There has never been a better time for Australian businesses to invest in commercial-scale solar power. Solar Choice analysed nearly 400 commercial clients across industries ranging from schools and farms to retail centres and health practices. Electricity tariffs reached record daytime highs in most states, while installation costs fell again according to the Commercial Solar PV Price Index.
The clear result: commercial solar now achieves paybacks of roughly 3 to 5 years for most small-to-medium enterprises, with strong long-term internal rates of return. Businesses consuming the majority of their power during daylight hours continue to see the fastest returns.
Below we’ve put together some information about how solar for business works, as well as some of the key takeaways from the data that we’ve collated – with a focus on payback periods & internal rate of return (IRR).
Understanding commercial electricity bills
Before launching into details about Electricity bills for businesses & commercial premises can be complicated, convoluted and otherwise difficult to understand – which can make it tricky to work out in detail whether solar is worthwhile. The structure of commercial electricity bills varies from state to state, but there are a few fee components that make an appearance on most bills.
- Retailer charges: The rate that your retailer (the company that sells you your electricity) levies on each unit of energy (in kilowatt-hours, kWh) that you draw from the grid/electricity mains.
- Network charges: A separate charge (also per kWh) that is levied by the local electricity network company and passed through to you by your retailer.
- Note that both retailer and network charges may be levied as either
- ‘Flat rate’ – where the same rate is charged around the clock, 24/7; or
- ‘Time of use’ – where different rates are charged depending on the time of day (higher during ‘peak’ usage times, and lower during ‘off-peak’ and ‘shoulder).
- Note that both retailer and network charges may be levied as either
- Other kWh charges: The two charges above constitute the bulk of the average commercial electricity bill, but additional charges may also be itemised on a c/kWh basis.
- Demand charges: Not all commercial electricity bills have a demand charge, where the customer is billed for the maximum amount of power (in kilowatts – kW – not kWh) that they draw from the grid during a period of time (whether that be a day, month or quarter, etc).
How solar saves businesses money
The benefits of solar in 2025 extend beyond simple energy offsetting. With higher daytime tariffs and the emergence of virtual power plant (VPP) programs for commercial users, solar now offers a multi-layered value stack:
- Offsetting daytime consumption – still the largest source of savings. With grid electricity costs often exceeding 30 ¢/kWh in 2025, each kWh of self-generated energy directly displaces expensive imports.
- Battery-assisted demand management – many businesses now pair solar with a commercial battery to lower demand charges or participate in Virtual Power Plants. These systems smooth peak demand and provide extra revenue from grid support.
- Feed-in credits (secondary benefit) – export rates remain modest (typically 5–10 ¢/kWh) but can still offset weekend or holiday generation.
Together, these mechanisms make solar one of the most reliable cost-control measures for Australian SMEs
Popular solar system sizes for a small to medium enterprises (SMEs)
Most small-to-medium enterprises continue to install systems in the 60 – 120 kW range, with 100 kW remaining a key financial threshold for eligibility under the federal STC rebate. Average installed prices for sub-100 kW systems fell a further 5–8 % in 2025, making these projects more accessible.
Larger SMEs are now “future-proofing” by slightly oversizing their arrays to support upcoming electrification loads such as EV chargers and heat-pump water systems.
While we note that solar makes sense for a wide range of business types & sizes, small businesses may find that the most attractive size options are less than 100kW for two main reasons:
- Affordability: Solar systems under 100kW in capacity are eligible for an up-front incentive through the federal government’s Renewable Energy Target. This means less capital expenditure to have the system installed and commissioned, which is sure to be an ‘easy win’ for business owners grappling with rising spiralling electricity costs.
- Right-sizing: For small businesses, maximising the returns of a solar system requires ensuring that the system is not too ‘large’ for the site’s energy requirements, as the greatest benefit comes from solar offsetting. For most small to medium-sized businesses, the optimal size will usually come in at under 100kW. (Relatedly, small businesses tend to have less roof space for panels – which serves as a secondary constraint on allowable system size.)
Systems larger than 100kW
For larger commercial and industrial properties, systems exceeding 100 kW are now standard.
Nationally, the average payback period for >100 kW systems sits around 4.8 – 5.5 years, with IRRs typically above 25 %.
Many medium-sized businesses are also exploring solar Power Purchase Agreements (PPAs), allowing them to access low-cost solar energy with minimal capital outlay while maintaining predictable long-term electricity pricing.
Request a free solar business case and compare leading commercial installers
Commercial Solar Payback Periods in 2025
Commercial Solar Payback Periods in 2025
Solar Choice’s latest modelling (2025) of nearly 400 business cases shows shorter payback periods across most states, driven by higher retail tariffs and lower installation costs.
| State | Typical Payback (<100 kW) | Average IRR | Trend vs 2024 |
| ACT | ≈ 3.2 years | 33 % | Improved (↓ from 3.4 yrs) |
| NSW | ≈ 4.5 years | 27 % | Improved due to higher daytime rates |
| NT | ≈ 2.3 years | 42 % | Stable (high irradiance) |
| QLD | ≈ 4.2 years | 31 % | Steady returns |
| SA | ≈ 3.1 years | 39 % | Excellent due to high retail prices |
| TAS | ≈ 4.9 years | 24 % | Little change |
| VIC | ≈ 5.0 years | 23 % | Slight increase (due to lower irradiance) |
| WA | ≈ 3.0 years | 36 % | Improved with new C&I tariffs |
Key 2025 Insights
- Daytime grid tariffs > 30 ¢/kWh are the main ROI driver.
- Installed costs have dropped ≈ 7 % year-on-year.
- 100 kW systems achieve 4.8 – 5.5 year paybacks with IRRs above 25 %.
- STC rebates still reduce capital outlay by ~ $55–65 k depending on zone.
Battery storage and VPP integration are increasingly used to manage demand charges and generate additional revenue.
Commercial Solar Payback Periods in Australian Capital Territory
| Electricity offset rate range | Payback Period | Internal Rate of Return (IRR) |
|---|---|---|
| 10 ¢/kWh – 20 ¢/kWh | ~ 3.2 years | ~ 31 % |
| 20 ¢/kWh – 30 ¢/kWh | ~ 2.9 years | ~ 35 % |
Commercial Solar Payback Periods in New South Wales
| Electricity offset rate range | Payback Period | Internal Rate of Return (IRR) |
|---|---|---|
| < 10 ¢/kWh | ~ 6.5 years | ~ 17 % |
| 10 ¢/kWh – 20 ¢/kWh | ~ 4.5 years | ~ 23 % |
| 20 ¢/kWh – 30 ¢/kWh | ~ 3.1 years | ~ 32 % |
30 ¢/kWh | ~ 2.3 years | ~ 38 %
Commercial Solar Payback Periods in Queensland
| Electricity offset rate range | Payback Period | Internal Rate of Return (IRR) |
|---|---|---|
| < 10 ¢/kWh | ~ 6.0 years | ~ 17 % |
| 10 ¢/kWh – 20 ¢/kWh | ~ 4.0 years | ~ 24 % |
| 20 ¢/kWh – 30 ¢/kWh | ~ 2.8 years | ~ 34 % |
30 ¢/kWh | ~ 1.9 years | ~ 45 %
Commercial Solar Payback Periods in South Australia
| Electricity offset rate range | Payback Period | Internal Rate of Return (IRR) |
|---|---|---|
| 10 ¢/kWh – 20 ¢/kWh | ~ 3.2 years | ~ 30 % |
| 20 ¢/kWh – 30 ¢/kWh | ~ 2.8 years | ~ 33 % |
30 ¢/kWh | ~ 2.0 years | ~ 42 %
Commercial Solar Payback Periods in Tasmania
| Electricity offset rate range | Payback Period | Internal Rate of Return (IRR) |
|---|---|---|
| 10 ¢/kWh – 20 ¢/kWh | ~ 4.8 years | ~ 23 % |
| 20 ¢/kWh – 30 ¢/kWh | ~ 4.1 years | ~ 28 % |
Commercial Solar Payback Periods in Victoria
| Electricity offset rate range | Payback Period | Internal Rate of Return (IRR) |
|---|---|---|
| < 10 ¢/kWh | ~ 7.0 years | ~ 14 % |
| 10 ¢/kWh – 20 ¢/kWh | ~ 4.8 years | ~ 21 % |
| 20 ¢/kWh – 30 ¢/kWh | ~ 2.9 years | ~ 33 % |
30 ¢/kWh | ~ 2.6 years | ~ 36 %
Commercial Solar Payback Periods Western Australia
| Electricity offset rate range | Payback Period | Internal Rate of Return (IRR) |
|---|---|---|
| 10 ¢/kWh – 20 ¢/kWh | ~ 3.5 years | ~ 28 % |
| 20 ¢/kWh – 30 ¢/kWh | ~ 2.6 years | ~ 37 % |
30 ¢/kWh | ~ 2.0 years | ~ 44 %
Request a free solar business case and compare leading commercial installers
Since 2008 Solar Choice has consulted with over 3,000 businesses around Australia and helped develop over 800MW solar commercial and solar farm projects.
- Running Cost of Air Conditioners – Explained - 7 October, 2025
- Air Conditioner Rebate South Australia: What You Need to Know - 19 September, 2025
- Air Conditioner Rebates in Queensland: What You Need to Know - 19 September, 2025
Very clear explanation.It’s really easily blog to understand people whoever don’t know commercial scale systems it’s help to them.