Is rooftop solar a good investment for your home?

It’s only a matter of time before you recoup your outlay on rooftop solar. Here, we outline the factors that affect payback periods.

It’s a compelling statistic: the cost of an average-sized NSW household’s solar system has fallen by 58 per cent in the past six years, while the price of electricity continues to rise. And that’s not the only reason why installing solar at home makes good sense.

So what’s holding some home-owners back? Our research shows that confusion about how long it takes to recoup your investment in solar is one reason.

The short answer is that recouping your investment – also referred to as the payback period – varies from house to house. But the good news is that residents in the City of Sydney have some of the shortest payback periods in Australia thanks to abundant sunshine.

Solar on an Alexandria apartment block. Photo: Jessica Lindsay

What about apartment dwellers?

Rooftop solar makes good financial sense for owners corporations and can be a better way to make money than simply leaving cash in a capital-works fund. Although the following advice is tailored to those who own houses, general information about panel costs and payback periods is applicable to apartment buildings, too. For more information about the steps you need to take to install rooftop solar in apartment buildings, check out this article.

How much does rooftop solar cost?

The total price for installing rooftop solar includes:

  • solar panels

  • an inverter or inverters (which convert solar energy into usable household electricity)

  • labour for installation.

In NSW, the average cost of installing a 5kW solar system is $4440, down from about $5100 in mid-2018.

Note that the cost of a basic installation doesn’t include the price of brackets or other special equipment you may need to affix the panels to your roof.

What is the average payback period?

The amount of time it takes to recoup your investment in rooftop solar depends on three main factors:

  • how much electricity your system generates

  • how much electricity you use versus how much you sell back to the grid (the rate at which energy companies buy back your electricity) is known as a feed-in tariff

  • how much it normally costs you to buy electricity from the grid.

How to reduce your payback period

The energy your panels generate is more valuable when used at home than when sold back to the grid. That’s because feed-in tariffs are lower than the prices energy companies charge consumers.

So, to maximise the value of your system, use as much of the electricity as you can. This might mean charging battery-powered items and running appliances such as washing machines during the day (when the sun is shining).

You can further reduce your payback period by adopting energy efficiency measures to reduce the amount of electricity you need to purchase.

Photo: Jessica Lindsay

Why else is rooftop solar a good deal?

  • It’s guaranteed. These days, the vast majority of solar systems are covered by warranties that last 20 years or more. That could mean 15 years or more of free electricity generation after your payback period.

  • It makes your home more valuable. More than three quarters of Australians believe a solar system adds value to a property.

  • It increases your energy independence. Households and businesses with solar systems can avoid the inconvenience of daytime blackouts – and those with battery storage can overcome blackouts at night, too.

  • Rooftop solar helps fight climate change. And by collectively taking less fossil-fuel energy from the grid, we send a powerful signal to government and the business sector that coal-fired power should be phased out.

A note on batteries

Battery storage means you can hold on to all the electricity you generate and use it yourself, rather than sell some back to the grid. Although batteries are becoming more affordable, adding one to your rooftop solar system at this stage will considerably increase your payback period – it should be considered for environmental and energy-security reasons rather than financial benefit.

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