When considering solar panels, homeowners and businesses often compare the cost of generating electricity on site with the cost of buying it from the grid. The comparison can help show whether solar is worth exploring, but it is not as simple as comparing one price per kilowatt-hour.
A solar system has an upfront or contracted cost, produces electricity at particular times and may generate more power than the property can use. Grid electricity is available when needed, but prices and plans can change. The financial outcome depends on how much solar power the property uses directly, what happens to surplus electricity, the system’s cost and the property’s long-term plans.
This guide explains how to compare solar power with grid electricity for homes and commercial buildings, with a focus on the factors that affect long-term value in Singapore.
What does “solar versus grid electricity” mean?
A grid-connected solar system usually works alongside the electricity grid. The panels generate electricity during daylight hours, and the property uses that power when it is available. If the property needs more electricity than the panels are producing, it draws the shortfall from the grid.
If solar generation exceeds the property’s demand, the excess may be exported to the grid or stored in a battery. The way exported electricity is measured and paid for depends on the system and the applicable arrangement. In Singapore, solar consumers can sell excess electricity through available schemes, but the rate and calculation differ according to the consumer’s arrangement and how the system is set up.
This means a solar system does not necessarily replace grid electricity. It changes how much electricity a property buys from the grid and when it buys it.
How grid electricity costs are structured
Grid electricity supplies a property whenever it needs power, including at night and during periods when solar output is low. In Singapore, households can buy electricity at the regulated tariff from SP Group or choose from plans offered by electricity retailers. The regulated tariff is reviewed periodically, while retail plans may use different pricing structures.
Electricity prices can change over time. For example, the regulated tariff is determined quarterly, with changes reflecting factors that include fuel costs. Retail plans may have different terms and may suit different consumption patterns.
A household or business comparing solar with grid electricity should therefore avoid assuming that today’s price will remain unchanged throughout the life of a solar installation. At the same time, future grid prices are uncertain, so a solar proposal should not base its case on a single assumed increase.
How solar changes electricity costs
When a property uses solar electricity as it is generated, it buys less electricity from the grid during that period. That is often the most direct way solar can affect an electricity bill.
For example, a business that operates during daylight hours may be able to use solar power for lighting, computers, cooling or equipment while the panels are producing. A household may use it for refrigeration, air conditioning, laundry or appliances during the day.
The potential benefit depends on the relationship between generation and demand. If the panels generate electricity when the building is using it, the property may avoid buying some grid electricity. If the panels produce more than the building needs, the extra electricity must be exported, stored or managed another way.
In Singapore, the Energy Market Authority explains that solar generation can offset a consumer’s electricity use, while excess generation can be sold back to the grid under available arrangements. The export rate can differ from the price paid to buy electricity.
That difference matters. A unit of solar electricity used directly on site may have a different financial value from a unit exported to the grid. Any financial comparison should treat these amounts separately.
The value of using solar power directly
A property’s self-consumption is the share of solar generation that it uses as the panels produce it. Higher self-consumption can improve the financial case because the property reduces its need to buy electricity during those hours.
Self-consumption depends on the property’s daily routine.
A home where someone works during the day, or where major appliances run while the panels are producing, may use a larger share of its solar generation directly. A home where most electricity use occurs after work may have more daytime surplus.
A business with a weekday daytime schedule may have a different pattern from a warehouse that operates at night, a factory with several shifts or a shop that closes on certain days. Even businesses with large roofs may have limited daytime demand.
Reviewing electricity bills can help estimate overall consumption. For a more detailed comparison, interval data can show when the property uses electricity. This can help an installer model solar generation against demand instead of comparing only annual totals.
What happens to excess solar electricity?
Surplus electricity is generated when the panels produce more than the property is using at that moment. Depending on the system and applicable arrangements, this electricity may be exported to the grid or stored in a battery.
Export payments should not automatically be treated as equal to the cost of buying electricity. The value depends on the applicable scheme, meter configuration, consumer status and current electricity market arrangements. EMA describes different payment schemes for solar consumers and explains that some export payments depend on prevailing wholesale electricity prices.
In some arrangements, export rates may differ from a property’s retail purchase price because costs related to grid infrastructure and electricity transportation are treated separately.
Before approving a system, ask the installer or relevant electricity provider to explain:
- How solar electricity will be measured
- Whether the system is eligible to export excess power
- How export payments or credits are calculated
- Whether a particular meter or registration process is required
- How the arrangement affects the financial estimate
Export assumptions can significantly affect a proposal. The installer should state clearly how surplus generation is treated in any savings calculation.
Comparing solar systems by cost per unit
A solar proposal may include an estimate of the system’s cost per unit of electricity over its useful life. This type of calculation is often called the levelised cost of energy. It can help compare the estimated cost of solar generation with the cost of purchasing electricity, but only if the assumptions are clear.
The estimate may depend on:
- The system’s installed cost
- Expected annual generation
- Equipment performance over time
- Financing or payment terms
- Maintenance expenses
- Inverter or battery replacement assumptions
- System lifespan
- Whether the calculation includes electricity used directly or exported
The Energy Market Authority’s guidance on evaluating solar potential describes the use of levelised cost of energy for assessing small-scale rooftop solar in Singapore. Its guidance also notes that under a Power Purchase Agreement, the price paid for solar-generated electricity is based on the agreement between the consumer and the solar company.
A quoted cost per unit should not be treated as a guaranteed bill reduction. The household or business still needs to consider when the electricity is produced, how much is consumed on site and what is paid for any exported power.
Buying a solar system or signing a Power Purchase Agreement
There are different ways to arrange a solar installation. A property owner may buy the system, finance it or enter into a Power Purchase Agreement, sometimes called a PPA. The specific terms depend on the provider and agreement.
Purchasing the system
When the property owner buys the equipment, the upfront cost is paid by the owner or financed through another arrangement. The owner controls the system, but also takes responsibility for understanding warranties, maintenance, monitoring and future equipment needs.
To assess a purchase, compare the installed price with the expected generation and the property’s likely use of that electricity. Include relevant costs over time, such as maintenance or possible component replacement.
Power Purchase Agreement
Under a PPA, a solar company may install and own the system, and the property purchases solar-generated electricity under the agreement. This can reduce or remove the need for the property owner to pay the full system cost upfront, but the contract terms determine the price, duration and responsibilities.
Review the contract carefully. Check how the solar electricity price is set, how it may change, who owns the equipment, who maintains it and what happens if the building is sold or the lease ends. The property owner should compare the PPA price with the electricity costs the property expects to avoid, while accounting for grid power that will still be needed.
A PPA is not automatically better or worse than purchasing a system. It is a different way to allocate cost, ownership and responsibility.
How batteries affect the comparison
A battery can store some solar electricity for use later. It may allow a property to use more solar power in the evening or during periods when the panels are producing less.
A battery does not increase the electricity generated by the panels. It shifts some of that generation to another time, subject to storage capacity and system settings. The financial case depends on how much surplus solar power would otherwise be exported, how much electricity the property uses later and the battery’s cost and operating life.
Batteries may also be considered for backup power, but backup capability requires suitable system design. A property should confirm which circuits or equipment can be supported during an outage and for how long.
Include battery costs, warranties, maintenance and potential replacement in a long-term comparison. Do not assume that adding storage automatically improves the financial return.
Consider the property’s energy profile
A good solar-versus-grid comparison starts with the property’s actual electricity use.
For a home, review recent bills and consider whether major energy use occurs during daylight. The household’s plans also matter: working from home, adding an electric vehicle or changing air-conditioning use can affect future demand.
For a business, review operating hours, equipment schedules and seasonal changes. A company operating in the day may use a different share of solar generation than one with evening shifts. A business that closes on weekends may have more surplus generation on those days.
Commercial buildings also need to account for ownership and tenant arrangements. If the owner pays for the system but tenants receive the electricity benefit, or the reverse, the project may require an agreement on costs and value. The building’s electricity meters and shared systems may affect how solar generation is allocated.
Account for system performance and maintenance
Solar generation varies with sunlight, shading, temperature, equipment and weather. A system’s rated capacity does not indicate the exact amount of electricity it will generate every day.
A proposal should explain how expected production is calculated and what assumptions are used. Ask whether the estimate accounts for roof direction, shading, temperature and equipment losses. It is also useful to understand how much variation is expected from year to year.
Maintenance should be included in the long-term evaluation. Panels usually have few moving parts, but the system still needs monitoring and appropriate inspection. Inverters and batteries may have different warranty periods and service lives from the panels. Ask which components may require repair or replacement and how those costs are treated in the projection.
Think about the property’s time horizon
Solar is a long-term property investment. The time a homeowner expects to remain in a home, or the length of a commercial lease, can affect the decision.
A homeowner planning to move soon should consider how the installation could be documented for a future buyer and whether the system’s expected value fits the sale plan. A business tenant should confirm what happens to the equipment when the lease ends. A building owner should consider future roof work, renovations or changes to tenants.
For a commercial property, also consider whether the business’s operations are likely to continue at the same location. If the building may be redeveloped or the roof replaced, these plans should be considered before installing a long-term system.
A practical way to compare proposals
When reviewing a solar offer, ask for a clear comparison that includes:
- Total system or contract cost
- Expected annual solar generation
- Estimated electricity used directly on site
- Estimated electricity exported
- Expected grid electricity still required
- The value assigned to exported electricity
- Financing, maintenance and replacement assumptions
- Battery costs and expected use, if applicable
- Warranty and service responsibilities
- Contract terms and what happens if the property is sold or leased
Compare proposals using the same assumptions where possible. A lower system price may not include the same equipment or services as another offer. A higher projected saving may rely on different assumptions about electricity use or export rates.
Conclusion
Solar panels and grid electricity serve different roles. Solar can generate power on site during daylight, while the grid supplies electricity when solar generation is insufficient. A property’s financial outcome depends on the system’s cost, its output, the amount of electricity used directly and the value of any surplus generation.
In Singapore, electricity tariffs and retail plans can change, and export payments depend on the consumer’s arrangement. That makes it important to use current, property-specific figures when comparing solar with grid electricity.
Homeowners and businesses should compare proposals using clear assumptions about generation, self-consumption, exports, maintenance and ownership. Solar may offer long-term value when the system fits the property’s roof and energy-use pattern, but the decision should be based on the complete cost and operating picture—not the panel count alone.
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