With recent increases in energy prices, the case for solar has never been stronger. While the economic case for solar has steadily improved over the years, it’s now an economic “no- brainer.”

Australia leads the world in rooftop solar. It’s estimated that 30% of Australian households have installed solar. 

Solar is not only a much better result for the environment, it is the cheapest way to generate electricity. And it makes sense, unlike burning gas or coal which constantly requires input, there are no input costs to solar. Sunshine is free!

The Quick Take:

  • Solar is a “no-brainer” for any homeowner that has a suitable roof and plans to stay in their home for greater than 5 years
  • The average annual savings for solar is $1,073 (this number was based on energy prices before the recent price rises, so it’s likely to be even greater)
  • The Net Present Value of solar systems is typically $5,000 – $10,000. The Internal Rate of Return is typically around 15%
  • With warranties of 25 years plus, solar panels will keep saving us money for a long time

 

One of the wonderful things about solar is its simplicity. Throw some panels up on the roof, connect it to the home and hey, we have free energy. The economics of solar are simple: we need to recover the cost of the solar system in energy savings before the system needs replacing. The good news here is solar panels generally last a long time, often coming with a 25 year warranty. A solar system will also need an or multiple inverters. Inverters convert the direct current (DC) electricity produced by the system to alternative current (AC) used by the households. We allow 12/13 years as a rule of thumb for inverters.

So, how much will we save from solar and is it worth it?

The short answer is ‘yes’ if:

  1. You use enough energy during the daytime, when the sun shines, and
  2. If you have a roof that is well suited to solar, and
  3. If you can afford the upfront cost of solar or if you can gain access to financing

 

1. Energy Use

Solar produces electricity when the sun shines. Savings from solar systems are low if the sun doesn’t shine or if we don’t use the energy generated during the day. The question then becomes, are you home during the day? If Mum and Dad are at work Monday to Friday and the kids are in school, then perhaps most of your energy use is at night time.

The good news is we can use data to answer this question. With the introduction of smart metres throughout Victoria, we can access 30 minute usage data. We wrote about analysing energy usage here, and using our home as a test case, while 90% of solar generation is from 9am to 5pm, only 36.5% of our usage is during the same timeframe.

 

2. Roofs

The suitability of a roof for solar generally depends on:

  • Roof space – how many panels can fit on the roof? Roofs with many pitches and angles might not have enough space.
  • Shading – are any trees blocking the sun and at what times of the day? Might there be shading issues in future. For example, have the neighbours planted fast growing trees along the border? Do you live in an area which might be attractive to property developers and a new apartment block?
  • Positioning – in Australia, we want north facing panels to capture most sunlight

 

3. Affordability

The price of solar systems is driven by the size of the system and the selection of equipment. The larger the system, the more expensive. Solar installers will look at energy bills, look at usage and size a system accordingly. Solar systems generally start at $3,500 and go upwards. A typical installation is around $5,000 after rebates. If homeowners cannot afford an upfront payment of this size, there are some innovative financing options like Brighte, National Renewable Network (not affiliated with the National Broadband Network) and Plenti.

 

Equipment & Quotes

 

We’ve looked at hundreds of solar quotes from a variety of solar installers. The quotes are confusing and it’s hard to work out the difference between them. You could easily receive 5 different brand recommendations from 5 different installers. You never know why installers make certain recommendations. Solar is a big investment and the panels need to last, so it can be a bit daunting. 

 

We, of course, help our clients through this process. For people wanting to go direct, here are some tips:

 

  1. Independent research – Choice has a section on solar panels and there are a number of independent reviews online.

  2. Size of the system – if you have the roof space, plan to live in the house for a long time, plan to electrify other appliances and have the upfront cash, bigger is better. Our view is that the electrification of everything (especially cars which use a lot of energy) is leading to increased electricity demand, so a bigger system will be worth the investment and future proof your needs.

  3. Quality lasts – if you plan to live in the house a long time, go premium. Premium panels will last longer and importantly, will perform better for longer, leading to increased savings over the long term. It’s a classic case of a bigger investment now will lead to greater returns in the future.

 

Rebates

 

Victorians may also be eligible for a $1,400 rebate on the installation of a solar system. 

To be eligible for the rebate you must meet the following conditions: you own the property, household annual combined income is less than $210,000 and the property is valued at less than $3m. An approved product must be installed by an approved retailer, which of course the team at Powrhouse are very happy to assist with. 

An interest free loan of $1,400 may also be available. You must be eligible for the rebate to be eligible for the loan.

 

Solar Calculations

 

 

Good quality solar panels have a 25 year warranty. Good quality inverters come with a 10-15 year warranty, but typically last longer. We assume we’ll replace the inverter in year 13. We’ve made no allowance for maintenance of solar panels – they should be cleaned once per year which in many cases can be done DIY.

 

Summary

 

Solar is a wonderful starting point for households that use energy during the day, have a suitable roof and can afford the installation cost. Installing solar is a wonderful place to start for Australian homeowners and is a key reason why, with about 30% penetration, Australia has the largest uptake in the world for household solar.

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