One reason why solar energy is widely being seen as the more viable option for Australian businesses and households is the payback period. The payback period essentially refers to the number of years taken for the total savings to outnumber the total costs of the solar panels, including installation. Total savings translate to the avoided cost of consumption, coupled with revenues received from the feed-in tariff. The total price includes the initial investment along with the time value of money.
A couple of factors determine the payback period of a solar panel system, including its size, cost, offered feed-in tariff, the prevailing price of retail electricity, and the interest rate on loans. A lot of these determinants are different for states across Australia.
The following graph represents the payback period for different sizes of solar PV systems across the country. Note that the higher the feed-in tariff offered by the local retailer, the higher the savings, the shorter the payback period. A comparative study with the previous quarter shows that the price of solar systems has not changed in Darwin and Hobart – the two states with the highest installation costs, and consequently, the highest payback period that exceeds 10 years. Melbourne also marks higher solar system costs than Adelaide, Perth, and Sydney, a discount of $120, $350, and $640 for 3kW, 4kW, and 5kW solar systems. The others have noted a fall in system prices by $40 to $140.
Note that these findings hold true only as long as the discount rate is set at 3.45%.
On the other hand, a graph for the expected payback period for systems with a discount rate of 5.49%. Melbourne has a distinct advantage when installing 5kW systems, as opposed to installing 3kW or 4kW systems. Preferring a 5kW system over the other two in Melbourne can bring down the payback period by three years. As for Adelaide, Perth, Sydney, and Brisbane, the payback period remains constant, even with higher interest rates, as illustrated in the graph below.Download AEC Report to read in details.