Menu
Business

How beneficial is installation of solar panels connected to grid for Cyprus homeowners?

September 6, 2019 at 12:39pm
Edited by

By Anastasia Barich-Chivikova

Every time your electricity bills comes in, you may begrudge paying that hefty sum.

Steep increases in electricity tariffs in the past, such as the 19.6% price jump in 2018, might have fuelled your wish to find effective ways to reduce your electricity consumption.

The first solution that comes to mind is to put strict limits on your usage of heating, air conditioning and household appliances. Many choose this option at the expense of their comfort.

Another path to decreasing utility expenses is to install a photovoltaic (PV) system or, simply put, solar panels yielding energy.

State initiatives for household production of solar energy in Cyprus

Following the EU’s Renewable Energy Directive, Cyprus has adopted its National Action Plan which compels it to achieve a 13% contribution from renewable energy sources in the overall use of energy by 2020. Solar energy plays an important role in meeting that target. Cyprus is an ideal spot for harvesting solar power due to its geographic location where over 300 days per year are sunny.

Individual households are encouraged to contribute to the production of solar energy by several initiatives. These include subsidies for the installation of photovoltaic systems and the ability to participate in the net metering system.

Net metering

Currently, net metering is the most efficient way to tackle household production of solar energy. Under this arrangement, the surplus energy generated by the individual photovoltaic systems is not wasted but goes to the EAC grid where it can be accessed by other consumers.

The PV system owners gain credits for their electricity exports that can be offset against their electricity consumption. An alternative way to deal with the produced excess energy is to store it in batteries (used in standalone or hybrid systems), which, however, have their limitations in terms of costs, durability and capacities.

If you opt for a net metering arrangement, your photovoltaic system will be connected to the EAC grid through a customer service panel and a special meter.

Solar panels generate energy mainly during the sunny daytime hours.

  • During the day, you can be away from home – at work or outdoors hiking – and your own household’s use of electrical appliances would be minimal. Most of the energy generated by your photovoltaic panels will be exported to the grid.
  • If you happen to stay at home during daytime and use electric devices, your PV system will power them and send any surplus energy to the grid. If the energy produced by your PV system is insufficient to meet your demand, the rest will come from the grid.
  • During nighttime, you get electricity only from the grid.

The meter records both the energy exported and imported from the grid.

If, by the end of the two-month billing period, you have consumed more energy than you have produced, you will have to pay only for the difference.

If, on the other hand, your production has exceeded your consumption, the surplus will be transferred to the next billing period.

The final annual set-off is done in the bill for February and March. No surpluses are transferred to the next billing year and, after that cut-off point, netting calculations start afresh.

The Net Metering arrangements in Cyprus operate under the Scheme Solar Energy for All launched by the Ministry of Energy in 2016. The scheme allows resident homeowners to apply to the EAC for a license to install photovoltaic systems connected to the grid.

Subsidies for the acquisition of net metering photovoltaic systems

The Grant Scheme to Encourage the Use of Renewable Energy Sources and Energy Saving for Homes offers homeowners subsidies for the purchase and installation of PV net metering systems. It should be noted that standalone systems are not covered.

Initially, the Scheme was launched on 12/03/2019 and was due to expire on 02/09/2019. However, this July, it was further extended until 20 December 2019.

The scheme contemplates 2 types of grants.

  1. Basic subsidies for owners of existing homes

Resident homeowners can recoup €250 per every kWp of their PV system (provided it was connected to the grid after 01/11/2018).

Kilowatt peak or kWp is the maximum rate at which a PV system can generate electricity when the sun is at its peak. The most popular household PV systems’ capacities range between 3 to 4kWp.

Beyond 4kWp, no compensation is available under the Scheme, as the total subsidy amount in this category is limited to €1000.

  1. Enhanced subsidies for vulnerable consumers

Vulnerable groups are eligible for increased funding amounting to €900 per every kWp of a photovoltaic system. The maximum total subsidy amount is €3600, so, again, no sponsorship is offered in excess of 4kWP for each household PV system.

Vulnerable consumers include:

  • recipients of welfare benefits
  • families with more than 3 dependent children provided that the annual gross family income does not exceed a fixed benchmark (i.e. € 51,258 increased by €5,126 for each child after the fourth)
  • recipients of various disability allowances.

Financial considerations

An indicative price of a 3kWp system is around €4300 whilst a 4kWp system would cost around €5250. After obtaining a basic subsidy, ordinary homeowners would end up spending only €3550 and €4250 for the respective PV systems.

Thus, with a basic grant, the average savings on a PV system would equal roughly 18%. For the vulnerable groups, the savings are even more attractive and would average around 65%.

A 3kWp system would produce approximately 5070 kWh per year, whilst a 4kWp system will yield about 6700 kWh per year.

The estimated annual net savings on electricity bills will amount to approximately €990 for a 3kWp photovoltaic net metering system, and €1300 for a 4kWp system.

Thus, self-financed photovoltaic net metering systems will have their Pay Back Period (PBP) – time needed for the equipment to pay for itself – on average within four years. With a basic rate subsidy, PBP will occur in approximately three and a half years. For the grant recipients in the vulnerable category, the PBP will come in about one and half years. Generally, a PBP of two to three years is considered reasonable for medium-sized equipment.

Following the payback period, the price of the photovoltaic system will be fully recouped, and it will remain only to enjoy the fruits of the investment and perform occasional maintenance.

The average product warranty for PV panels is 12 years. However, the estimated useful life of most parts of a PV system is 20-25 years. The system’s inverter may have to be replaced sooner and comes with an average seven-year warranty.

Provided that the whole system will function for over 20 years and that annual electricity savings will remain the same throughout this period, a €5250 investment into a fully self-financed 4kWp PV system can yield about 25% Internal Rate of Return (IRR). This appears quite attractive. For the vulnerable categories of the grant recipients, the IRR will amount to a staggering 80%.

It should be noted that the positive numbers of the IRR and NPV (Net Present Value) will start to show only after the Pay Back Period, increasing over the years.

Documentary formalities

Applications for taking part in the net metering or for requesting a grant must be supported by the requisite packages of documents (such as permanent residence certifications, recent EAC bills, title deeds, building plans and licences).

This can seem like quite a hassle, particularly, for many expats, since the full detailed descriptions of the Schemes’ conditions are officially available only in Greek.

However, in practice, applications are often managed by the companies that supply and install photovoltaic systems. Handled this way, the process has been straightforward and stress-free for a number of buyers.

In addition, the supplier company can advise you on the optimal number of solar panels, their location, and provide you with more precise calculations of the costs and benefits of a photovoltaic system in your particular case.

Of course, the advantages of solar energy are not purely financial. Going solar strikes the cord with the society’s desire to promote technologies helping to reduce carbon emissions, prevent global warming and conserve the planet’s natural resources. Viewed from this broader perspective, the benefits are not restricted to your immediate monetary savings but will be passed on to the future generations.