Case study: the impact of the abolition of the compensation scheme
Solar panels

The impact of the abolition of the compensation scheme

The decision to scrap the principle of the compensation scheme for solar panels caused quite a stir last week in Belgium. But, what exactly has been decided and what is the impact on your living situation? In order to provide an answer to this, we take a detailed look at the impact for a young couple.

1. Compensation scheme

1.1. What is a compensation scheme?

It’s better to speak of a goverment battery. After all, the compensation scheme works just like a battery: you can inject your extra energy at any time and consume it again at any time without loss. This battery therefore provides both long-term (seasonal) storage and short-term (day / night) storage.

1.2. How much does the compensation scheme cost?

The cost of this “battery” is approximately + – 90 EUR / kW inverter / year. Converted for inverters from 1.5kW to 5kW, we speak of an annual cost of  EUR 135 to EUR 450 per year. This is called the prosumer rate. Very simplistically is it the rent you pay for the ‘battery’. However, this ‘battery’ has disappeared.

1.3. Why is the compensation scheme disabled?

This decision was made to end a shaky legal framework. After all, the government wanted to continue to offer this ‘battery’ for 15 years and this for all installations installed until 31/12/2020. The reasoning behind this is that the grid can still function as a battery for the time being. After all, there have been few days in Belgium on which we have a surplus of renewable energy. We are, however, evolving in that direction and the intention is to store this overproduction in the future (usually in the summer) with the help of hydrogen, for example, so that it can then be used as the main source of heating in the winter. However, the concrete effect of this transition is not yet known.

1.4. What’s the financial impact?

It goes without saying that a battery with unlimited seasonal storage at a modest rate for the owners of solar panels can greatly increase the efficiency. After all, the supply and demand do not have to be geared to each other over time and the users of this electricity can use ‘their’ produced electricity in all comfort. For example, on dark, windless winter days you can use nuclear power as if it came from your solar panels. The only extra cost is an annual flat-rate contribution, your so-called prosumer rate. This typically allows you to earn back the cost of your solar panels in about 7 years.

The financial impact of the decision has the concrete effect that you will initially save because you no longer have to pay a prosumer rate. It is also the case that you still receive compensation for the surplus electricity that you inject back into the grid. However, the differences are in the details. You used to get the same price for injection as for consumption (after all, there was no way to measure these separately). With a digital counter, the counters are kept separately and you receive a different rate from the supplier for injection of your electricity. The prices for injection are usually a lot lower than for purchase (currently about 20%). The concrete impact will therefore come down to the question: how much electricity can you use yourself and how much surplus electricity can you inject back into the grid at this lower rate?

2. Calculate the impact for your situation

2.1. Own use

In order to be able to mitigate the impact of the disappearance of the compensation scheme, it is important to coordinate your supply (solar panels) and demand (consumption) as much as possible and therefore to consume as much as possible yourself. This is called ‘own use’, expressed as a percentage. This percentage expresses how much electricity you have been able to use for direct useful consumption throughout the year.

Put to the extreme: if you could (usefully) use all the electricity yourself, you don’t need a consumption scheme AND you even save on your bill. After all, there is no longer a prosumer rate to be paid. One hundred percent own use is of course not realistic, but as a rule, the higher this percentage, the more favorable the invoice will be.

However, useful power is different for each individual. A concrete and good example is the air conditioning, for some a necessity on hot summer days, for others an extra in terms of comfort. Not only subjective in perception, but also depending on the orientation of your home, the insulation level, the amount of glass areas and screens, …

2.2. General consumption

Before discussing possible solutions to increase your own use, it is interesting to first map out your general consumption. The digital meter is a device that allows you to measure how much and especially when you use power. So there is some irony in the fact that people with a purely compensation scheme cannot get any idea of what percentage of their own use they currently have. Fortunately, there are also other affordable devices on the market that can perform current measurements, even down to the level of individual devices. You do not need to have a digital meter installed for this.

The 3 most important parameters you need to know, are:

  • A. PV-production per year (kWh)
  • B. Consumption per year (kWh)
  • C. Injection per year (kWh)

The percentage of own use is then: (A-C) / A. If you don’t know these parameters, you can use averages. However, this can be very different for you in practice. A young couple that heats on gas and regularly travels has a completely different consumption pattern than a family with 2 children and a heat pump.

2.3. Three-phase connection with single-phase inverter

It is also the case that a digital meter can measure per phase whether you are injecting or consuming. However, these are only instantaneous measurements and no counter readings per phase are stored in the meter itself. The digital meter contains 2 simple meters with backstop inside. One measures the net consumption, the other the net injection. If the sum of the 3 phases of consumption and injection together results immediately, the corresponding counter (consumption or injection) is increased.

Suppose you have connected a few large consumers to phases (L1, L2) other than your PV inverter (L3). On sunny summer days, injection will therefore effectively take place on the network via L3. At the same time, you also consume electricity from the grid via L1 and L2. However, the digital meter will internally ‘net’ these flows and only your net instantaneous result will be included in the meter readings.

2.4. Solution

In general, the solutions consist of 2 broad categories:

  1. be less dependent on storage (demand control)
  2. provide a form of storage yourself (supply control)

Good candidates for demand control are:

  • behavioral changes: use dryer / washing machine / dishwasher manually when the sun is shining
  • smart control of the above devices by switching them on / off depending on the sun
Good candidates for supply control are:
  • home battery
  • thermal storage: smart control of electric boilers

In general, less good candidates are:

  • heat pumps (no seasonal storage possible, highest consumption when the sun is not shining)
  • electric cars (the car is typically not at home when the sun is shining, exception: people with night work)
compensation
Sarah & Dries: a young couple from Ghent

3. Case study

3.1. Situation

Dries and Sarah are a young couple without children. They heat on gas and cook on electricity. They have solar panels and a digital meter that allows them to read the following values on an annual basis:

  • A. PV production: 2200 kWh (7 panels, inverter 1.5kW)
  • B. Consumption: 1243 kWh
  • C. Injection: 1650 kWh

Dries and Sarah therefore have their own use of (2200-1650) / 2200 = 25%. In the old system they pay EUR 135 prosumer rate .

In addition, Dries and Sarah have an energy contract with EcoPower. EcoPower uses the following rates:

  • B. Consumption: 0.2645 EUR/kWh
  • C. Injection : 0.044 EUR/kWh

3.2. Cost

Without solar panels: The net consumption is 1793 kWh (A-C + B). Their bill is EUR 474.25.

With compensation scheme: The net consumption is -407 kWh (B-C). So they returned more energy to the grid than they used. However, the reverting counter can revert to a maximum of 0. Their net consumption is therefore 0kWh. Their bill is EUR 0 + prosumer rate = EUR 135. A saving of EUR 339.25 on an annual basis.

With digital meter: The consumption of 1243 kWh is billed at EUR 328.77. They receive EUR 72.6 for their surplus electricity (injection). Their total bill is EUR 256.17. Savings of EUR 218.08 on an annual basis.

3.3. Solution

The technical solution can consist of a form of storage and / or manual / automatic optimization of consumers. This will increase own use.

In order to match a compensation scheme without compensation mechanisms or additional large investments, Dries and Sarah will have to achieve an own use of about 50%. Broadly speaking, any other solution under the same circumstances will have to boost this own use to at least the same level. Each solution also has an associated price tag, which will affect the payback period. This is difficult to calculate in general and depends very much on the profile of the user.

Some end users will opt for the purchase of a smart control because they already have an electric boiler that they now want to control smartly. Other people may choose a home battery. Typically, self-consumption increases from about 30 percent to 70 to 80 percent thanks to a large battery. Placing an air conditioner, if desired, will also boost your own use. Although it must also be said with the latter that the total consumption in general will also be higher, in the service of increased comfort. Furthermore, a change of behavior in your use can already be sufficient, it sometimes comes at the expense of some comfort but costs you nothing at all… Finally, with a limited investment in smart control, you can achieve the same in all comfort. In this way, at OpenMotics, we succeed in immediately using your generated energy in a useful way.

4. Conclusion

Regardless of whether the compensation scheme was a good idea or not, according to OpenMotics it is especially important to turn the page and look forward. Solar panels are still an attractive investment. Our society and the energy landscape are constantly changing. The best solution therefore consists in being able to respond flexibly to these changes with a mix of technology and behavioral changes.