Solar panels on a home

Solar power for homes: Still worth it in Australia?

by Solar Choice Staff on December 6, 2016

in Installation advice,Solar PV Power System Prices,Solar system sizes

Lots of things have changed in recent years with regard to solar power for homes. The business case for going solar – the investment-worthiness of solar panels – has quickly progressed through roughly three stages since the solar panel boom began in Australia in around 2008.

Making a long story short, these stages were:

Stage 1 (until about 2011): High solar system prices, high incentives. Lots of people installed solar despite relatively high prices thanks to government incentives on the federal and state level. “Solar is a no-brainer, and there’s a deadline!”

Stage 2 (2011-2013/2014): Falling solar system prices, falling incentives. System prices fell, but so did incentives, creating a landscape of uncertainty. “Is solar still a good idea?”

Stage 3 (2014-present): Relative stability. Solar PV system prices come down significantly, and upheavals in the solar incentive sphere cease.

Solar power is here to stay

At this point, it seems fairly clear that residential solar power is here to stay in Australia. Over 1.5 million homes already have a solar PV system, and there is now one panel installed per human being in the country. Virtually all industry analysts and investment houses – both within and outside Australia – are predicting that solar (and battery storage) are the future.

Solar system prices for homes have come down

The strongest evidence for the permanence of solar as a household fixture in Australia is the solar system price trends witnessed over the past several years.

The chart below offers a glimpse into how average prices have changed since 2012. Systems cost about 25-30% less to install in November 2016 than they did in August 2012, according to the data that we’ve been keeping track of.

all-residential-solar-system-prices-index-nov-2016

The most recent article with current and historic system prices can be found here. You can also get pricing specific to your home and location by requesting a Solar Quote Comparison by filling out the form to the right of this page.

Average solar system sizes have increased

Several years ago, it was common for most homes to install 1kW, 1.5kW and 2kW solar systems. As prices have come down, however, the average solar system size has increased – and these days, 3kW, 4kW, 5kW and even 10kW solar systems are not uncommon. In fact, the larger system sizes almost always offer better value for money than smaller ones.

Not sure which size system is best for your home’s needs? Check out our Solar PV System Sizing Estimator Tool.

Estimated returns on solar panels for homes

Of course, solar panel prices only make sense when one considers how well solar systems perform as an investment. There are a number of factors that influence a solar PV system’s return on investment – and installation cost is only one of them. Other important factors include: the amount of sunlight available (and orientation of the panels), the amount of solar electricity that the home consumes directly (as oppose to exports to the electricity grid), the feed-in tariff reward rate (if available), and the cost of electricity when purchased from an electricity retailer.

To provide some examples, we’ve crunched the numbers on payback period and returns for a 3kW solar system based on average system prices for each capital city as of November 2016. After the system has ‘paid itself off’, it will provide free electricity (minus occasional maintenance costs) until its 25-year lifespan has ended, yielding the results in the ‘net system value over 25 years’ column on the right.

Want to crunch the numbers for yourself? Check out our Solar PV System Payback Estimator Tool.

Assumptions:

  • Nominal system capacity of 3kW
  • System price is equivalent to the average 3kW solar system price for each city (as of November 2016)
  • Average daily household energy usage of 25 kilowatt-hours (kWh)
  • Solar panel array orientation is facing due north with optimal tilt angle
  • 80% of solar electricity produced is used directly by the home (only 20% of all solar exported to the grid)
  • Overall system efficiency of 85% of nominal capacity
  • Flat retail electricity rate of $0.25/kWh (no time-of-use metering) in year 1
  • Solar feed-in rate of $0.08/kWh
  • Annual electricity inflation rate of 2.5%
  • Besides inverter replacement in year 14 for $3000, no maintenance or repair costs
  • Discount rate of 5%
Estimated returns & payback periods for a 3kW solar system
City Payback period Annual rate of return
Estimated energy bill savings
(year 1)
Adelaide 4.26 years 24% $1,180
Brisbane 3.53 years 29% $1,180
Canberra 4.85 years 21% $1,200
Hobart 5.93 years 16% $960
Melbourne 4.48 years 22% $1050
Sydney 4.21 years 24% $1,100
Perth 2.64 years 39% $1,270

 

The figures in the table above are intended to be indicative only, but they do provide some insight into how attractive a home solar PV system currently is as an investment in Australia – outperforming standard savings accounts by well over 4-fold in some cases.

If you’re thinking about solar panels, now might be a great time to make a move.

Compare solar & battery storage prices instantly: Complete our Quote Comparison request form on the right of this page

© 2016 Solar Choice Pty Ltd

{ 3 comments… read them below or add one }

Dudley Conn December 27, 2015 at 9:01 pm

We went for the very early solar scheme which is great but finishes in 2017. We are keen to pursue further options as this scheme winds down. WE consume approx. 4,000 kWts per annum.
We own our own home, & reside in Dubbo NSW. Sunlight is not a problem. Roof area is adequate with a reasonable northly aspect.
Usage during the day is low as we both work. I am keen to understand battery storage in relation to useage at night & week ends
Cheers

Reply

Solar Choice Staff January 7, 2016 at 9:47 am

Hi Dudley,

We actually wrote about the issue you’re referring to in an earlier article: “Energy storage in NSW after the Solar Bonus Feed-in Tariff ends“.

I assume that right now you are on a gross metering setup, where all of the solar energy you generate is exported to the grid. This is the best way to get the most financial benefit out of the program. However, once it ends, you’ll want to switch to a net metering setup, where only your excess solar is exported to the grid. This will allow you to offset some of your daytime electricity usage, thus saving you money on your power bill.

The exported solar energy, however, won’t be worth much (6-10c/kWh), so you’ll want to find ways to use more of it. One way would be to install timers on some of your devices so that they operate during the day while you’re not at home. The other could be to install batteries, which would let you store the excess energy for later use.

However, you’ll want to make sure that the battery bank is appropriately sized to ‘soak up’ only the excess solar you have – no point in paying for a battery bank that is too large and will never get filled up. You can do some back-of envelope calculations to determine how much excess solar you’ll have (e.g. total daytime electricity consumption minus total solar production over the year) or you can install some kind of monitoring device to log these numbers automatically so that you’re fully informed when you move to install batteries next year.

Hope this helps!

Reply

Sun MonitOZ May 14, 2014 at 3:54 pm

Thank you guys for this article! You challenge the assumptions on solar costliness in a very convincing manner.

Reply

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