factors give me 8 possibilities and these are as follows:
let's understand this feasibility score card with an example:
The USA 12 months electricity price is 12.81 cents/unit
and the average annual growth rate is 2.59%.
You're living in California where:
So, everything is '1', yours is Case-1 and the feasibility score is 100%.
It means that you're going to save the most with solar.
Try Solar Feasibility Spreadsheet to design and knowing the financial feasibility of the solar power system in minutes.
This simple score card gives you an idea about the amount of solar savings based on the 3 factors discussed above.