Is home solar power in Australia still worth it in 2021?

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Solar Energy provides many benefits for the environment, this article examines the costs, benefits and payback period of installing solar panels on a residential rooftop.

 

What is the average cost of solar in Australia?

For those looking for the cost of solar power in Australia, Solar Choice publishes a solar price index each month with the current pricing state by state, for different system sizes. The pricing the below table includes the upfront STC rebate provided by the federal government but excludes any additional state incentives like the Victorian Rebate Scheme.

 3kW4kW5kW6kW7kW10kW
All$4,020$4,650$5,090$5,700$6,700$9,180
Adelaide, SA$3,630$4,190$4,440$4,560$6,010$8,160
Brisbane, QLD$3,830$4,280$4,720$5,160$6,470$9,350
Canberra, ACT$3,770$4,700$5,040$5,780$6,550$8,990
Darwin, NT$5,870$7,160$8,120$9,330$10,540$12,140
Hobart, TAS$4,960$5,600$5,990$6,870$7,330$11,210
Melbourne, VIC$3,930$4,290$4,620$4,920$5,680$8,180
Sydney, NSW$3,340$3,830$4,240$4,880$5,780$7,450
Perth, WA$2,850$3,170$3,520$4,070$5,230$7,990

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History of Solar Panel Prices

In the early days (pre 2010) Solar prices were around $5 to $10 per watt and was really only taken up by the early adopters with greater financial means. The popularity of solar has been driven in part by the decreasing costs and also by an attractive federal STC scheme which offers up to 40% of the cost of the system via a government incentive. Over the last 5 years solar prices have continued to decrease dramatically as product manufacturers have reached economies of scale with production and as installation methods have been streamlined. Solar Choice’s price index has been recorded monthly since 2012 where solar was almost 3 times more expensive.

 

Solar Choice Price Index as at January 2021

Future Solar System Prices

Many people in the solar industry expect the price of solar systems to continue to decline at a much slower pace. Improvements in cell efficiency and panel designs continue to improve the way solar can deliver benefits but most of the costly production processes have already been rebuilt and benefits passed through to consumers.

 

How do you benefit from solar panels (financially)

 

There are 2 main ways in which a home solar system offer benefits, both of which have the effect of reducing your energy bill.

1. Offsetting your energy consumption

The primary way in which solar can help you tackle your energy costs is by reducing the amount you need to buy from your electricity retailer which typically will cost between 20-40c per kWh. Solar systems are installed with the smarts that tell your appliances to use solar power first before ‘buying’ energy from the grid. This is usually referred to as ‘self-consuming’ your solar energy.

2. Feed in tariff for excess energy

Any surplus energy that is generated by the system can be sold back to your energy retailer at a rate called a feed in tariff. In some states (WA and NT) these rates are fixed and in other states its up to your energy retailer what rate they offer you – view our comparison table here. In Victoria there is a mandatory minimum of 10.2c per kWh. Generally speaking, your feed in tariff rate is always lower than the rate you are buying power for. Your ability to access a feed in tariff is also usually limited to a maximum solar system size – for a full explanation of what is possible state by state read this guide.

Given that feed in tariffs are usually fairly low compared to how much you buy energy for (and rates have been dropping lately) it usually doesn’t make sense to go for a large system size unless you have large energy usage. Maintaining a high ‘solar self-consumption’ rate will help you optimise your return on investment.

 

Payback Periods for Solar in 2021

 

To determine the payback period for your solar system we recommend using the Solar Choice payback period calculator and entering the specifics of your case. As a quick guide we have created the below table using some conservative assumptions for a typical residential scenario for a home with an average usage of 25kWh per day and a 6.6kW solar PV system:

 

Average price for 6.6kW solar systemPrice of electricity
($/kWh)
Solar feed-in tariff 
($/kWh)
Payback period
(years)
Internal rate of return 
Adelaide$4,960$0.31$0.102.540%
Brisbane$4,960$0.16$0.054.721%
Canberra$5,200$0.20$0.103.727%
Darwin$9,330$0.26$0.085.119%
Hobart$6,940$0.27$0.094.423%
Melbourne$5,680$0.28$0.123.232%
Perth$4,030$0.29$0.072.246%
Sydney$4,920$0.21$0.053.926%

Assumptions:

    • Electricity rates & feed in tariffs based on middle ground of what’s available
    • Assumed that 50% of Solar Energy is used by the home (self-consumption rate)
    • Panels are tilted to the North at 30% pitch
    • Inflation at 2.5% and a 5% discount rate

 

Conclusion: Solar is worth it financially

As you can see, for most Australians they can install solar and have the system pay for itself within 2 – 5 years. Alternatively through a finance agreement or drawing down on the mortgage, solar can be funded cash flow positively by the savings it makes on energy bills.

Installing a good quality solar power system will also increase the value of the house and increases the potential rental yield as new owners or renters can benefit from the free energy on the roof.

Importantly installing solar power reduces a household’s carbon footprint and helps Australia on its journey to transition to 100% renewable energy sources. There is a great opportunity for a positive financial and environmental outcome.

 

Compare quotes from up to 7 installers in your area now.

 

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