Are solar panels still worth the investment in Melbourne? It would seem so: Tens of thousands of Victorian households have installed solar PV systems in the last few years alone, with 10-15% of homes in the Melbourne area now meeting at least part of their energy needs with the sun. This article takes a look at the case for solar power in Melbourne, Victoria.
Why go solar in Melbourne?
1) Harness the sun to power your home
Australia is home to some of the best solar energy resources in the world. Although Melbourne is a bit further south than Brisbane or Sydney, there’s still enough sunshine to make panels a worthwhile investment.
According to PVWatts, a typical Melbourne home’s roof receives about 4.8 kilowatt-hours (kWh) of raw sunshine per square meter per day, while the BOM.gov.au website averages work out to about 4.18kWh. Essential, this sunlight is the ‘fuel’ for the system. If a solar PV system could be 100% efficient (which is not physically possible), a 1 kilowatt (kW) solar system in Melbourne would produce between 4.18kWh – 4.8kWh of energy per day, and a 2kW system would produce between 8.36kWh – 9.6kWh per day.
In real life, however, there are efficiency losses that must be taken into account between the time the sun hits your panels and when it exits the system’s inverter. The table below shows rough daily energy output figures for a range of popular solar system sizes if installed on a north-facing roof in the Melbourne area, assuming an efficiency loss of about 25% (to be conservative).
|Approx daily solar PV system yields in Melbourne (Popular system sizes, at 85% efficiency)|
|Solar system size (kilowatts)
||Avg daily system output (kilowatt-hours)|
|1.5kW||4.7kWh – 5.4kWh|
|2kW||6.3kWh – 7.2kWh|
|3kW||9.4kWh – 10.8kWh|
|4kW||12.5kWh – 14.4Wh|
|7kW||21.9kWh – 25.2kWh|
|10kW||31.4kWh – 36kWh|
How solar energy saves you money
When you are grid-connected with no solar system, you have to purchase all of your electricity from an energy retailer. Typically, you will pay at least 21c for every kilowatt-hour that you use.
Having solar panels will allow you to save money by reducing your need to purchase energy from the grid – every unit of solar energy that you ‘self-consume’ in your home is a unit that you do not need to pay for. You can also earn credits (a minimum of 11.3c/kWh from July 2017) for selling your energy into the grid, but you’ll save far more money by focusing on maximising your solar self-consumption.
There are two ways to ensure you’re using as much of your solar energy as possible: 1) Make sure your system is the right size for your home, and 2) Know your electricity consumption pattern and behave accordingly.
We have developed a tool to help you select a solar PV system size based on the amount of energy that you consume and your consumption pattern:
Solar Choice’s 8-point Guide to Solar & Batteries (plus FAQs)
2) Solar incentives through the federal government
Although Victoria no longer has a state-based feed-in tariff incentive, the federal government’s Renewable Energy Target contains a mechanism that reduces the up-front cost of solar installations under 100kW in capacity.
The actual value of the incentive depends on a number of factors such as location and system size, but usually works out to be about 30% of the total installation cost. This incentive has been crucial in making Australia home to some of the lowest solar PV system prices in the world.
As an example, when this incentive is applied to a 5kW solar system in Melbourne, it results in a reduction of $2,300 to $2,900 off the sticker price.
3) Solar is affordable
Thanks in great part to the RET, Australia is home to some of the lowest PV system installation prices in the world – one of the reasons that there is such a large amount of rooftop solar installed across the country. Solar Choice has been tracking price trends in Australia’s capital cities since 2012 in our monthly Solar PV Price Index articles.
The chart below (click to enlarge) tracks average solar system prices in Australia from August 2012 to early 2018. Average prices for Melbourne are represented by the light blue line. (Note that all prices are in dollars-per-watt ($/W) format to make it easy to compare pricing across system sizes.)
Instantly compare solar & battery packages in Melbourne
What about battery storage for Melbourne homes?
One way to increase solar self-consumption is to have a battery storage system installed. Although batteries can still be quite pricey, they are quickly becoming more affordable. Read more about battery storage in Melbourne or check out our analysis: What cities are best for solar battery storage in 2018?
Solar Choice now offers free battery storage price comparisons alongside our Solar Quote Comparisons.
4) Solar panels remain a good investment option in Melbourne
Melbourne homes can save hundreds of dollar per year by installing a solar PV system – which, when combined with the low system prices discussed above – translates into payback periods as short as 3-5 years, depending on how much of the solar energy your home manages to use directly. Keep in mind, however, that while lower prices don’t always necessarily mean lower quality, they should be approached with a healthy degree of caution; a solar PV system should continue to produce power for up to 25 years (with inverter replacements every 7-13 years). Any system downtime (due to component failure, for example) will result in extended payback periods – not to mention the costs that may be incurred for repairs/replacements not covered under warranty.
The table below provides an overview of the case for investing in systems of various sizes in the Melbourne area. The table below uses average system prices – keep in mind that lower system prices will deliver more impressive returns. Furthermore, we use generally conservative figures for the example below – including an efficiency rate of 75% and ‘high’ and ‘low’ solar-self consumption scenarios for each system size.
You can play with the numbers yourself using Solar Choice’s Solar System Payback & ROI Estimator tool, which will allow you to adjust variables such as system size and self-consumption ratio.
Indicative returns for solar systems @ average Melbourne prices
(Assuming 75% system efficiency, 25kWh electricity consumption/day, retail electricity @ 21c/kWh, solar feed-in rate @ 11.3c/kWh)
– Last updated February 2018 –
|@ 50% self-consumption||@ 90% self-consumption||@ 40% self-consumption||@ 80% self-consumption|
|~8.8 year payback||~6.9 year payback||~7.6 year payback||~5.8 year payback|
|~8% IRR||~13% IRR||~11% IRR||~16% IRR|
|~$420 annual savings||~$540 annual savings||~$590 annual savings||~$760 annual savings|
|@ 30% self-consumption||@ 70% self-consumption||@ 20% self-consumption||60% self-consumption|
|~7.4 year payback||~5.6 year payback||~7.5 year payback||~5.5 year payback|
|~12% IRR||~17% IRR||~12% IRR||~18% IRR|
|~$720 annual savings||~$960 annual savings||~$830 annual savings||~$1,100 annual savings|