It Is Profitable to Bet on The Energy Self-Sufficiency at Home?

The electricity sector in Spain is the most regulated industry that exists now and there is a difficult balance between the needs of electricity consumption, electricity generation, the distribution of costs and the final price that consumers pay for the electricity bill.

On this line, with the explosion of the generation of electricity from renewable energy sources, the end user opens a very important door for reduce our domestic electricity bill. This is the energy self-sufficiency through the generation of own electricity from places photovoltaic or wind generators installed in our home. The problem? The industry Ministry led by Minister Soria, poses a reform of the sector of the self-generation of energy that will penalize consumers that it will generate their own electricity.

The current scenario of electric consumption

Today, any consumer can assemble their own domestic installation of electrical energy, consume that electricity and dump to the general network the surplus not consumed electricity. For purposes of the consumer, and simplifying the process, has a bidirectional counter, which adds poured electricity and subtracts the consumed and presents a final balance which widely reduces the overall cost of our electricity bill called net balance.

In return, the utilities, they charge a toll for the electricity producers pouring to the electric network, toll which is justified by stability in the global burden of the power supply and the needs which has the own general grid to transport electricity being consumed at each time. This toll charged, referred to as term of power, that is a monthly cost that pay all electrical installations which the company guarantees maximum electricity consumption that we can perform in terms of time. For example, a domestic installation usually have a term of 5 power, 5KWh.

Annually, a global settlement of the electricity consumed is made and if the net balance of consumption we were favourable, the power company will pay us the kilowatts poured to the net price of producer (around 50% of the cost we pay for KW).

The current economic scenario of electricity self-generation

Photovoltaic technology is a technology advances by leaps and whose prices are falling every day that passes at the expense of improving the performance of the plates. To evaluate the economic scenario, we can take an average consumption per household of 3,500 KWh per year, which gives a cost in term of annual energy that 685 euros. The term of power, have to pay the electric company, since we are still connected to the network and its cost is around 94 euros per year.

Currently, self-generation photovoltaic installations give a performance of 1. 400KWh/KWp(*) as average in Spain, although conditioned by areas. That means that we need to place some 2, 5KWp in order to cover the consumption of 3,500 KWh per year means that we consume during a year.

The total cost a self-generation of electricity installation, It ranges from the 6,000 to 9,000 euros, so taking an average cost of 7,500 euros and taking into account inflation and financial costs, we need some 13/14 years to fully amortize the investment and our cost of electricity tends to zero for the rest of installation life.

Calculate the repayment term is simple as we can see in the top box. We set the return as income which will get our installation of electric energy with the estimated saving in power consumption that we pay. Subtract the cost financial or cost of opportunity that we would lose if we pay the investment cash and assume a linear capital amortization schedule in 10 years. With an inflation of 2.5% and a cost financial/opportunity cost of 7.5% took 13 years to pay off completely energy self installation.

The new scenario of electric autobastecimiento, more expensive electricity bill

The decree which is posed to approve the Ministry of economy has two fundamental changes regarding the current scenario:

  • It eliminates payment for excess electricity production for producers.
  • It increases the cost of connection to the mains autoproducers, around 27%. In addition, the Ministry fixed the ability to alter this percentage upward or downward through revisions to modulate the impact of subsistence.

The economic effect for the producer makes a projection in the years of depreciation that can increase from 3 to 7 years more, so fully amortize a photovoltaic production plant we can shoot calmly to the fork of the 17 to 20 age. Even with this scenario, own electricity production, would remain profitable, given that the average life of these systems of energy production are around age 30 as a minimum.

To calculate the new picture of amortization, just that extra cost by tolls that will have to withstand electricity producers domestic with a rate of increase of 30% over the current rate I introduce inside the box of depreciation of the investment made. Logically, this additional rate decreases the annual return and will give the most amortization period.

The legal uncertainty, the great problem of power self-sufficiency

The worst thing that can happen to a domestic economy is the uncertainty to plan financially for its status in the medium to long term. In Spain, our personal finance financial planning relatively coherent and stable, is almost impossible and not own mathematical calculations, but the legal uncertainty in which we live that it generates that you change them every few minutes, laws that really serve to schedule us in the medium to long term.

Electric self-sufficiency standards and arbitrary parameters that are introduced into them, are a clear example of impossibility of adjusted economic forecast of our economic scenarios in the long run. In a subject to legal arbitrariness scenario, make an investment of this amount within the domestic economy, generates insecurity and can lead to legislative changes in the future, to become a good financial operation in the medium term in a disastrous investment.

We can see this same example in pensions, deductions to housing policies and other policies in the business world, so the Council better to invest now in their own electricity production has to meet the following requirements:

  • Not bear additional financial costs for investment.
  • Wait for the final approval of the Decree of self-sufficiency.
  • Adjust as much as possible the costs of installation and commissioning underway so the repayment period can be as little as possible.

In any case, when we are subject to the arbitrariness of the BOE, we can further analyze on changing scenarios and variable rates for autoproducers.

(*)KWp: Per kilowatt peak, unit used to express the performance and the production of electricity from photovoltaic panels. A photovoltaic system, need some certain areas depending on the position and final geographical area of installation, each facility will have a different production in kilowatts per each per kilowatt peak.