Pay-back Period

How to calculate pay-back period #

Required Information #

  • Average daily electricity cost
  • Average daily usage
  • Average daily sun hours
  • System size (kW)
  • System cost
  • Solar energy usage
  • Feed-in tariff

Step by Step #

  1. First step is to pull out your electricity bill. Take note of your average daily usage and average electricity cost.
  2. On the next pages, find the general usage charge. This would be the cost of electricity per kwh. Or you could just divide average daily cost by daily usage.
  3. Find out how much you will save. Pick any sized solar system. You can then determine roughly how much energy it produces by multiplying the size (in kWh) by 4.84 (the average amount of sun hours), to get daily solar energy produced.
  4. If your system generates more than your daily usage then it is likely it will be able to cover your entire electricity bill. Subtract the amount of solar energy produced with the daily usage. If it is positive then your energy bill is covered. But if it is negative then you will still need to pay your energy bill.
  5. Determine how much money you will be saving. Multiply the solar energy produced daily by the general electricity charge and multiply again by 365 for annual savings. If you still have to pay electricity bills, find the new daily energy cost by multiplying the kW by the general electricity charge. Multiply this number by 365 and subtract from the savings from solar power.
  6. To calculate the pay-back period, simply divide the cost by how much you can save a year to find your average pay-back period in years.

Case Study #

The average cost of electricity in SA is 37.79 c per kWh. For this calculation we assume 39.23 c per kWh from the electricity bill above. We assumed the home to be a single person. Perhaps they lived in a small home and working as their energy usage is lower than the average 1 person. In a period of 95 days, they consumed 913 kWh of electricity bringing to an average of 9.61 kWh per day. Annually the cost of electricity would be $1376.05.

What sized system would be suitable? #

A good-sized system for a household of this size would be a 1.5 kW system. We assume solar panels would be exposed to 4.84 average sun hours in Adelaide. this is the total time that a solar panel would be generating electricity, check this website for other states. We calculate that a 1.5 kw system would generate 7.26 kWh daily. It would not be enough to cover the entire electricity bill which uses 9.61 kWh a day unless you get a bigger system.

The average cost of a 1.5 kW solar system is $2450. You install one, but you still need to pay for about 2.35 kWh of electricity. You would however, save about $1039.55 a year. You’re looking at around 2.36 years to pay-back your investment. Your pay-back period may lessen substantially the bigger system you get. The more solar panels you get, the rate of prices decrease. The difference between a 5 kw and 6 kw system may be only a couple hundred dollars but the savings would be much higher.

You may not use all the electricity generated by the solar panels. You may not be home during the day and miss out on using the solar power then. A feed-in tariff (currently 44c per kWh) may be applicable when not using as much power, the excess energy not used will then be exported.


Do you still pay electricity bills with solar panels?

Going solar can get rid of your electricity bills entirely or remove a significant portion of it. You may still need to pay electricity bills if you find that the daily solar generated does not cover your daily energy usage, and you would need to pay electricity bills for periods where you are not able to use solar energy like when you are not at home.

How much will my electricity bill be with solar panels?

Your electricity bill would depend on how much electricity you draw from your retailer. Depending on when you use your electricity, you can just use the solar energy you generate. You may have to draw electricity during the evening when your solar panels cannot generate electricity.

Why is my electricity bill so high with solar?

Even if you have solar panels, there are a multitude of reasons that may impact the electricity bill. Your solar panels might be obstructed by trees, creating shade. Your bill might be particularly high during winter, as the amount of sunlight hours is reduced.