Solar panels are always a good investment for a household

Below is a statement from the Finnish Solar Energy Association regarding the transition to quarter-hourly billing and the changes it causes in solar power systems.

Original publication
https://sary.fi/ajankohtaista/uutiset/aurinkopeanilet-ovat-aina-hyvae-sijoitus-kotitaloudelle

In recent days, there has been a lively discussion about a change that, according to an article in Helsingin Sanomat, threatens to destroy the benefits of the panels. The change is a Europe-wide transition from a one-hour balancing period in the electricity market to a 15-minute balancing or metering period.

In the electricity market, the price of electricity is always determined on the electricity exchange the previous day for the following 24 hours. This is exchange-traded electricity, the price of which varies depending on supply and demand – sometimes significantly. Industry uses exchange-traded electricity, but electricity sellers also offer consumers fixed-price contracts. In this case, the seller bears the risk of price fluctuations – and receives the benefit of successful prediction.

A brief explanation of why the measurement period changes

The energy system is undergoing a transformation. The growth of weather-dependent electricity generation is strong, while the volume of traditional, controllable generation is decreasing. The electricity market model must be updated to be compatible with the new production structure, so that the balancing of energy production and consumption can work reliably, guided by market prices, and so that energy and climate goals can be achieved cost-effectively, without forgetting the supply of affordable electricity.

This is why Finland and the whole of Europe are moving towards a shorter balance settlement period and towards a more real-time electricity market. At this stage, the price of electricity is the same every quarter of an hour, so for now the discussion about the advantages or disadvantages of a 15-minute metering period is purely academic. Fifteen-minute pricing will be moved to later, when the price of balancing electricity is determined on a 15-minute basis and intraday cross-border trading in the Nordic countries moves to a 15-minute resolution.

For electricity producers and consumers, the move to 15-minute balance settlement and trading is a shift towards a market model that encourages flexibility. The shortening of the trading period of the marketplaces allows for more accurate optimization of production and consumption closer to the moment of use. Quarterly balance creates incentives to plan consumption and production with a 15-minute resolution, which may require changes to current operations.

Electricity is produced and consumed in a variable manner

Electricity is a commodity that most of us need to have. Consumption can be optimized and savings can be made with more energy-efficient solutions, but hardly anyone can do without electricity altogether.

You can invest in a solar power system on the principle that all the energy it produces is consumed in your own use and reduces the cost of purchased energy. This gives the best return on investment, because in addition to the price of energy, the costs of transmission, electricity tax and VAT are reduced.

The other extreme is to purchase a large system, with all of the production sold to the grid. At current prices for solar PV systems, this is also starting to be justified if the system is quite large. In either case, the length of the measurement period is irrelevant in both of these options.

Because the consumption of a property varies greatly from moment to moment – ​​and so does the yield of solar panels – there is sometimes a surplus and sometimes a need to buy energy. Flexibility in consumption is then the key to achieving the highest possible self-sufficiency, and in many cases it is very easy to implement.

For example, electric water heating or heating of a property can be easily controlled to occur primarily when the sun is shining. On the other hand, it is also worth monitoring the price of electricity on the exchange, although the majority of consumers still use fixed-price electricity. However, the exchange price may at some point be so high that it is better to sell the solar yield than to use it yourself.

In the future, a fifteen-minute measurement period will provide even better opportunities for such optimization. The keyword is flexibility, and the change in the system may give a flexible operator even better opportunities for profitable optimization, compared to the old one-hour measurement period.

Practical calculations on the impact of the measurement period

The impact of the measurement period on the profitability of solar power has not been studied very comprehensively. An article in Helsingin Sanomat on March 4, 2024 presented a well-caricatured example of the operating costs of a hot water heater with a measurement period of one hour or fifteen minutes. However, the reality is much more complicated.

It may be worth selling solar power during the day when prices are high and the storage tank heats at night with cheap electricity. Or the storage tank can be controlled based on sunshine and the price of electricity on the exchange. In addition, the property often has other consumption items besides the hot water tank.

A few years ago, Jero Ahola, a professor of energy efficiency at LUT University, measured and calculated the significance of netting in a real property equipped with a 20 kilowatt (kWp) solar power plant. The starting point was the old phase metering situation, where no netting occurred at all, compared to hourly netting.

The property’s total consumption during 2017 was 7,457.47 kWh and the system’s output was 16,584.03 kWh. 2,607.78 kWh was used for own use, 4,834.85 kWh of electricity was purchased and 13,976.25 kWh was sold, as no netting was done. In the hourly savings situation, the need for purchased electricity decreased by 200.36 kWh for the entire year.

However, instead of the measurement period, the greatest significance was the netting between the output and consumption of the different phases of the electricity network, because energy is always consumed asymmetrically in a property to some extent. When switching to quarterly metering, part of the increased own consumption noted above will, according to Ahola’s estimate, be used as electricity for sale. If it is half, then the amount is 100 kWh/year. In monetary terms, we are talking about an amount of €10/year, if the difference between the purchase and sale prices is 10 €snt/kWh. The amount does not destroy the benefit generated by solar panels.

An hourly measurement period would therefore be slightly more profitable for the consumer than a quarter-hour balance. On the other hand, daily netting would be even more profitable and annual netting even better. However, netting for small producers that is longer than the electricity market trading period is unlikely, because that would be a subsidy. Of course, nothing prevents producers from acquiring their own electricity storage, which may be profitable in the future.

Why should consumers buy solar panels?

Solar panels in Finland produce electricity efficiently from March to September. The highest yield is usually in May, and April is often comparable to the summer months. Cool air and reflection from snowdrifts improve yield.

An article in Helsingin Sanomat claimed that the panels’ output would completely stop when the sun goes into the clouds. This is not entirely true, as diffuse radiation filtering through clouds easily provides a 20% output in relation to the panels’ nominal output.

The main motive for purchasing solar panels is probably economic, i.e. a solar power plant reduces the electricity bill. Another reason is environmental friendliness. Of course, almost 90% of electricity in Finland is produced emission-free, but the share of wood chips and other biomass is significant and burning must be eliminated. The share of imported fuels is even greater than bioenergy.

A solar power plant also increases the value of the property and shows an informed owner. The impact on the value of the property may be greater than the value of the power plant investment. The investment is also a good long-term investment, because a solar power plant is almost maintenance-free and its lifespan is decades. Many of the first panels, manufactured in the 1950s, still produce electricity without problems.

The high energy prices of 2022 strongly increased the demand for solar power plants, which also affected their price. Since last summer, prices have fallen significantly, and at the same time, technological developments have brought more efficient panels to the market. Now is a buyer’s market and the right time to invest in solar energy. The sun is the world’s most important – almost the only – source of energy.

information@sary.fi

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Finnish Solar Energy Association

PO Box 3 06151 Porvoo