Solar Panel System Cost Analysis
Ok, so you’re hearing that Solar is a great investment.
Here are the overview statistics:
- Cost – $/kwh for solar electricity is at least half the cost of grid electricity
- ROI – Return on Investment per annum is about 12-18%! Compare this to an investment property at 6% pa return and shares at 11%, or your money sitting in the bank at 3% pa.
What you need to work out is:
- Whether or not it’s a good investment in your circumstances,
- How long it will take to pay for itself before you start seeing a benefit financially,
- How the returns on the initial investment compare to putting your money into shares or even just putting it into the bank at 3%.
- If you’re paying for the system on finance, you want to be sure that the return on investment is quite a bit more than what you’re paying in interest or else what’s the point?
Let’s look at a scenario and we’ll show you how to work out the returns for yourself. Firstly, how much energy will you solar energy system generate.
3.24kW Solar System Cost / Benefit Analysis
- You decide on a 3.14kW system (11 x LG Electronic solar panels) and it costs you $6,930 out of pocket fully installed (after STC & including GST).
- You live in Newcastle where a 3.14kW system produces on average 12.96kWh per day. This assumes a north facing roof with no shade issues.
- The price you currently pay for electricity is approx $0.28/kWh.
- You use 70% of the energy your system generates during the day time and you therefore you export 30% to the grid.
- Yearly System production = 12.96 units (kWh) x 365 days = 4,730 kWh per year
- Yearly Solar consumption = 4,730 units (kWh) x 0.7 = 3311 kWh (70% Consumed) = 1419 kWh (30% Exported)
- Yearly Benefit = (3311 x $0.28) + (1419 x $0.05) = $1000.
- Cost $/kwh of solar over 25 year life of system = $0.06/kwh (compared to $0.28 /kwh for grid electricity). That is a 79% reduction!
- Return on Investment = $1000/$6,930 x 100 = 14.43% per annum
- Payback period = $6,930/$1000= 6.93 years
- And the price of this electricity will not go up!
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