Is a Residential Solar System a Worthwhile Investment?
Many residential homeowners say that they are not looking at a solar system as an investment. Our response to that is they definitely should do so.
If a solar system does not stack up as investment then why not put your money somewhere that does. However, an investment return need not be considered just in terms of dollars and cents, but in dollars and sense.
If you care about this planet and your future and that of your children living on this planet, you may wish to think in terms of solar as an investment in sustainability, in reduction of carbon emission,( CO2), less use of finite resources, fossil fuel etc.
So if money is not the issue in your case, you could maximise your use of solar power just to be a good citizen of this planet.
However, most of us live in a world where money for us is also a finite resource, so it makes sense to make sure that a solar power system is a good investment.
A Solar System as a Financial Investment
How well a solar system will stack up as an investment for a residential homeowner will depend on how much electricity you use during the daytime. This aspect was irrelevant when the generous State Government Feed in Tariff of 44 cents per kW for electricity generated and fed into the grid was available. It is still payable for customers who installed a system before 1st January 2014. New installations do not receive any State Government Residential Feed in Tariff. Some Electricity retailers however, pay a Feed in Tariff, which can be up to 16 cents per kW.
The standard rate for electricity (Tariff 11) is currently around 24 cents per kWh GST, so for every kWh you generate and consume you will save 23-24 cents. A 5kW system with 6.6 kW of panels will produce on average around 27kW per day. So 27 by 24 cents is $6.48 per day, or total $2,365.20pa.
However, most families will not use all of the solar generated electricity, and the solar generated electricity not used is normally fed into the grid. You can receive up to 16.1 cents per kWh for electricity fed into the grid. With the combination of savings on solar generated electricity and the electricity fed into the grid it is possible to have a quality residential solar system pay for itself in around 3 years. That’s equivalent to a 33%pa Return on Investment! Where do you get a better investment than that? But there is more; for most homeowners this is effectively a tax-free return. If you are paying tax at 30 cents in the dollar you will need to earn 47.14%pa from a taxable investment to equal that!
Those electricity users who will benefit most from a solar system are those who consume considerable amounts of electricity during the daytime. A good system of this size will currently cost around $7,000.00, depending on your location. You can get one for less than that, but it wont be a good system with Tier 1 panels and a good European inverter and quality installation. If the residential householder used all the electricity generated, the system would pay for itself in a little over 2.5 years. However, it is unlikely that a householder would use that much electricity in the daytime.
So, if you can find a better investment than that, go for it! But remember this, the effective return will be increasing each year as electricity costs increase.
As renters we had given up on ever owning solar until we met Fred from Australian Sola Power Consultants. He helped us purchase and install a system that saves us over $3600 a year in energy costs.