There was a time not so long ago when a solar photovoltaic (PV) panel system could pay for itself in fewer than 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 bit longer to pay off.
Previous government grant and rebate systems have been replaced by two main financial incentives, and there's no longer means testing for eligibility.
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 feed-in tariffs, which apply only in the ACT and NT, see households paid for all the electricity their panels produce, irrespective of their own domestic electricity consumption.
- Net feed-in tariffs apply in the other states. 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'll get a better price.
Currently, the scheme allows you to claim the certificates you can potentially earn over the next 15 years today, even if you later decide to sell the house or in the event of damage.
There are large variations between advertised payback times for panels. Some are much cheaper than others, but tend to ignore plenty of potential costs and changes. For example, no allowance is made for the decline in panels' output over time, or the likely need to replace the system's inverter later on.
"Some in the PV industry are far too simplistic about these calculations – they're being misleading," says Damien Moyse, Energy Projects and Policy Manager for the Alternative Technology Association. "They're experts in solar energy, but not in the calculations around feed-in tariffs, STCs or the variable export rates over time."
We asked the ATA to include a much more comprehensive set of costs to calculate payback times for a 2.0kW PV system in each state and territory. The table below includes recent changes to the schemes nationwide. We also encourage you to do your own sums – results from such exercises depend entirely on your inputs and on certain assumptions. For the assumptions made in calculating the payback times below, see How the ATA calculates.
|Payback times by state / territory
|State / territory
FiT rate (net /gross)
|2.0 kW system
||8.0 c/kWh (net)
||6 to 7 years
||7 to 8 years
||8.0 c/kWh (net)
||6 to 7 years
||8 to 9 years
||8.0 c/kWh (net)
||6 to 8 years
||8 to 10 years
||8.4 c/kWh (net)
||7 to 8 years
||11.2 c/kWh (net)
||6 to 7 years
||7 to 8 years
||27.8 c/kWh (gross)
How the ATA calculates
- Table correct as of June 2013.
- The calculations assume a system size of 2.0 kW, and a system cost (fully installed, before payment for STCs) of $4400.
- The STC price is $30.
- The zones used for the purpose of STC calculation were: NT: zone 1 (Alice Springs); Qld: zones 1-3; SA: zone 3; Tas: zone 4; Vic: zone 4; WA: zone 3 (Perth); NSW: zone 3 (Sydney); ACT: zone 3.
- The electricity export rates for net feed-in jurisdictions assume households export 30% and 50% of the electricity they produce; 100% export for NT and ACT.
- The system degradation rate is 0.5% per annum with 20% generation losses and inverter replacement (after 15 years) costing $800.
- The annual increase in retail electricity price is assumed to be 0.25% (equivalent to 6.4% increase over 25 years).
- The opportunity cost of money that could have been invested instead is 5%.
- The payback table is approximate as it depends on your inputs and assumptions. Allowances should be made for the differing decline in panels' output over time and non-optimal placement and angle.
- Annual generation for the two locations within each state are calculated using the following formula: Annual generation [MWh] = System Size [kW] x PSH x 365 x (100% – Generation Losses) / 1000 (Where: Generation Losses was 20%).
Member experiences with solar panels
When we asked CHOICE members who had solar PV in their homes about their experiences, the responses were largely positive. Charlie said: "Yes [we are] happy with ours. It will take many years to pay ours back, but that's what we expected because of living in Tasmania. But part of the reason we did it is to help the environment, not just us."
NSW resident Ron installed a 5kW grid connect system, 27 panels, which set him back $21,000 in 2011. "I get a cheque for about $400 per quarter, it halves my electricity bill … the capital investment payback is about nine or ten years, not accounting for inflation."
Solar panel case studies
Joe, Sydney, NSW; two-person household
Joe installed his 1.5kW system in 2011, just after the NSW 60c and 20c feed-in tariffs were scrapped. He paid $4479 for his system, including a $400 connection fee, after selling STCs. Joe's energy use has increased since the installation of the solar panel due to work he's been doing around the house.
Joe gets roughly $20–30 back with every bill. While he's glad he installed solar, he doesn't think it's been worthwhile financially due to the relatively high cost of the installation versus the low FiT. "The initial cost versus the long term cost at the current FiT is not economically worth it," he says. "I should have signed the contract when the FiT was 60c, or even 20c."
Paul, Melbourne, Victoria; two-person household
Paul paid $2400 after STCs for his 1.5kW system in early 2011, and is much happier with the return on his investment. With a saving of around $400–500 per year, his payback time is relatively speedy. However, he did have issues with the installation of the system, which is unsurprising considering CHOICE's 2011 investigation into dodgy solar panel installation. "The wiring wasn't completed properly and nearly burnt my house down," he says. "Also, it took nine months to get a bill from the energy company after completion."
Jaime, Gympie, Queensland; five-person household
With three children, Jaime and her husband Gary have a bigger household, so installed a larger 3.04kW system that cost $8824 after STCs in mid-2011. They've wiped out their energy bills entirely, and make an extra $800 in FiT per year. "We both believe it has been worth it, [even though initially] Gary had reservations before purchasing the system and wasn't certain that it was a good idea," says Jaime. "Although it is going to take a long time to recoup the cost of the system we also like the fact that our system puts back into the grid much more electricity than we use."
Frequently asked questions
Here at CHOICE there are some questions we get asked all the time when it comes to solar PV installations. We put those questions to Damien Moyse from the ATA.
Q: Is now a good time to install solar power?
A: Yes. The payback times in all the states and territories are pretty good now, mainly because the technology is so cheap at the moment. It's hard to imagine it can stay at this level as it's not much above the cost price of the gear and the labour costs.
Q: Why do the payback times promised by installers end up being inaccurate?
A: A payback time's calculation is complex, with 15 or more different variables, and no consumer system is the same. When you see a quoted claim by a supplier, it's based on the supplier's assumptions, which may be different to your reality. The best thing to do is to get your energy consumption data over as long a period as possible – ideally longer than 12 months – and think really hard about when you use electricity in your house, and make a calculation based on your individual numbers. Visit the ATA for a calculator.
Q: Can suppliers be held to their payback times promises?
A: Most suppliers will give you a range for the amount your electricity bill will go down, and have disclaimers on their websites or in their terms and conditions saying you need to get specific financial advice for how it will affect your property, and that these are just generic estimates.
Q: Is bigger better?
A: No. You need to understand how much electricity you use in your home between roughly 9.00am and 5.00pm (when your PV system is generating at its peak) and match the size of your system to that consumption pattern. If you don't consume much energy during the day then you'll want a smaller system that just feeds your fridge. If you have a family at home during the day, you'll need a bigger system. Nowadays you don't get much money back from feeding electricity back into the grid, and you actually pay more for the electricity you use than you get in FiT. So you want to maximise your own usage of your solar PV, and minimise your export into the grid. That's why exporting less to the grid shortens your payback times.
Q: Is there an environmental reason to export energy into the grid?
A: The best thing to do is reduce your electricity use as much as possible and then produce the electricity you need from a renewable source. There's still an environmental cost to manufacturing the solar cells themselves.
Q: Are there any particularly good or bad brands out there?
A: A brand will have models that are good and others that aren't. You can tell a decent piece of equipment by the warranty a manufacturer is willing to offer. Panels are really quite simple technology, so you should get a 25-year warranty with 80% level of output in the 25th year. The inverters are more critical: if you have a poor inverter you may have a lot of losses through the system, and you don't want to replace your inverter early. A 10-year warranty for that should ensure you'll get a decent-quality system.
There is no credence to the anti-Chinese solar PV bias. It's really too simplistic to say Chinese stuff is bad. Look at the specifications and performance data sheets, and look at the warranties being offered. If they're only offering a two- or three-year warranty, it's pretty clear that it's a cheaply made product that might have a high failure rate.
Q: Are prices going to come down even more?
A: Grid-connected solar systems are unlikely to cost any less than they are now. The predictions are that over the next couple of years solar prices will go up.
Solar panel checklist
- Buy accredited products.
- Use an accredited installer who is a signatory to the Clean Energy Council's voluntary code of conduct.
- Get a 25-year warranty for your panels, from a company you can be confident will still be around for the long-term.
- Check your eligibility for rebates and payments.
- Ensure your house is suitable.
- Check whether council approval is required.