Before long, their solar savings are greater than the price of the system. The time this takes is known as the ‘payback period’.
In Australia, payback times are so good that it’s possible to get your solar to pay for itself in as little as 3 years.
And you don’t just have to take our word for it. The Australian Energy Council did the maths too. They estimate it takes 3 years for a 5kW system in Sydney to pay for itself (based on average electricity prices and feed-in tariffs in April 2020).
Does this mean your system will pay for itself in 3 years?
The answer is a little more complicated than a straightforward ‘yes’.
How To Calculate Solar Payback
At its simplest, solar panel payback is calculated by dividing the total cost of the system (after the government rebate has been deducted) by the energy savings the system generates per year.
For example, if your high-quality 6.6kW system cost $8,200 to install and saves you $600 per quarter, then the payback is 3.4 years (8200 / (600 x 4) = 3.4)
But, how can you estimate the solar savings before your system is installed?
You need to drill down into more detail, including:
● Where you live (the sunnier the better)
● Your household’s energy consumption vs the size system you install
● Your feed-in tariff rate (how much you get paid by your energy retailer for your surplus solar energy)
● How much solar energy is self-consumed (the more you can use during the day, the better)
● The quality of the equipment installed (higher-performance equipment will produce more power and you save you more money)
● How the panels are positioned on your roof (eg. north, east or west)
As you can see, there are a few different variables in play.
But, there’s something else to consider.
While payback can be a useful tool to work out solar’s break-even point, it’s a blunt instrument. It doesn’t take into account the lifetime savings that your system generates. This is far more important than the short-term savings a system brings.
Lifetime Savings Are A Better Measurement
Using the above formula, a cheaper system has a shorter payback period than a higher performance system (generally by 6-12 months).
Does this mean it’s a better return on investment?
No.
A high-performance system is designed to last over 25 years. However, entry level systems only last around 10-15 years.
So while it costs more upfront, you get at least 10 extra years of free electricity with a high- performance system compared to a cheaper system – supercharging your total savings:
● Cheaper system delivering $2400 per year in savings = lifetime total of $36,000 (15 x 2400)
● High-performance system delivering $2400 per year in savings = lifetime total of $60,000 (25 x 2400)
And that’s assuming that electricity rates won’t increase in that timeframe. Which they will. Not to mention replacement costs (entry-level inverters typically last no more than 5 years).
But what do you do if the upfront cost of a high-performance system is preventing you from pulling the trigger – even with the generous government rebates?
Enter the Green Loan
Green Loans are low-interest unsecured personal loans offered by lenders who have a keen interest in the environment. They can only be used to fund energy saving products like solar panels. The loans tend to very flexible, offering:
● Low setup costs
● Low ongoing fees
● Terms between 1-5 years
● No early repayment penalties
But that’s not the best bit.
A high-performance system can save you more money every month than it costs to finance. So, you can be cash flow-positive from Day One.
Want us to crunch the numbers for you? Find out how much you can save. Contact us, call 1300 516 474 or email save@theenergyexperts.com.au
