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Do solar panels save you money?

Updated: 30 September 2020

For most Australian residents, going solar is fast becoming the new norm. With the cost of electricity rising by the day, you might as well take advantage of the generous rebates and get a system installed yourself.

The truth is solar is a great investment and will save you tens of thousands of dollars over their lifetime. Investing in solar panels is a long-term investment, but they pay for themselves relatively quickly. Since you’ll be generating most of your home’s power, getting solar panels installed saves you lots of money.

Do solar panels save you money

How much money do you save?

Your savings with solar is greatly determined by the average cost per kWh of your state.  This is because each state has its own rules and policies which affect their prices.

This graph represents how much you will save by system size Australia wide.

System sizeNo. of panelsAverage yearly savingLifetime saving
1.5KW6$690$15,525
2KW8$986$22,185
3KW12$1,478$33,255
4KW16$1,971$44,437
5KW20$2,364$53,190
6KW24$2,981$67,072
7KW28$3,565$80,212
8KW32$3,952$88,920

If you live in a state with a higher kWh cost, you’re likely to save more going solar than a person from a state with a lower kWh cost.

Here’s a table indicating the average cost of power across four states in the country.

solar-money-saved-and-pay-back-period700x412

Keep in mind; your solar savings refers to the utility costs you’ve avoided by going solar.

So, assuming your home consumes 600kWh per month, using the power rates from Queensland, your monthly bill comes up to $130.08. For the year, you spend $1560.96 on power bills.

If you invest in a solar system, say a 6kWh producing 750kWh per month, for $5,240, you’ll save the $1560.96 and also the extra 150kWh in feed-in tariffs if you fed it back to the grid. If your feed-in rates are at 15c per kWh, then you’ll have an extra $22.5 monthly or $270 annually.

As such, your total savings will be $1560.96 + $270 = $1830.96 every year.

At this rate, your solar system will pay itself back within 3 years of its lifetime.

StateAverage usage rates (c/KWH)
Queensland21.68
New South Wales24.68
South Australia35.25
Victoria22.91

What determines how much you save?

While it’s clear that you can save more than $1500 every year by going solar, not everyone will get this result. There are several factors (besides your state and location) that affect how much you can save from solar. This includes:

The size of your solar system  

Different solar systems generate varying amounts of power during the day. The larger your system is, the more electricity it can generate, and thus, the more savings you’ll gain.  If you have a large system like the 6kWh in the example above, expect to save more than a home using a 3kWh system.

Your power consumption

Your monthly power usage also determines how much you’ll save by going solar. Generally, homes with higher power demand will save more than those with lower energy demand. Your electricity consumption will also determine the solar system size appropriate for your home.

solar system saves you money

How do solar panels save you money?

There are two main ways in which solar panels save you money. This includes cutting down your power bills and also feed-in tariff income.

By installing solar panels for your home, you reduce your household’s dependence on electricity from your utility company. So, as electricity prices skyrocket, generating your electricity through solar means, you’re saving a lot of money that you’d have otherwise spent on electric bills.

The best thing about solar energy is that you can store it in batteries. Therefore, even if you’re never home during the day to use it, it’s available at night. This helps cut down most of your power costs.

The feed-in tariffs program in Australia is also a great way to save money. If your solar system produces more energy than you consume at the house, this program allows you to send back the excess power to the grid for a small incentive.

While the feed-in tariff rates differ depending on your state and utility company, the price ranges from 15c/kWh to 22c/kWh. This rebate given can go a long way to offsetting your power bills.

Additionally, having solar panels on your home is also known to increase the value of your home. You’ll therefore fetch a lot more if it’s on the market, and even charge slightly higher rents to tenants.

How much do solar panels cost?

You’ve probably heard that the price of solar panels is plummeting down – which is true. Owing to the government’s solar rebate program and the influx of solar manufacturers in the market, the price of solar panels is now more affordable to homeowners.

The average cost of solar panels for a 5kWh system is roughly $5,250. However, this price can go as high as $9000, depending on your energy demand and solar brand. These prices, however, vary from state to state and the number of solar panels needed.

Here’s a breakdown showing the average cost of solar panels by size.

System sizeNo. of panelsPrice range
1.5KW6$2,600 – $3,900
2KW8$3,000 -$4,600
3KW12$3,400 – $4,900
4KW16$4,000 – $5,900
5KW20$5,000 – $7,800
6KW24$5,500 – $8,700
7KW28$6,300 – $9,500
8KW32$7,500 – $10,500
10KW38$9,500 – $13,000

Your location in Australia is also a key factor affecting the price of solar panels. You’ll notice that prices in Queensland, Victoria, and New South Wales are much higher than those in Western Australia, South Australia, and the Australian Capital Territory.

This difference is brought about by the different zone ratings of each part of Australia, as outlined by the Small-scale Renewable Energy Scheme (SRES).

Under this scheme, a homeowner looking to install solar get rebates and discounts through Small-scale Technology Certificate (STCs). Here’s a formula calculate the numbers of STCs, you should receive;

System Size x Zone rating x Years remaining (until 2030) = Number of STCs.

The more STCs you have, the less you’ll pay for the solar panels.

average cost of solar panels

Electric bill after solar panels

With a fully functioning solar system running in your home, you should notice a significant decline in your monthly energy bills, right from the first month.

Depending on the size of your system and your energy consumption, the decrease can be as high as 50% – 80%. It might be harder to eliminate 100% power bills from your utility company due to the different factors affecting your daily production.

So, assuming your average kilowatt usage monthly is 500kWh at 25cents/kWh your monthly bill will be approximately $125.

Now with a 5kWh solar system producing 600kWh monthly at 20cents/kWh, you’ll save $100 on your bills. An extra 100kWh can be fed back to the grid at the base rate of 8 cents and generate you $8.

So, in total, your monthly saving will be $100 + $8 = $108.

Your monthly bill will therefore be approximately, $125 – $108 = $17

Do you still have an electric bill with solar panels?

Yes! Based on the calculations above, you should expect to pay a small amount in your electric bills to your utility company monthly. Remember, during winter or cloudy seasons, the efficiency of your solar system will be reduced. This means more reliance on your utility company.

Therefore, going solar doesn’t mean going off the grid – you’ll still need it.

You can, however, have some net-zero months, but that is rare, and you’ll still pay a small fee to the utility company for their losses. If your input into the grid is high, you may also receive negative bills, which means you’re a net energy seller for that month.

In such a case, this balance will be rolled over to offset the next month’s bill.

Is it worth getting solar panels?

Yes! Getting solar panels, in general, is a good investment for everyone. It not only helps cut down your power bills, but solar panels also generate clean energy, which is good for the environment. Solar panels also last for almost 30 years and, thus, will serve you for a long time.

Depending on the size of your system and the solar intensity of your region, solar panels also have a relatively fast ROI. Usually, the ROI for most panels is between 4-6 years, but it can be as short as three years.

And contrary to popular belief, solar energy works perfectly at night and also during those cloudy days. All you need is a good solar battery, and you’re good to go.

Moreover, the presence of government incentive programs such as the SRES makes solar installation very affordable.

Nonetheless, if you live in areas with low sunlight intensity, going solar may not be as effective as it is in areas with better penetration. Therefore, your ROI may take a longer time, and the impact of solar on your monthly bill may be lower than you expected.

But in the long run, investing in solar panels will always lead to more savings regardless of your location or the size of your system.

FAQ

Solar panels generate enough electricity from the sun to run most activities in your home. This reduces your dependence on power from your utility company and, consequently, reduces your power bills.

Absolutely. Solar panels have a relatively short payback period i.e., 3-5 years, allowing you to cut down your power expenses and conserve the environment.  Solar panels also increase the value of your home, which is great when you’re looking to sell or rent it.

Ben McInerney head shotAuthor: Ben McInerney is a renewable energy enthusiast with the goal of helping more Australians understand solar systems to make the best choice before they purchase. Having an accredited solar installer in the family helps give Ben access to the correct information, which allows him to break it down and make it easily understandable to the average homeowner.