Home Solar Power Systems – All You Need to Know

How Solar Energy Works step by step

If you are going to get a solar power system installed on your home, we suggest you read this guide to understand the basics first. Solar Choice is an independent organization with no bias to product brands or different types of solar designs.

The Basics: How does solar power work in Australia?

The vast majority of residential solar power systems in Australia are grid-connected systems without a solar battery. If you are starting from scratch, to get a full explanation of the diagram in the top image – click here.

Grid-connected home solar power systemGrid-connected systems enable you to keep your connection to the grid to buy power at night-times (and when its cloudy). Your solar inverter will work harmoniously with grid power to intelligently use all solar power first and before drawing any power from the grid. Grid-connected solar systems also enable you to sell power back to the grid. Generally speaking, it is not feasible or economically viable to disconnect from the grid altogether.

Off-grid home solar power system with a solar batteryOff-grid systems are a standalone power source including solar and batteries to provide a 24 hour power solution and not requiring any grid connection. These are more common in new construction projects in rural parts of Australia as often properties can be quoted over $50,000 to simply connect to the grid. In those scenarios, it can be economically and environmentally a better choice to put in a Solar and Battery standalone power system to support the new home. It will have a large upfront cost (usually min. $25,000) but power will be free from there-on through its lifetime.

Hybrid solar power and solar battery systemHybrid solar systems are grid-connected system that include a solar battery to store solar energy and reuse at times when there is no solar power (i.e. night-time). Solar Batteries provide an excellent back-up power source and an ability to make greater use of your solar power, however at their current pricing they do not offer a great return on investment. In fact, in 48 scenarios we recently modelled across every state in Australia, none provided a payback period under 8 years and most scenarios were over 20 years. Given a typical battery expected lifetime is 10 years, this explains why less than 1 in 10 households are installing a battery with solar.

 

How Does Solar Power Save you Money?

In order to assess whether it’s a worthwhile investment, first its important to understand how having solar panels installed will reduce your electricity bill. We are ignoring the environmental benefits for now!

 

  1. Offsetting your energy consumption

The primary way in which solar can help you tackle your energy costs is by reducing the amount of electricity you need to buy from your electricity retailer, which typically will cost between 15-40c per kWh. A grid-connected solar system will prioritise solar energy and harmoniously supply any remaining energy needs from the grid. A typical household may expect to offset 30% to 70% of their energy usage with solar panels depending on how much of their electricity usage is consumed during daylight hours. This offset percentage can get closer to 100% by installing a battery storage system.

 

  1. Feed in tariff for excess energy

The amount of energy generated by your solar panel system is dictated by the sun, not your energy consumption, so there will be times when surplus energy is created and can be sold back to the grid for a rate called a ‘feed in tariff’. These feed in tariffs vary by state and which electricity retailer (e.g. AGL, Origin etc.) you are with. Typically you can usually find a feed in tariff between 3-12c per kWh. Your ability to access a feed in tariff is usually limited to a maximum solar system size – for a full explanation of what is possible state by state read this guide.

 

On an electricity bill you will notice that the quantity of energy you are buying will reduce after solar is installed, and you will see an additional line item for the Feed-in credit.

Australian electricity bill with home solar impact highlighted

 

Some options for increasing self-consumption

Increasing your self-consumption of solar energy will reduce your energy bills. To improve your return on investment you can consider applying a timer on common household appliances, such as:

  • Electric hot water system
  • Washing machine
  • Dishwasher
  • Swimming pool pump
  • Underfloor heating system

You can buy programable wall-socket timers from a hardware store for under $50 or an electrician can install one for you.

 

How much will I save on my electricity bill?

To work out how much you will save on your energy bill, you first need to work out what the right system size is for your needs. As discussed above, you save money by offsetting the amount of electricity you are buying (self-consumed energy) and by selling electricity for a feed-in tariff. As there are different rates for buying and selling energy, understanding how much solar energy you will be self-consuming is important in estimating your savings.

Simple solar payback period free calculatorUsing the Solar Choice advanced calculator we have created the below 5 scenarios which looks at the savings from different system sizes with some typical assumptions made on energy consumption. We suggest you have a play with one or both of our free to use calculators:

  1. Easy to use calculator
  2. Advanced calculator for more precise results

 

System SizeAve. Daily Solar Energy Created (kWh)Ave. Daily Electricity Usage (kWh)Annual savings from self-consumptionAnnual savings from Feed-in TariffAnnual Total Savings
3kW10.210$360$225$585
5kW1720$692$350$1,042
6.6kW22.525$876$472$1,348
8kW27.230$1,053$575$1,628
10kW34.140$1,384$700$2,084

Assumptions:

  • Solar panels installed in Sydney at 30 degree slope to north. See examples of output of systems from Brisbane, Melbourne, Canberra, Adelaide, Perth, Hobart or Darwin
  • Electricity price of $0.25 per kWh and a Solar Feed-in rate of $0.07 per kWh
  • Electricity usage is focused in mornings (6am to 8am) and the evenings (4pm til 10pm) – under the ‘double peak’ profile

 

How much does home solar cost?

The price of solar depends on where you live, what type of system and products you select and which solar company you sign up with. As part of our free compare the market service we collect live and up to date price information from 100s of solar installers around Australia and we publish average pricing by capital city on the Solar Price Index:

 

 3kW4kW5kW6kW7kW10kW
All$3,870$4,610$5,060$5,730$6,850$9,700
Adelaide, SA$3,410$4,040$4,450$4,940$5,960$8,400
Brisbane, QLD$3,750$4,330$4,690$5,040$6,530$9,990
Canberra, ACT$3,030$4,250$4,420$5,050$6,220$7,830
Darwin, NT$5,960$7,450$8,400$9,690$10,930$13,210
Hobart, TAS$4,440$4,970$5,580$6,760$6,770$10,900
Melbourne, VIC$4,140$4,730$5,330$5,830$7,490$10,770
Sydney, NSW$3,400$3,950$4,300$4,750$5,820$7,450
Perth, WA$2,850$3,140$3,280$3,770$5,090$9,010

Note the average prices in the above table include:

  • A full turnkey system – all products, labour, equipment hire
  • The government STC rebate (more on this below)
  • GST

 

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

 

Over time the cost of solar has decreased dramatically mainly from the reduction in equipment costs through increase manufacturing scale and improved efficiency of products.

Solar Panel Price History

Beware of cheap solar!

Inevitably once you start looking into solar you will start to come across some ‘too good to be true’ prices for solar – One Time Offer $2,500 for 6.6kW! We recommend treating these companies with caution as usually they are making major sacrifices on customer servicing, product quality and installation procedures. See this ABC coverage which covers some examples of what can go wrong.

They may be offering a 10 year + warranty on their installs or products but that warranty is only valuable to you if the company is still around and there is a clear Australian warranty claim process. We receive many phone calls from orphaned customers from years ago who are trying to contact Chinese factories to claim warranty.

Ultimately if it looks too cheap, it probably is, and a too cheap solution will cost you more in the long run than a well-priced system.

Always do you research on the solar installation company and the products they are offering. See our 5 questions you should ask your installer or email us or call us on 1300 787 273 if you need any help.

What extra costs should I prepare for?

There are a range of additional costs that could apply in residential projects. Fortunately as part of our online quote comparison service we ask installers to advise what they would charge for the common extras that come up. See below table to see if any of these common items would apply to your home:

Extra CostRange based on our price databaseReason
2 Story Building$200 to $800Need to use edge protection and hire a scissor lift
Tile Roof$10-$50 per panelExtra work required for installers as they need to remove many tiles to fasten mounting structure to roof battens
Kliplok Roof Sheeting$10-$50 per panelSpecialised non-penetrative clamps required which are not required for other roof materials
Tilt Frames$25 to $50 per panelUsually only required if your roof is south-facing or completely flat to correct tilt or prevent dirt build up
Switchboard upgrade$1000+No electrical contractor can install solar on a switchboard that isn’t to code without replacing it first
3-phase properties$500+Properties with a 3-phase power supply require compatible solar inverters that are more expensive than single-phase inverters

 

What about batteries?

Solar battery image with positive and negative anodesCurrently batteries cost are approximately $1,000 per kilowatt-hour (kWh) of capacity installed. This means a typical home battery would cost around $10,000. As we’ve demonstrated in-depth, the economic case for solar batteries is not quite there yet. We expect that batteries will become viable for homeowners in the next 2-5 years, but that depends on manufacturers significantly increasing their scale of production.

 

Understanding Australia’s solar rebate

Introduced in 2011, the Small-scale Renewable Energy Scheme (SRES) was introduced to support the uptake of renewable energy in Australia. The SRES works by issuing Small-scale Technology Certificates (STCs) to homes & businesses that install systems under 100 kilowatts (kW) in terms of the DC Solar Panel capacity. The STCs are officially created once a Clean Energy Council accredited Solar Installer has commissioned the system. The Solar Installer sells the STCs either on the market themselves or via a broker/aggregator, meaning the end-customer only needs to pay the difference.

How are STCs calculated?

The STCs are based on the amount of renewable energy your system will generate before the end of 2030. This means STCs are calculated based on your postcode, the solar panel capacity of your system and the time left until 2030. The length of time before 2030 changes annually on the 1st of January, so there will be a slight difference to the rebate value if you install your system after each new year. Roughly speaking the rebate equates to around 30-35% of the total system cost.

 

Solar Payback Periods

Now you have the pieces to work out your return on investment (Upfront cost of solar, the amount of electricity bill you can offset and earnings from selling solar electricity at a solar feed-in rate)

As a quick guide we have created the below table using some conservative assumptions for a typical residential scenario with a 5kW solar PV system:

 

Average price for 5kW solar system (after rebate)Price of electricity
($/kWh)
Solar feed-in tariff 
($/kWh)
Payback period
(years)
Internal rate of return 
Adelaide$3,730$0.34$0.113.430%
Brisbane$5,120$0.23$0.154.223%
Canberra$4,540$0.21$0.086.015%
Darwin$9,510$0.26$0.244.721%
Hobart$5,600$0.26$0.097.213%
Melbourne$4,870$0.25$0.125.318%
Perth$3,120$0.27$0.073.727%
Sydney$4,510$0.25$0.114.920%
Average$6,523$0.25$0.125.818%

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

You can calculate your own circumstances with our Free Solar Payback Calculator (also see our advanced version)

 

Selecting good quality solar equipment

Good quality solar equipment logo stampAs with many purchases, there are high quality products, cost-effective products and cheap and nasty products that will cause more problems than benefits. Solar is a long term investment and given it requires accredited electricians to fix issues and replace equipment, our advice is stick with the good brands.

While there is no substitute to good old-fashioned research, we have identified three easy tests to determine if a solar panel brand is ‘good’. Firstly you can look at Bloomberg NEF’s tier 1 ranking. This ranking highlights the most financially secure solar panel manufacturers which is an indicator of whether they are likely to be around if you need to claim warranty. As a second test, you can see if the solar panel brand is mentioned as a ‘top performer’ in PV Evolution Labs independent testing which is completed every year. Finally through some googling you should be able to establish whether the manufacturer has an Australian office and contact number. If you installer is no longer around this will be crucial if you need to claim warranty directly.

To see a list of brands that meet these tests – head to our Solar Panels Comparison Page. We have also independently written a review on almost all Solar Panels, Inverters and Batteries on our Product Reviews Page.

 

Selecting a ‘good’ solar installer

Selecting a good solar installer is more difficult. Over the last 12 years we have vetted over 1,000 solar installation companies to be part of our comparison service. You can click the link below to instantly compare quotes from good solar installers.

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

 

Solar Choice’s Due Diligence Process:

ProcessMinimum Requirements
1.      Verify company trading history via ABN Lookup

 

1 year trading history (ideally 5 years +)
2.      Check publicly listed reviews (Google reviews, Product Review, Trust pilot etc.)Minimum of 20 five-star reviews and over four-star average
3.      Check Clean Energy Council accreditation, Energy Contractors Licence and Masters Electrician membershipClean Energy Council accredited for design and install of grid-connected Solar PV systems
4.      Check products they are putting as their standard offers on the Solar Choice comparison portalNo ‘cheap and nasty’ products
5.      Request feedback from each customer 6 months after install is completedCustomer reported issues are very rare. Any identified customer issues are resolved promptly and fairly.

 

Get in touch with us

Still have questions. Feel free to browse through the hundreds of useful articles on our site and blog or get in touch with us directly:

Call on Monday to Friday (9am to 5pm) on 1300 787 273

or

Email us anytime at sales@solarchoice.net.au