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Pay-back time

How long until my system pays itself off?

				System size, kWs
	Number of panels			9	12	15	18	20	24	26	28
	Size of PV system in kilowatts		kW	1.58	2.1	2.63	3.15	3.5	4.2	4.55	4.9
	Average daily output in kilowatt hours		kWh/day	6.32	8.4	10.52	12.6	14	16.8	18.2	19.6
	(1 kW of panels produces an average 4kWhours per day in Melbourne)
	Amount used by average household during period when sun is shining	2.5	kWh	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5
	Savings (assumes 2.5kWh used per day, at 20 cents/kWh)			$182.50	$182.50	$182.50	$182.50	$182.50	$182.50	$182.50	$182.50
	Solar buy-back		kWh	3.82	5.9	8.02	10.1	11.5	14.3	15.7	17.1
	Assumes the rest of your output is sold back to the grid at 60c/kWh	0.60	365	$837	$1,292	$1,756	$2,212	$2,519	$3,132	$3,438	$3,745
	What you save each year			$1,019	$1,475	$1,939	$2,394	$2,701	$3,314	$3,621	$3,927
	($182.50 plus solar buyback amount)
	Price of solar PV systems			$4,200	$6,400	$8,750	$10,500	$11,800	$14,700	$15,700	18,200
	Years to pay off			4.1	4.3	4.5	4.4	4.4	4.4	4.3	4.0
	Amount you would save in the next 10 years			$10,191	$14,746	$19,389	$23,944	$27,010	$33,142	$36,208	$39,274
Note this is based on Sept 2010 prices. Some lower prices are now available for which pay-back is quicker.
This estimate is based on a survey of 50 Melbourne homes with small (1kW) systems. They had used about 2.5kWh of electricity from their PV systems, and exported 1.5kWhs each day on average.
kilowatt-hours per day on average.
Note - this is a simple calculation: no allowance is made for borrowing to buy the system,
and there is likewise no allowance for expected increases in the price of electricity.
Assumptions: electricity use is about average for Australia (as was the case for the 50 Melbourne households studied.)
The State Government feed-in tariff continues for 15 years (as promised by the government).
Inverters are under warrantee for 5 years, extendable to 20 but may require replacement during this period.
Maintenance, such as an annual wash is not included. We expect the panels will last for 30+ years.

At current electricity prices it would take 4years for your system to pay itself off.
This is partly due to savings from your household’s electricity usage but the main benefit is the Victorian Government’s 60 cent feed-in tariff, paid for the excess power your solar panels produce. Savings from your own electricity usage, plus the feed in tariff, could earn about $850 a year. The less power your household uses in the day-time, the more is exported.
Electricity prices are expected to rise sharply so the system could actually pay itself off in as little as 4 years. Once the system has paid itself off you will have many years of free electricity, and perhaps an income of around $650 from the feed-in tariff. The panels are under warranty for 25 years.

The $8000 rebate has ended, but 1.5kW systems have never been cheaper.
Small solar electric systems were cheap under the Federal Government’s $8000 rebate (scrapped in June 2009). But that rebate was capped at 1kW.
Larger systems were expensive, e.g. in 2007/8, a solar shop was selling 1.5kW systems for $17,500. Even after the $8000 rebate they still cost $9,500. Now, with Solar Credits and a bulk-buy we can bring the price down to $4580 – less than half the cost two years ago.
1kW systems only produce about 4kWh a day of electricity, not enough for a normal household. It is good thing that the government has extended the Solar Credits rebate to cover 1.5kW systems, as it encourages people to buy a bigger system. Larger ones (2 or 3kWs) are also available.

How long will THIS rebate last? We do not know for sure, as Government policy in this area is constantly changing. It may be wise to grab the current Solar Credits rebate while it is available.

How many kilowatt hours a year do we get from the 1.5Kw system?
This system will produce almost 6kWh a day on average, more in summer (about 9kWh a day), and about 2-3kWh a day in winter. Note: one kilowatt-hour (kWh) is one kilowatt for an hour.
Your house will still be connected to the electricity grid (the street wires). In winter most of your power will come from the grid. In summer your excess power can be sold back into the grid.

How many panels will I need to power my house?
It depends on how much electricity your household uses per day. This should be shown on your electricity bills. A household with 3 people and gas appliances – heating, cooking and hot water - with TV, fridge, laptop computers etc. may use only 6kWh a day. It depends on you.

Air conditioning, pool pumps, halogen down-lights, slab heaters and especially electric hot water, add significantly. The average Australian home is said to use 18kWh a day, but most people who buy solar electricity systems are energy-conscious and use less.
If you use more, and want to power your whole house with solar electricity you could get a bigger system. The rebate is capped at 1.5kWs, so bigger systems are relatively more expensive.
A 2kW system costs about $8500 to $9080. But with a bigger system you can sell more power at 60c a kWh. Work out what’s best for you. Remember, if your solar system only provides half your electricity, you are still making a major saving in energy use, greenhouse emissions and money.

Will I be able to sell electricity back to the grid with a 1.5kw system?
Yes. Even if your solar panels produce 6kWh and you use 7kWh on one particular day, you will probably export power at noon. This electricity is metered on a 30 minute basis, not by the day. Victorian electricity retailers are required to pay 60 cents a kWh for it. At night, the household will draw electricity from the grid. You pay only your normal rate (usually 17c a kWh) for this.
Even with a small1kw system households typically export some power to the grid in the daytime. A 1.5kw system may produce 9kWhs of power on a summer day, exporting 6kWhs of this power to the grid .
If you want to make money from exporting power, cut energy use during the day time. Make sure your fridge is efficient and turn off appliances at the wall. Try to use electrical appliances only after the sun has sunk low in the sky.

How much will I earn
If you export an average of 1095kWs a year (3kWh a day) @ 60c you would earn $657 a year. In addition you would save about $200 off your home consumption. This comes to about $850. In reality households vary greatly in the amount they export, depending on who is home and what appliances they have on in the day time. You must also ensure you sell your power to an electricity retailer who pays cash.
At $850 a year it would take about 5.5 years for the system to pay itself off but in fact electricity prices are expected to rise sharply over the next few years so it could be 4 years. Once the system has paid itself off you will have many years of free electricity. Money will come in from the feed-in tariff for as long as it lasts. The panels are under warranty for 25 years and should last longer. The systems take longer to pay themselves off if you use more household energy, and pay themselves off soonest if you conserve electricity.

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