What is solar payback time?
Solar payback times is the time that it takes for a solar panel system to pay off the initial investment made. In Victoria, it generally takes 4-7 years for a solar panel system to pay itself off, after which point a homeowner can start to experience the true financial benefits associated with solar.
It is important to understand the different factors that affect the solar payback time so that you can make a smarter purchase and maximise your return on investment. These factors include:
- The overall size of the solar panel system.
- The initial cost.
- Household energy consumption.
- The annual output of the solar panel system.
- Self-consumption of solar energy.
- Solar feed-in tariffs.
All of the above will affect how much a person can save with solar, and inherently, impact on the solar payback time.
Solar panel system size
As a general rule, larger solar panel systems generate more electricity each year. In saying that, larger systems typically incur more sizeable upfront investments, are generally more costly to maintain, and also require more regular inspections by solar providers.
Currently, the most common system size for homes in Victoria is a 6.6-kilowatt solar panel system. This is because it is the most powerful in terms of how much usable electricity it can produce – saving you more money. A 6.6-kilowatt system has also become more cost-effective in recent years due to advances in technology.
In Australia, a6.6-kilowatt (kW) system tends to be the largest for homeowners, as it fits within the capacity of single-phase power, rather than requiring three-phase power.
Single-phase power has a limit of 6.6-kilowatts for solar power systems and will be able to supply a voltage of up to 230 volts (240 for Queensland and Western Australia) to household appliances – this is within the rang of most household devices.
Three-phase power, on the other hand, can power a solar panel system that is up to 30-kilowatts and can supply power to devices requiring 400+ volts. Items requiring this kind of power are commonly industrial machinery or commercial appliances for business and production use.
The initial cost
Depending on where you are in Australia, prices for solar panel systems can vary greatly. Nevertheless, the price of a system per kilowatt has declined by almost 40% over the last six years. When this is combined with government incentives for solar power, it makes it a perfect time to invest in solar.
As of August 2020, the average price for a solar panel system was between $1,200 – $1,600 per kilowatt. This would put the average cost of a 6.6-kilowatt system to be in the region of $9,000 in Australia – with even higher costs in areas such as Hobart or Darwin.
To make solar more affordable for residents, the Federal Government currently provides an upfront incentive for new installations through the issue of Small-scale Technology Certificates (STC). In Victoria, eligible applications can also apply for the “solar homes rebate” and “solar homes loan”, both of which are worth up to $1,850. Therefore, in Victoria, it is not uncommon for homeowners to see shorter solar payback times due to the special incentives offered by the State Government.
For more information regarding solar incentives, see our previous post titled “Solar Rebates And Incentives Explained”.
Household energy consumption
Energy consumption in the home is another significant factor which influences solar payback time.
An Australian household without gas uses an average of 5,000kilowatt-hours annually. This average would now be higher for people working from home during the COVID-19 pandemic.
Household electricity consumption fluctuates depending on the following:
- The number of people in the household. The higher this number is, the more daily electronics and devices are used, therefore impacting on the amount of electricity the home consumes.
- The housing type. Suburban houses and townhouses use more electricity than units and apartments, due to requiring more power for heating, cooling, and water.
- The mix of energy that a home has. Homes without gas tend to use more electricity, but also benefit more from solar panel systems due to using more of the solar energy they produce.
- The lifestyles of the people living in the residence. Parents whose children have left home use less power. Young families with teenage children use more.