SOLAR REPORTMARCH 2016
Australian Energy Council

SOLAR REPORTQUARTER 1, 2024
Australian Energy Council

DD MM YYYY
© Australian Energy Council
Level 14, 50 Market Street, Melbourne VIC 3000

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Table of contents
STATE OF SOLAR IN AUSTRALIA ............................................................3
SOLAR INFLUENCE IN THE NEM.......................................................7
LEVELISED COST OF ELECTRICITY ............................................... 14
PAYBACK PERIOD, DETAILED MODEL .......................................... 17
METHODOLOGY APPENDIX............................................................. 19
1.
2.

Solar installation methodology ............................................................................................................ 19
Payback period methodology.............................................................................................................. 192

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STATE OF SOLAR IN
AUSTRALIA
Rooftop Solar
The latest data from the Clean Energy Regulator (CER) – updated as of the 29 February 2024 –shows the cumulative total of registered rooftop solar installations in Australia has reached 3,742,601
with a capacity of 22.58 GW. The CER registered a total of 50,975 new installations in the first quarter
2024, which combined, added 508 MW to Australia’s solar Photo Voltaic (PV) fleeti.

New South Wales and Queensland continue to lead the way in rooftop solar capacity andinstallations. New South Wales, with a capacity of 6.232 GW, holds the top spot, closely followed by
Queensland with 6.082 GW. In terms of installations, Queensland leads the nation with a total of
1,015,589, while New South Wales follows closely with 963,524 units.

Despite its smaller number of installations, the Northern Territory is making significant strides in solar
energy. By the end of the first quarter this year, 22,946 NT households and commercial
establishments had installed rooftop solar, contributing 0.61 per cent to Australia's rooftop solar
capacity. What is noteworthy is the Northern Territory is installing solar at a faster rate than otherstates and territories, indicating its potential for further growth in the solar energy sector.
Table 1. Total SGUs installed by territory and period.

Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Q1 -2024
Total

Australia
644,176
343,205
200,405
180,025
141,459
132,601
174,761
224,741
283,512368,652
377,408
315,585
323,486
32,5853,742,601

ACT
10,350
1,524
2,413
1,227
1,067
1,001
1,954
3,198
3,788
5,544
6,489
9,073
8,242
512
56,382

Small Generation Units (SGU) installed
NT
SA
WA
NSW
QLD
1,484
94,791
87,671 168,812
167,041513
41,822
42,63953,884130,227
1,024
29,186
21,60033,933
71,207
1,026
15,15323,49037,121
57,7301,196
12,073
20,79333,43839,504
1,745
12,597
24,19029,44334,4091,949
16,18831,39743,083
46,4302,370
21,88433,09459,26155,0693,493
27,056
36,62877,372
70,6293,200
36,17648,145 110,277
88,0891,942
32,593
48,760 110,141
90,195
1,760
29,13938,66892,97977,361
1,171
27,13034,586 102,480
79,135
73
2,393
4,087
11,3008,563
22,946 398,181 495,748 963,524 1,015,589

VIC
107,977
66,23233,38440,071
31,36826,73031,37147,22561,65573,881
83,17562,492
65,2085,113
735,882

TAS
6,050
6,364
7,658
4,207
2,020
2,486
2,389
2,640
2,891
3,340
4,113
4,113
5,534
544
54,349Source: Analysis from the AEC with data from CER.

The chart in Figure 1 illustrates the newly added capacity and units across different jurisdictions
based on the latest CER update. New South Wales leads the way with 168.03 MW, followed by
Queensland at 127.76 MW, Victoria at 107.28 MW, Western Australia at 45.23 MW, South Australia3

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at 38.85 MW, the Australian Capital Territory at 10.48 MW, Tasmania at 7.48 MW, and the Northern
Territory at 2.75 MW.
Figure 1. New rooftop solar capacity (bar) and SGUs (line) installed since last report (Jan-24).

Source: Analysis from the AEC with data from CER.

In 2024, the average size of solar systems across Australia dropped slightly compared to previous
periods. However, this number is most likely to improve once more installations are recorded by the
CER. Most of the states and territories installed average systems greater than 9.00 kW, except forVictoria, Tasmania, and Western Australia. These statistics encompass both residential andcommercial installations.
Table 2. Average size of solar systems per state and period.
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Q1- 2024

Australia
3.02
3.95
4.44
4.99
5.64
6.40
7.19
7.62
8.00
8.46
8.84
9.29
8.87

NT
4.47
4.93
5.97
7.22
7.28
7.88
8.51
8.18
8.57
9.64
10.84
11.93
9.80

SA
3.30
4.85
5.44
5.52
6.16
7.13
7.98
8.24
8.35
8.89
8.84
9.32
9.11

ACT
3.26
4.49
3.98
5.37
6.89
6.33
6.91
7.92
8.34
8.99
9.43
10.07
9.88

QLD
3.21
3.78
4.31
4.88
5.79
6.60
7.40
7.99
8.51
8.99
9.24
9.69
9.49

NSW
2.68
3.93
4.63
5.28
5.66
6.07
7.16
7.60
8.08
8.63
9.15
9.69
9.31

VIC
3.13
3.94
4.28
4.78
5.40
6.55
7.17
7.45
7.71
8.13
8.66
8.93
8.05

TAS
3.18
4.11
4.51
4.72
4.76
6.08
7.15
7.09
7.97
8.09
8.38
8.70
8.17

WA
2.33
3.22
4.05
4.63
5.29
5.94
6.35
6.73
6.95
7.24
7.41
7.64
7.21

Source: Analysis from the AEC with data from CER.

Battery installations with rooftop solar

Since our last publication, the CER has registered a total of 4,221 new batteries with rooftop solar
installations in Australia. Of these, 1,979 units were installed during 2023, but reported in the latest
data, while 2,226 were installed in the first quarter of 2024. The remaining 16 units were actually
added in the last quarter of 2022 but are only now reported. These were added in Victoria (8 units),
SA (7 units), and WA (1 unit).

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New South Wales and Victoria continue to top the number of solar installations with batteries. NSW
has a new fleet of 1,123 batteries, while Victoria added 1,096 units. Fifty per cent of the total newbatteries added in Australia since the last report has come from both Victoria and NSW. They arefollowed by South Australia, which installed 776 new batteries (18.38 per cent).
Figure 2. New battery systems installed per state since last report.

Source: Analysis from the AEC with data from CER.

Tasmania contributed only 1.33 per cent of the new battery with solar additions and sat at the bottomof the rank, adding only 56 units. This means that the Northern Territory took over another region for
the first time, and their outlook is promising, with a significant percentage increase in the uptake,although from a low base, which was also noticeable in 2022 and 2023. Table 3 shows thepercentage of solar systems installed in conjunction with a battery per jurisdiction and year. The NT
has been the leader in the growth of battery with solar installations in percentage terms since 2021.
Table 3. Battery installations as a percentage of SGUs installed per state and period.
Installation year

ACT

NSW

NT

QLD

SA

TAS

VIC

WA

2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Q1-2024

0.65%
0.28%
10.49%
10.49%
9.63%
8.90%
6.84%
8.00%
13.15%
9.18%
8.98%

0.56%
0.40%
2.27%
4.51%
3.17%
1.94%
1.68%
2.50%
4.21%
5.67%
5.75%

0.29%
0.08%
0.34%
0.92%
0.34%
0.63%
4.63%
20.08%
38.69%
42.36%
46.58%

0.22%
0.47%
0.96%
1.84%
2.03%
3.84%
1.09%
1.58%
3.68%
5.83%
3.42%

0.22%
0.17%
1.03%
2.96%
2.81%
8.47%
10.33%
10.15%
16.28%
17.98%
17.55%

0.12%
0.30%
0.72%
3.89%
6.21%
3.25%
3.08%
3.06%
6.05%
6.70%
4.60%

0.34%
0.52%
0.90%
2.69%
2.88%
2.09%
2.07%
3.63%
9.05%
9.18%
8.06%

0.72%
0.12%
0.29%
0.68%
0.71%
0.86%
1.62%
3.33%
7.01%
8.39%
8.47%

Source: Analysis from the AEC with data from CER.

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There have been no changes in incentives since the last report.

Current government policies
Policy Incentive

State/ Territory
Australian Capital•

Territory

New South Wales

Energy target(Solar & Battery)•

Sustainable Household Scheme1 provides•

To deliver a 70 per cent cut

zero-interest loans to help with the costs ofin emissions by 2035

energy-efficient upgrades, including solar

compared to 2005 levels

panels and batteries.

•

Net zero by 2050

Rebate Swap for Solar: The program gives•

Net zero by 2050•

50 per cent by 2030

low-income homeowners the option to get afree 3kW solar system.
•

No specific policy for new solar or battery
installations.

Northern Territory•

Home and Business Battery Scheme allows
residents to buy and install batteries andinverters with a maximum grant of $5,000(reduced from $6,000) from 1 July 2023.

Queensland•

No specific policy•

50 per cent by 2030

South Australia•

No specific policy•

100 per cent by 2030

Tasmania•

No specific policy

Victoria•

4,500 interest-free loans of up to $8,800 are•

65 per cent by 2030

available in 2023-24.

•

95 per cent by 20352•

The solar homes program provides rebatesof up to $1,400 towards the installation ofsolar panel systems.

Western Australia

1
2•

No specific policy

Sustainable Household Scheme
Victorian renewable energy and storage targets, page last updated 24 November, 2023

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SOLAR INFLUENCE IN THE
NEM
Utility-scale solar often sets the prices in the electricity spot market, as the marginal bidder sets themarket clearing price for all bids dispatched. Solar acts as the marginal bidder regularly enough thatthe behaviour of non-solar bidders in the market has changed in response.

In 2023, solar was the price setter in Queensland almost 14.70 per cent of the time. In New South
Wales, solar set the spot price 7.65 per cent of the time. South Australia and Victoria saw these
events around 6 per cent of the time, and Tasmania only 0.20 per cent of the time.
Table 4. Time of price setting for different technologies across the NEM.
Fuel type Price Setter
In 2023

NSW

QLD

SA

TAS

VIC

Black Coal

45.56%

44.16%

19.94%

11.98%

20.47%Natural Gas

9.74%

11.46%

13.24%

3.63%

8.49%

Hydro

29.37%

24.39%

26.07%

74.89%

29.84%

Brown Coal

3.33%

1.84%

11.42%

5.26%

18.26%

Solar

7.65%

14.69%

6.41%

0.20%

5.99%

Wind

1.26%

0.81%

15.29%

1.23%

11.08%

Battery

1.62%

1.54%

2.19%

0.67%

2.11%

Others

1.47%

1.10%

5.44%

2.13%

3.76%

Total
100.00% 100.00%
Source: Analysis from the AEC with data from NEOExpress.

100.00%100.00%100.00%3

Other traditional technologies continue to be the main market price setters, especially when solar
generation is unavailable. For example, black coal set the price in the Queensland and New South
Wales markets around 45 per cent of the time last year. Hydro was responsible for moderating
prices in South Australia, Tasmania, and Victoria. Hydropower was the marginal supplier 26.07 per
cent, 74.89 per cent, and 29.84 per cent of the time in those states, respectively, and was the primary
generation to set the price in those markets.

Note: It is worth clarifying the marginal supplier represented in the data for this report corresponds
to the energy-only market. Other marginal suppliers exist for ancillary services, like those forfrequency balance. Thus, increasing production in Tasmania’s hydro plants in the energy-onlymarket could be the least-cost solution to balance energy in South Australia or Victoria, for example.
Similarly, increasing brown coal production in Victoria could be the best solution to balance South
Australia, Tasmania, or Queensland’s power requirements.

3

Others include Kerosene, Diesel, Bagasse, etc.

78Figure 3. Queensland spot price outcomes in the electricity market in 2023.

Solar price setter
Non-solar price setter

0:00

4:10

8:20

12:30

16:40

20:50

23:55

Source: Analysis from the AEC with data from NEOExpress.

Figure 3 shows all the spot price outcomes in Queensland for the year 2023 in the range of $500/MWh to $1,500/MWh graphed in a 24-hour period (or 288, 5-minute intervals). Every point in
the graph represents a time and spot price outcome at the time registered in the NEM, and in yellow,
we identified those intervals where solar was a price setter in Queensland. To compare the different
market outcomes, Figure 4 shows four of the states in the NEM. Tasmania is excluded from thegraphs due to its low count of solar price-setters and the fact that all price-setters are outside of
Tasmania.

Solar energy can participate as a price setter just during the daytime. However, most of the time that
solar sets the price, it is at a negative price4.

The dashed line in Figure 3 separates negative and positive spot prices and shows a clear trend forsolar to remain under the dashed line in Queensland for the period analysed. Further, note that othernon-solar technologies are below-zero price setters in the Queensland market; brown coal and wind

4

Tasmania is the only state with a different effect, but with little data and no solar marginal supplier to conclude this.

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suppliers are the most notable examples. Some of the grey dots in the negative-price area
correspond to these technologies.

Spot Price ($/MWh)

Spot Price ($/MWh)Figure 4. Spot price outcomes of QLD, NSW, VIC, and SA electricity markets in 2023.

Source: Analysis from the AEC with data from NEOExpress.

In the case of Queensland in 2023, 77.05 per cent of the time when solar was a price setter, spot
prices were negative, and 90 per cent of the time, the system recorded a price lower than
$30.50/MWh. Negative prices were registered 86.84 per cent of the time of solar price-setting in SA,
84.53 per cent in Victoria, and 56.1 per cent in NSW. In other words, NSW and Queensland have ahigher number of solar events with higher-than-zero prices, which we can see illustrated in Figure 4
as the set of dispersed dots above the dashed line. This is partially due to more frequent solar pricesetting events in these states. In contrast, solar suppliers in Victoria and SA tend to set prices below
zero, which we can identify as the three clustered yellow lines in the graphs of these states. The
Empirical Distribution Functions of this data for the four states in the NEM are presented in Figure
5 to show a difference in the distributions.

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Figure 5. Empirical Distribution Function of solar price setting in the NEM.

Source: Analysis from the AEC with data from NEOExpress.

It is unclear what is driving the different bidding strategies behind the distributions in NSW andQueensland compared to SA and Victoria. One possible driver could be the availability or otherwiseof Power Purchase Agreement revenues or Large-Scale Generation Certificate (LGC) revenues
driving more negative bidding than would otherwise be the case. Interestingly, we detected nearly
two-thirds (67.72 per cent) of the events with these different price settings in the Queensland market
correspond to two specific solar farms in NSW and 11.63 per cent more to one solar farm inQueensland. That is, almost 80 per cent of the cases come from three suppliers.

Looking deeper into the Queensland data, we constructed a supply curve by using the total
generation of solar suppliers at the time of solar price-setting events, and have graphed the result in
Figure 65. We categorised those prices set by different states in the Queensland region by colour.
Prices set by a Queensland producer in the Queensland spot market are blue, New South Wales
producers are green, and the rare cases from Victorian and South Australian producers are in black.

When graphing generation versus spot prices, we can see lines of fixed prices in the chart for
Queensland and New South Wales producers. A set of clustered dots that form a line, most likely,
indicates a producer or a set of producers with similar revenues and/or agreement characteristics.
That is, a bidder or set of bidders who use the same strategy to be dispatched in the electricity
market. For example, a group of solar farms willing to pay to produce at the level of revenues
generated by large-scale generation certificates. As long as this group has a second income stream

5

The total megawatts of generation are those of production at a certain time in the correspondent state that
set the price for the Queensland market.

10

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for production, like Power Purchase Agreements, there will be net revenues for production for theplant.
Figure 6. Queensland solar supply curve constructed from spot price outcomes and state price setters.

11

Spot Price ($/MWh)

Spot Price ($/MWh)

12

Generation in MW

Generation in MW

Source: Analysis from the AEC with data from NEOExpress.

The changes in the system
The electricity supply during the middle of the day has changed over the last few years in the NEM.
Solar electricity has become a common source of energy for houses, businesses, and suppliers in
the wholesale electricity market, affecting the daytime demand for electricity.

With the connection of more solar PV systems in Australia, operational demand has shifted from aplateau to a curved line with low demand at times of high solar radiation – the so-called “duck curve”.
When there is lower demand, prices in the market drop, if supply remains constant, as in the caseof electricity.

Looking at suppliers other than solar, we show brown coal plants setting prices in the Queensland
market in Figure 7. This shows the supply curve of brown coal plants with different colours indicating
the price-setting events according to the time of day.

We identified two clear cases where brown coal generators are marginal producers. Firstly, higher
spot prices are recorded when solar is not available in the system (i.e. outside of daytime). We see
this in the graphs as the top cluster line is coloured in darker and brighter tones. Additionally, brown12

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coal suppliers generated more power during these times, ranging between 3,300 MW and 4,750
MW, and the price was set at about 90 $/MWh for the Queensland market.
Figure 7. Queensland’s brown coal supply curve constructed from spot price outcomes.
Time (hr)
23:55
20:50

16:40

12:30

08:20

04:10

00:00

Source: Analysis from the AEC with data from NEOExpress.

Secondly, when solar energy was available in the system, brown coal supplier prices fell nearly tozero, or even below zero, in a few cases consistent with more supply and lower demand. Brown coalsuppliers are forced to bid at low prices when the operational demand is low to keep their plants
running, and are also, at times, willing to pay to produce when the demand drops to very low levels.
In these instances, the supply of these generators ranged from 2,300 MW to 4,500 MW.

In conclusion, we believe that bilateral agreements coupled with revenues from other markets impact
the electricity market by decreasing the average spot price overall. However, the prices agreed onthese contracts also depend on the changing signal price of the electricity spot market, and therevenues from other markets depend on the supply and demand in those other markets. Eventually,
prices in all markets will find equilibrium.

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LEVELISED COST OF
ELECTRICITY
The Levelised Cost of Electricity (LCOE) is the cost of energy per kilowatt hour (kWh) produced fora type of electricity generator. The LCOE helps to compare costs between different electricity
sources like coal, wind, solar, etc. When the cost is equal to or below the price consumers pay
directly to suppliers for electricity, this is called grid parity.
Table 5 shows the LCOE for rooftop solar in Australia’s major cities, indicative retail prices andcurrent Feed-in tariff (FiT) rates. A detailed methodology on how the LCOE was computed can befound in the Appendix.
The retail comparison rates are representative variable rates and do not include supply charges.
That is, the rate is an energy-only price. For all capital cities, excluding Perth and Hobart, retail prices
are based on the implied usage charges from St Vincent de Paul’s tracking of market offers, which
was last updated in July 2023. Perth prices are regulated and obtained from Synergy. Hobart prices
were obtained from Aurora Energy’s Tariff 31, while Darwin prices were obtained from Jacana
Energy’s regulated residential usage charges. Tables 5, 6 and 7 show the LCOE across major cities
at different discount rates.
Table 5. Central estimate: 5.01 per cent discount rate (ten-year average mortgage rate)

All figures in$/KWh
Adelaide
Brisbane
Canberra
DarwinHobartMelbourne
SydneyPerth

System Size
3 kW
$0.10
$0.10
$0.11
$0.11
$0.15
$0.13
$0.11
$0.09

4 kW
$0.09
$0.10
$0.10
$0.12
$0.13
$0.11
$0.10
$0.09

5 kW
$0.09
$0.09
$0.09
$0.11
$0.12
$0.11
$0.10
$0.08

6 kW
$0.09
$0.09
$0.09
$0.11
$0.12
$0.10
$0.09
$0.08

7 kW
$0.09
$0.09
$0.09
$0.11
$0.11
$0.10
$0.09
$0.08

10 kW
$0.08
$0.09
$0.08
$0.10
$0.12
$0.10
$0.09
$0.09

Retailprices
$0.42
$0.31
$0.26
$0.28
$0.30
$0.31
$0.35
$0.31

FIT
$0.09
$0.08
$0.10
$0.11
$0.11
$0.07
$0.08
$0.06

Source: AEC, April 2024

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Table 6. Low cost of capital sensitivity: 6.54 per cent discount rate (low current standard variable rate)

All figures in$/KWh
Adelaide
Brisbane
Canberra
DarwinHobartMelbourne
SydneyPerth

System Size
3 kW
$0.11
$0.11
$0.12
$0.12
$0.16
$0.14
$0.12
$0.10

4 kW
$0.10
$0.10
$0.11
$0.13
$0.14
$0.12
$0.11
$0.09

5 kW
$0.09
$0.10
$0.10
$0.12
$0.13
$0.11
$0.10
$0.08

6 kW
$0.09
$0.09
$0.09
$0.12
$0.12
$0.11
$0.09
$0.09

7 kW
$0.09
$0.09
$0.09
$0.11
$0.12
$0.11
$0.09
$0.08

10 kW
$0.09
$0.09
$0.09
$0.11
$0.12
$0.10
$0.09
$0.09

Retailprices

FIT

$0.42
$0.31
$0.26
$0.28
$0.30
$0.31
$0.35
$0.31

$0.09
$0.08
$0.10
$0.11
$0.11
$0.07
$0.08
$0.06

Source: AEC, April 2024
Table 7. High cost of capital sensitivity: 19.99 per cent discount rate (indicative personal loan rate)

All figures in$/KWh
Adelaide
Brisbane
Canberra
DarwinHobartMelbourne
SydneyPerth

System Size
3 kW
$0.19
$0.19
$0.21
$0.21
$0.28
$0.24
$0.21
$0.16

4 kW
$0.16
$0.17
$0.18
$0.23
$0.24
$0.20
$0.18
$0.15

5 kW
$0.15
$0.16
$0.16
$0.21
$0.22
$0.18
$0.16
$0.13

6 kW
$0.14
$0.15
$0.15
$0.21
$0.21
$0.17
$0.15
$0.14

7 kW
$0.15
$0.15
$0.15
$0.20
$0.20
$0.17
$0.15
$0.13

10 kW
$0.14
$0.15
$0.14
$0.18
$0.21
$0.16
$0.14
$0.15

Retailprices

FIT

$0.42
$0.31
$0.26
$0.28
$0.30
$0.31
$0.35
$0.31

$0.09
$0.08
$0.10
$0.11
$0.11
$0.07
$0.08
$0.06

Source: AEC, April 2024

Small and large businesses - Levelised cost of electricity
Tables 8 and 9 show the estimated cost of electricity production for commercial-sized solar systems.
As businesses look to reduce overhead costs, installation of larger-scale solar systems continues toincrease.

Business tariffs differ from residential retail tariffs. Depending on the size of the customer and theamount of energy used, businesses can negotiate lower prices. If a business were to consume allelectricity onsite, the electricity prices in Tables 8 and 9 would represent the cost per kWh of energy
consumption generated from the different system sizes listed. For businesses, installation occurs if
the benefits outweigh the cost. The average electricity bill for industrial businesses in 2014-15 was
10.72 c/kWhii.

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Table 8. Central estimate: 5.49 per cent discount rate, ten-year average small business interest rate

All figures inc/KWh
Adelaide
Brisbane
Canberra
HobartMelbourne
SydneyPerth

10kW
9.40 c/kWh9.31 c/kWh9.00 c/kWh12.44 c/kWh10.85 c/kWh
10.29 c/kWh
9.48 c/kWh30kW9.28 c/kWh9.00 c/kWh9.41 c/kWh
10.54 c/kWh
10.16 c/kWh9.25 c/kWh8.92 c/kWh

System Size
50kW
9.54 c/kWh9.31 c/kWh
9.22 c/kWh10.69 c/kWh
10.54 c/kWh9.76 c/kWh9.62 c/kWh70kW9.60 c/kWh9.12 c/kWh
9.06 c/kWh10.64 c/kWh
10.19 c/kWh9.43 c/kWh8.96 c/kWh

100kW
8.88 c/kWh8.71 c/kWh8.86 c/kWh9.73 c/kWh9.81 c/kWh9.00 c/kWh8.59 c/kWh

Source: AEC, April 2024

Table 9. Central estimate: 2.95 per cent discount rate, ten-year average large business interest rate

All figures inc/KWh
Adelaide
Brisbane
Canberra
HobartMelbourne
SydneyPerth

10kW
8.55 c/kWh8.47 c/kWh8.20 c/kWh
11.23 c/kWh9.87 c/kWh9.35 c/kWh8.58 c/kWh30kW8.45 c/kWh
8.22 c/kWh
8.54 c/kWh9.64 c/kWh9.30 c/kWh
8.48 c/kWh8.12 c/kWh

System Size
50kW
8.66 c/kWh8.47 c/kWh8.38 c/kWh9.77 c/kWh9.62 c/kWh8.91 c/kWh8.70 c/kWh70kW8.72 c/kWh8.32 c/kWh8.25 c/kWh9.72 c/kWh9.33 c/kWh8.63 c/kWh8.15 c/kWh

100kW
8.11 c/kWh7.98 c/kWh
8.08 c/kWh8.97 c/kWh9.01 c/kWh
8.27 c/kWh7.84 c/kWh

Source: AEC, April 2024

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PAYBACK PERIOD,
DETAILED MODEL
The payback period is defined as the year when the cumulative savings are greater than the
cumulative costs of a solar PV system. Savings represent the avoided cost of consumption and any
revenue received from FiTs. The cumulative cost incurred represents the initial investment and thetime value of money. A detailed methodology is contained in Appendix 2.
Although installing solar panels typically involves an initial investment, customers who use them,
benefit from future reduced electricity bills. This is achieved by lowering their reliance on gridelectricity and selling surplus electricity back to the grid in exchange for solar feed-in tariff credits.
Nevertheless, it's essential to note that solar feed-in tariff rates have declined in all regions
nationwide. When selecting an energy plan, customers with solar panels should assess their choices
based on their historical electricity consumption and the amount of solar energy they export. It's
important to remember an energy plan offering the highest solar feed-in tariff may not always be themost cost-effective choice overall, as it could involve higher supply and usage charges compared toother plans.

Figure 9 highlights the payback period for different system sizes across Australia. Note: Electricity
prices are subject to change with consumer price index (CPI) levels and, therefore, will affect the
payback period. The low payback periods across many cities highlight the reason behind thecontinuous support of customers to install solar PV. However, the persistent high interest rates inAustralia, along with minimal price differences in the cost of the systems, do not significantly impact
the payback period compared to the previous quarter.
Figure 8. The payback period for solar PV (6.54 per cent discount rate)

Source: AEC, January 2024

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Figure 9 shows the expected payback period for systems with a 5.01 per cent discount rate (10year average home loan rate). Most capital cities' payback period falls between 5 - 7 years inclusive.
The 3 kW systems in Canberra and Melbourne have a payback of 8 years. However, Adelaide is thebest place to produce returns on installing solar panels, with a 3-4-year payback period. Since thecosts of electricity are high, solar panels are cheap, and solar irradiation is excellent in this place,the benefits of installing solar are evident. Brisbane and Perth are in a similar situation, with payback
periods of up to 4 years.
Figure 9. The payback period for solar PV (5.01 per cent discount rate)

Source: AEC, January 2024

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METHODOLOGY APPENDIX
1. Solar installation methodology
Analysis from the CER’s monthly data allows us to estimate the amount of solar PV installed inAustralia. Since November 2015, the CER has consistently released data dated as of the first ofeach month. The new consistent release date allows us to provide a more accurate estimate of thecapacity of recent installations. Due to the lag in reporting of new installations, however, the CER
data takes up to 12 months to be finalised.

2. Payback period methodology
This methodology outlines our approach to calculating the payback period for solar panels installed
across capital cities in Australia. Our analysis includes the following:•

Initial investment•

Discount rate•

Efficiency•

System degradation rate•

Export rate•

Avoided usage cost•

FiT

Initial investment, discount rate, efficiency and system degradation rate are described in Appendix
1. The key difference to LCOE calculation is that the payback period assumes no annual
maintenance cost.

Calculation
The payback period occurs when ∑ savings > ∑ cost
Where:
Savings = (usage cost x (1+ CPI)t x consumption / 100) + (Export x FiT)
Cost = investment x (1 + real discount rate)tt = years

Avoided cost and FiT
The onsite consumption is multiplied by the retailer’s usage charges. CPI has been applied to theusage charge to allow for growth in retail prices. The excess energy is exported to the grid, and the

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customer is expected to receive the mandatory FiT or a realistic market offer where mandatory tariffs
are not applicable.

Export rate
The percentage of onsite consumption and electricity, which is exported to the grid, is calculatedusing the median value from Sunwiz’s analysisiii. See Figure 10 below.
Figure 10. Export rate of residential solar PV at different system sizes

Source: Sunwiz’s analysis, 2015

i These units are registered in the period of the last twelve months, not year to dateii BCA, “Impact of Green Energy Policies on Electricity Prices”, June 2014
iii Sunwiz, Solar Pays Its Way on Networks. Last accessed 17 June 2015.

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