Why Solar Panel makes a good investment

April 30, 2019

Solar energy is the best alternative to increase your independence from the grid while at the same time contributing to making Australia more sustainable by reducing our reliance on fossil power plants.

Also, Australia has become one of the few spots in the world where solar energy provides the largest savings over time. This is because Australia has one of the highest electricity rates in the world, especially in South Australia, New South Wales, and Queensland. At the same time, the country has an amazing solar resource (especially in the North and West side of Australia) that makes it the most suitable scenario to install solar panels.

ReasonSolargis

Figure 1. Comparison of electricity rates across the world (left) and Australia Solar Resource (right). Sources: Reason and Solargis

Moreover, the development of renewable energy policies in Australia also adds an additional incentive for you to go solar.

Each State offers a rebate or grant that supports the installation of solar power systems in the residential and commercial sectors.

For instance, the Australian Capital Territories (ACT) government through its Low Income Program offers a subsidy to cover up to 50% of the capital cost of the PV system with a 3-year interest-free loan.

New South Wales (NSW) also offers the possibility to apply for a free 2.5 kW PV system to become part of the first program for energy storage integration in the power grid.

South Australia (SA) also offers an incredible rebate that can reach up to $5,000 depending on the size of the PV system up to 20kW.

On the other hand, the Victorian government offers the Solar Homes Package Scheme where applicants can opt for a maximum rebate of up to $2,225 and have access to an interest-free loan scheme that will give eligible households the possibility to install solar panels at home. This scheme will open in July 2019.

Different options for rebates are available in other states as well such as Queensland.

While in Tasmania, Northern Territories, and Western Australia there are non-existing rebates, you can also apply for a Feed-in tariff scheme. This scheme offers a fixed tariff for every excess kWh that is injected into the grid. In other words, the solar energy that you do not use and that is connected to the power grid, will be paid by the utility or electricity retailer. This scheme is available in every State, and payment options vary according to market price values, typically ranging between 6c/kWh (NSW) and 26c/kWh (NT).

Australia also offers the Small-scale Renewable Energy Scheme (SRES) that is a Federal Level Solar Rebate that offers Small-scale Technology Certificates (STC) which can be obtained by installing a PV system and can be traded with electricity retailers for every MWh generated by the PV system at a value close to $35 per MWh generated, every year.

When you balance all of these factors with electricity savings and solar system costs as well (which vary typically between $1 and $1.3 per watt in 2019), then you realize that solar power is a great investment.

To have a better idea of the potential savings that could be expected in electricity without taking into account the additional rebate of a State, we can use PVWatts to take a look at a solar estimation for a typical household that wishes to install a 5kW grid-tied PV system based in Adelaide, SA,

PVWatts

Figure 2. Annual electricity savings for a 15kW system in Adelaide. Source: PVWatts

By knowing that annual savings on electricity would be close to $2,701, then we can estimate total electricity savings over the life of the PV system (at least 25 years). This estimation is made considering 30% in PV system losses taking into account degradation factors, typical PV losses and generation-consumption offset. Below we can see a chart with this value, as well as the total cost of the PV system assuming an average cost per watt of $1.23 (Adelaide case) and the estimated ROI.

Electricity rate is assumed at $0.43/kWh (South Australia case) and the PV system costs as of April 2019 are estimated according to market data taking into account solar panel, string inverter, cabling and mounting equipment supply and installation. The PV system cost already includes the federal level rebate of the small-scale renewable energy scheme (STC)

Location

PV system size

Annual savings on electricity

25-year period savings

Total PV system costs

Net Savings in Electricity

Estimated ROI

Adelaide (SA)

5kW

$2,701

$67,525

$6,150

$61,375

2.5 years

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