How Do Solar Panels Work: A Complete Guide

Solar Energy Diagram - explaining how solar works
Solar Energy Diagram

Step 1: Solar Panels convert sunlight to energy

Solon Black Solar Panels 230-07

Solar panels receive sunlight during the day which they convert to energy through the photovoltaic effect. In simple terms, solar panels contain silicon cells as the active material which when exposed to sunlight create free electrons which flow through an electrical circuit. Read our complete explanation on how solar panels work here.

The quantity of solar panels you will need for you install depends on a number of factors:

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Step 2: Solar Inverter converts from DC to AC electricityFronius Symo Hybrid Solar Inverter

The direct current (DC) electricity created by the panels is then connected by electrical cable to a Solar Inverter which is usually installed somewhere near the switchboard. Regular appliances in a home or business use alternating current (AC) electricity, so the solar inverter’s job is to convert the DC energy to AC energy. There are many types and brand of inverters and they need to be designed to meet the size of the solar panel array.

Step 3: Switchboard routes solar energy to home appliancesHome electrical switchboard

The now converted AC electricity is then connected into the switchboard so it can be used as a power source. If the home also has a connection to the grid, then the house will prioritise first the use of cheap solar energy and if there is any additional energy required then that can seamlessly continue to be drawn from the grid. If the solar system is generating more than sufficient energy, then the surplus can be ‘exported’ back to the grid for use elsewhere on the network.

Solar batteries can be connected via the Switchboard or via a ‘battery-compatible’ hybrid inverter – see section below on batteries.

Step 4: Utility meter records Ausgrid Meter type 2

Once solar is installed the responsible retailer is required to replace the current meter with a bi-direction meter. The meter can then record all the power that is drawn to the house, but also record the amount of solar energy that is exported back to the grid. Often there is a small cost for the household to pay to change over this meter. The recorded electricity that is exported back to the grid can earn a “feed-in tariff”

Step 5: Grid rules define system permissionsElectricity Poles and Wires residential area

The Distributed Network Service Provider (DNSP) is the company who owns and operates the grid (poles and wires) in your local area. A portion of your energy costs are paid to the DNSP as a contribution to the maintenance and operational costs of the network – though for residential customers this is not visible and is bundled into your electricity retailer bills. Each DNSP have slightly different rules on how much solar can be installed and whether you are permitted to export energy back to the grid or not. For a break down of the rules in each state – read our guide here.

As a general guide:

  • Most DNSPs permit solar up to 5kW (inverter-size) with permission to export via a relatively automated approval process
  • For commercial projects over 30kW a network protection device is required
  • For commercial projects over 100kW a more detailed approval process usually is required meaning an engineering study will need to be completed to approve the system – and there might be some design alterations required for the install to be approved

Solar Batteries (optional)

A solar battery in its simplest form is designed to store solar energy when there is surplus being created and to use (discharge) energy in the evening or at night when the solar panels are not generating power. To take into consideration of if battery storage is worth it, then you need to consider the lost feed-in-tariff, the lifetime of the battery and the total cost to install a battery.

Solar batteries can also generate income if you are able to participate in a Virtual Power Plant (VPP) scheme which enables a fleet of batteries to help stabilise the grid and capitalise on price spikes on the wholesale market.

A solar battery can be either connected to the solar inverter (DC) or to the switchboard (AC). Batteries store energy in DC so, when a battery is connected to a hybrid solar inverter, DC electricity from the solar panels is able to charge the batteries directly. The hybrid solar inverter then converts the energy to AC later when the battery discharges. For a battery than is connected to the switchboard it is “AC Coupled” meaning it is received AC power. These batteries (like the Tesla Powerwall 2) have an internal inverter which converts the AC power back to DC to store it. Companies have chosen this design despite the inefficiency of inverting the power multiple times as it makes them more compatible with virtually any solar inverter and can even be used without any solar panels.

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Jeff Sykes