Are solar panels worth the cost?

Solar panels – they’re those big silvery things that get installed on your roof, magically transform sunshine into electricity, and save you heaps of money. Right? Well, yes, sort of. But as any homeowner who has spent time looking into it will be able to tell you, it all starts to seem very complicated, very quickly and the potential benefits can be lost in a sea of jargon and confusing tables. The processes involved are complex and really interesting but for the purposes of this article, I’m going to keep it all pretty basic so we can just nut down to the essentials.


Before we start, let’s quickly clarify a couple of often misused terms:

kW and kWh – measuring power and energy

kW means kilowatt which is 1000 Watts and is a measure of power. The size of a solar power system is defined by its maximum power. A 1kW system can produce 1kW of power on a sunny day.

kWh means kilowatt-hour and is a measure of energy. To produce 1kWh of energy, your solar panels need to produce 1kW of power for 60 minutes.



This is the easy part. Solar power is the energy produced by the light and heat of the sun. It can be captured to create electrical energy that can be used in our home’s electrical circuits.



Solar panels are made up of solar or PV cells which are a device that can convert sunlight into electricity through the photovoltaic effect. Most solar panels are made from silicon PV cells laid out in a grid pattern. The panels are sealed and framed to prevent environmental damage. A group of solar panels make up an ‘array’ which is the complete power-generating unit that you see on the rooftops of houses.

The direct current (DC) electrical energy produced by the PV cells cannot be used to power household appliances or fed back into the grid until it has been changed into (AC) alternating current. This is done by a solar inverter.

If the array is providing more energy than the house uses, the excess can be fed back into the mains grid for which the homeowner may receive a (low!) feed in tariff, or into a battery storage system such as a Tesla Powerwall for later use. 

How solar energy works


If you have a generous roof with good sun exposure, preferably facing north, will consume more energy before 6pm than after 6pm, and can install a good quality solar array, then the short answer is yes.

An average household uses about 18kWh per day which equates to around $1700 per year in energy bills. The average daily electricity supplied by a 3Kw array (the standard for a 4 person house in Sydney) is 11.7kWh. So you can see already that the energy bill of a house with solar panels is greatly reduced.

These average annual savings equate to a payback period of between 5 and 8 years based on household self consumption of between 50% and 90% i.e. between 10% and 50% of the solar energy produced is fed back in to the grid.



Here’s a more specific example: with 30% of energy exported back into the grid, a 3kW system costing around $4500 and producing approximately 4270kWh of energy per year has the potential to save an average NSW household over $3000 net in energy costs over 10 years (i.e after you have paid off your solar system you are in front by $3000). In this case, the payback period would be approximately 7 years and the internal rate of return would be 8.7%. Even this reasonably conservative example demonstrates what a sensible investment solar energy can be for a household.



Approximate costs of good quality solar panel system installation including a central inverter are:

  • 3kW: $4,000 to $6,000

  • 5kW: $6,000 to $9,000

  • 10kW: $12,000 to $16,000

( A bit more info on the average pricing as of 2016 can be seen here)

As for how big a system you require, well there are all kinds of handy calculators on the web to help you figure this out but the best thing you can do is be as clear as possible about how much energy you consume and when. Although in NSW it is tricky to work out when you are using your energy you can easily see how much you are using by looking at your energy bill. Once you have this information get an experienced and reputable installation company to advise you.

Be aware that when we are talking about the size of a solar panel system, we are referring to the peak amount of energy it can produce. So a 3kW system can produce 3000W of energy on a clear, sunny day. The number of hours it produces that energy in a day varies depending on the city, whether and time of year.



  1. If I look at my electricity bill I can see that I use 16kWh per day

  2. In Sydney 1kW of solar panel will generate approximately 3.9kWh per day

  3. If i divide 16kWh (my daily usage) by 3.9kWh I can work out very roughly how big my solar array needs to be

  4. I need a 4.1kW system


Electrical usage table

Electrical usage table

These numbers above will vary from home to home but can be used as a rough guide.



The key to worthwhile solar panel use is based on two key elements.

  1. Installation of the best sized system to suit your household needs.

  2. Self-consumption i.e. Use the energy your panels are producing if possible rather than exporting back to the grid. Sounds pretty obvious, doesn’t it? But the complicating factor is that the most energy producing hours of the day are the ones we are most likely not to be in the house for.

This diagram from Solar Quotes illustrates the point well:

The blue line is electricity use

The yellow line is the average output of a 1.5kW system

The yellow area shows the solar energy used by the home’s appliances

The orange area shows the solar energy that is exported back into the grid for which the owner receives a feed in tariff. However, that tariff is no longer substantial enough (and in some cases will shortly cease to exist at all) to make the export worth it on its own. To get the most value and the greatest savings you need to be making sure that yellow area is much larger i.e. use your home appliances as much as possible during the day. As a result if you are using 95% of your electricity after 6pm it makes very little sense to install solar unless you do it in tandem with a battery system as well.

“It is more cost effective to use the energy that you produce than export it back into the grid.”


What about storage batteries?

Batteries such as the Tesla Powerwall can store power produced by your solar system, thus reducing the amount returned to the grid and maximising self consumption. Competitive solar panel installation costs, good environmental conditions, high electricity prices and low feed-in tariffs all make for good motivations to consider storage batteries. The main issue is that they are still expensive and may not be financially viable for another few years yet. Battery pricing is currently around $1,000-$2,000 per kWh of capacity. Until that drops to about $250 per kWh, batteries are unlikely to see large scale uptake. What might be worth considering is a battery-ready solar panel system so that when that market does eventually become competitive, your system is ready for it.

Is more solar better?

Not necessarily. This will depend greatly on when you use your electricity and how much your home uses. A system sized to your requirements will mean you are not paying for panels that are generating power that is not being used or is being fed back into the grid at only a marginal return.

Is the feed in tariff the same as the rebate?

No. The feed in tariff is a State Government subsidy that means you are paid for the electricity that your solar panels export back into the grid. The ‘rebate’ is a government subsidy for the upfront cost of installing a system. The advertised price you see will have this rebate already applied. The feed in tariff is changing but the rebate is not.

Is solar hot water generated from my solar panels?

No. Solar hot water is a different system. Although it still uses the sun’s energy to heat your water. The systems may be a split system or a roof mounted system where both the energy collectors and the storage are installed on the roof.

Does it make sense to use timers on your appliances?

Maybe. It depends whether your electricity meter uses a ‘Flat rate’ or ‘Time of Use’ setup. For example we have a flat rate of 22.8cents/kWh for the power that we use. It does not matter if we use this power at 9am or 9pm. If you have a ‘Time of Use’ setup your ‘peak’ cost could be up around 45 cents/kWh or as little as 11.8 cents/kWh for ‘off peak.’

So there you have it – everything you wanted to know about solar panels and nothing you didn’t! If you do want to delve more into the nitty gritty, give me a buzz – I’ll be happy to hook you up with some reliable resources or just have a chat about how a solar power system might work for your home from an architectural perspective.

Do I need a DA to put solar panels on my roof?

For houses generally no. In the majority of cases solar panels fall under a category of development called exempt and complying development. There are a few conditions (for example you are limited to a maximum of 10kW)  but in general solar panels can be installed without council approval. The story can be slightly more complicated for apartment buildings or townhouses.


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