Solar panel payback times

01.Solar state of play

Installing a solar system can be expensive; the rewards come over time as the system gradually pays for itself out of the energy savings made.

In this article we look at:

• Solar incentives such as feed-in tariffs and STCs
• Payback times for a 2.0kW solar system in each state
• Case studies of households with solar photovoltaic (PV) panel systems
• Frequently asked questions regarding solar PV.

In a bid to find out how long your investment might take to pay for itself, CHOICE asked the Alternative Technology Association to calculate approximate payback times for a 2.0kW solar system in each state and territory. For more information, see How the ATA calculates.

Solar incentives

There was a time not so long ago when a solar photovoltaic panel system could pay for itself in under five years in several states in Australia. But with the winding back of feed-in tariffs (FiTs) - which have been cut around the country - and the scrapping of the multiplier for small-scale technology certificates (STCs), most new panel installations now take a little longer to pay off.

Previous government grant and rebate systems have been replaced by two main financial incentives. There’s no longer means testing for eligibility.

Feed-in tariffs

This is the rate you’re paid for electricity that grid-connected panels contribute to the local network.  There are two types of FiTs: “gross” and “net”.

Gross feed-in tariffs applied only in the ACT and NSW, where households are paid for all the electricity their panels produce, irrespective of their own domestic electricity consumption.

Net feed-in tariffs apply in the other states and territories. You’re only paid a higher rate for surplus electricity fed into the grid after domestic use is subtracted. If your system produced 3000 kWh, for example, and you used 2500 kWh of electricity in your home during the day (the time when your PV system was generating power), the higher rate is only paid for the 500 kWh difference. 

Small-scale technology certificates (STCs)

Under the Federal Government’s Solar Credits Scheme, eligible households receive money for small-scale technology certificates (STCs) created by their PV systems. STCs were formerly known as renewable energy certificates (RECs). The government uses these certificates as evidence of Australia’s contribution towards our renewable energy targets. 

The price you get will get for each STC depends on how you choose to sell your STCs, but is likely be close to $30 per STC.

The most common option is to allow someone else - most likely the installer - to sell your STCs. This may then be applied as a discount to your installation costs. The benefit is that the process is hassle free, which means all the paperwork is taken care of for you. The second option is to sell the STCs yourself, which involves considerable paperwork, applications and a few fees. Depending on the number of buyers and the time it takes to complete the process, it may be a couple of months after installation until you receive your funds. There's no way to tell exactly how long you could be waiting, which means unless you have the capital you might find yourself out of pocket. However, you will get a better price. 

Currently, the scheme allows you to claim the certificates you can potentially earn over the next 15 years today, regardless of if you later decide to sell the house or in the event of damage.