Can going off-grid save you money?

As electricity prices continue to climb and renewable technologies become increasingly viable, more and more households are beginning to ask if it’s worth going ‘off the grid’.

Recent leaps in small-scale solar generation and storage technologies have made it possible for households to self-generate a large portion of their energy consumption. It’s a great way to save money, and given that Canstar Blue research has found many Aussies are unsatisfied with the value for money they receive from their electricity provider, you can see why solar might be an attractive choice.

It might seem like a wonderful idea to exit the grid and become your own electricity provider, but it’s unfortunately not that simple. Creating a self-sufficient property requires a large investment, so there’s a lot to consider before making any bold decision.

What is the electricity grid?

‘The grid’ refers to a large and complicated electricity transmission and distribution system. There are four major power grids, and nearly all Australians are connected to one, they are.

  • National Electricity Market (NEM): Operating in VIC, NSW, QLD, TAS, SA and ACT
  • South West Interconnected System (SWIS): Operating in WA
  • North West interconnected System (NWIS): Operating in WA
  • Darwin-Katherine Electricity Network : Operating in NT

These grids are managed and maintained by electricity distribution companies – not your electricity retailer. It’s the costs of maintaining and upgrading these grids that accounts for more than half your electricity bill. Falling grid energy demand is making it more expensive for network operators to maintain its systems meaning we could electricity prices rise. So is now time to jump ship? Well… Keep reading.

How much would it cost to live off the grid?

Installing solar can be very expensive, even after you factor in government rebates and incentives. To live without grid electricity requires a powerful and reliable solar system.

The average Australian household will on average consume between 12kWh and 16 kWh of electricity each day. A general rule of thumb with solar is that a 1kW solar power system will produce roughly 4kWh of electricity under ideal conditions – which can’t always be guaranteed.  This means in order to cover your daily energy usage, you would require a 3kW – 4kW solar system; if you want to go completely off the electricity grid however, you might want to play it safe and opt for a larger 5kW system.

The major drawback of solar is that it only works when the sun is shining, so you will need to also install a solar storage battery if you’re to have electricity through the night.

At the time of writing, a 5kW solar system will cost around $13,000 – $15,000, however customers eligible for a government rebate could possibly have the price reduced to around $10,000 – $12,000.

Next you need to consider how much electricity you use at night, and how large your solar storage system will need to be. Solar storage is relatively new and unfortunately a little pricey right now. If we take a hypothetical person who uses most of their electricity at night, then you might want a storage system of at least 10kW – again, this entirely depends on your energy usage. Prices for a solar system of this size, including installation can often cost anywhere from $12,000 – $15,000.

All up, you can expect an off-grid solar system to cost in excess of $25,000.

News Corp published a story late last year about a woman who completely disconnected her home from gas, water and electricity services. The project cost nearly $50,000 in total, with the solar system alone coming in at $29,000. She expects it will take about 20 years to pay the money back, but insists it’s a good long-term investment.

The price of solar systems and storage batteries are tipped to fall in the coming years, so if you aren’t prepared to spend the money now, it may be worth waiting. Keep in mind that you will need to maintain your solar system, which may mean having to spend extra on repair and replacement expenses.

green city

Is it cheaper to live off the power grid?

The short answer to this is maybe, but probably not right now for most of you reading this.

Case example:

Let’s take a completely hypothetical Sydney household that is on a single rate tariff for the purposes of this calculation. Let’s also assume relatively standard rates:

  • 26c/kWh for the first 1000 kWh block of usage
  • 25c/kWh for the next 1000 kWh block of usage
  • 88c/day supply charge

Let’s further assume this house uses 15kWh of electricity per day. For one quarter (91 days), electricity prices will be as follows:

  • Quarterly usage: 1,365 kWh (91 x 15kWh)
  • Supply charge: $80.08 (91 x 88 cents)
  • Usage charges: $351.25 (26c x 1,000 kWh + 25c x 365 kWh)
    • Total electricity bill: $431.33 (not including discounts)

For the purposes of this calculation, we are also making the rather unrealistic assumption this person has a constant energy bill. If they went completely off the grid, and spent $25,000 on a solar system, not including ongoing maintenance costs, then it would take nearly 15 years before disconnecting from the electricity grid actually became a profitable investment.

Of course, there are a lot more factors you will need to consider in assessing your personal situation. How sunny is your area? What’s your electricity rate? Do you receive a feed-in tariff? How long do you plan to live at your house? The list goes on. 

So should you quit the grid?

Whether or not you should actually disconnect from the electricity grid depends entirely on your location and personal situation. Generally speaking, even if you get a good deal on your solar installation, it can take decades before you see any decent returns on your investment – and that’s assuming your system doesn’t deteriorate before then.

For new houses, not connecting to grid electricity might be a no-brainer, since connection is so expensive, but for home’s already connected, leaving the grid is a massive risk. Solar won’t be able to work very well on cloudy days, leaving you without electricity when you might need it most. If you are interested in solar, it’s a safer move to install a capable solar system, but remain connected to the power grid for those days when your solar system is unable to operate.

It’s widely accepted that renewable sources of energy will be the way of the future, and as solar technologies continue to improve, the capacity and efficiency of solar systems should climb, while prices fall. Even if it might not be viable for you to disconnect from the grid right now, one day soon it might be.

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