How to calculate solar returns in Australia: payback and ROI

Sizing a solar system and estimating generation

From 2008 to 2014 I ran solar and energy efficiency businesses, including International Solar Solutions and Green Energy Corporation of Australia. Over my career I've been responsible for producing more than 6MW of solar energy generation capacity across Australia. Panels are far cheaper and more efficient now, but the maths behind a good decision has barely changed.

Most people want one answer: how long until the system pays for itself? That depends on the net cost, how much the system generates, how much of that energy you use yourself, what you pay for grid power and what you earn for exports. Get those inputs right and the rest is arithmetic.

Size to your load, not your roof

Start with your bills. Pull the last 12 months of electricity bills and note your average daily use in kilowatt hours (kWh). If you have a smart meter, ask your retailer or network for interval data, which shows when during the day you use power. That timing matters as much as the total.

For years the typical home system was about 6.6 kW of panels on a 5 kW inverter, shaped by network export limits and certificate rules. Larger home systems are common now that panels cost less. Your local network may cap how much you can export, often at a few kilowatts per phase, and some areas now use flexible limits that change through the day. A good installer checks this before quoting.

Businesses should size to daytime load. An office, workshop, cold store or shop that trades from morning to late afternoon can use most of what a well-sized system produces. Roof area, roof condition and switchboard capacity then set the practical ceiling.

My view is simple. Size to your load and your export rules first, then decide whether extra panels are worth it. Modest oversizing can make sense because panels are cheap and winter output is lower. Doubling a system just to export more at a low feed-in rate rarely does.

Solar generation by location in Australia

Installers estimate output in kWh per kW of panels per day, averaged across the year. As a rough guide, commonly used averages sit around 4 to 4.4 kWh in south-east Queensland, Perth and Adelaide, close to 4 in Sydney, and around 3.5 in Melbourne and Hobart. Northern and inland areas generally do better. Winter days produce noticeably less than summer days everywhere.

Several factors move your real result away from the average:

• Orientation. North-facing panels produce the most energy over a year. East and west faces produce a little less in total but spread output across the morning and afternoon, which can suit your usage better.
• Tilt and shading. Panels tilted close to your latitude catch the most sun across a year. Shade from trees, neighbouring buildings or even a vent pipe can cut output from a whole string of panels, and microinverters or optimisers reduce that loss.
• Heat. Panels lose some efficiency as they get hotter, so a scorching summer afternoon isn't the peak you might expect.
• Degradation. Quality panels typically lose around half a per cent of output a year. Build that into any long-term estimate.

Ask your installer for their generation estimate in writing, along with the assumptions behind it. The Bureau of Meteorology publishes solar exposure data if you want to sense-check the numbers yourself.

Self-consumption vs feed-in tariffs

This is the part most quotes skim over, and it decides your return. Every kWh you use yourself saves you the full price of buying it from the grid. Every kWh you export earns the feed-in tariff, which is usually a small fraction of that price. Some network tariffs and retail plans now reward exports less, or even charge for them, at the busiest solar times of day.

So the key number is your self-consumption rate: the share of your solar output you use on site. A household that's empty during the day might use a fifth to a third of its output. A home with people working from home, a pool pump or an electric vehicle charging at midday can use much more.

You can lift self-consumption without spending much:

• Put electric or heat pump hot water on a timer that runs in the middle of the day.
• Run the pool pump, dishwasher and washing machine while the sun is up.
• Charge an electric vehicle at home during daylight when you can.
• Pre-cool or pre-heat the house in the afternoon on very hot or cold days.

Businesses usually have an advantage here because their load lines up with daylight. Watch for demand charges, though. If your peak demand lands at 5.30pm when the panels are fading, solar alone won't reduce that part of the bill.

STCs and the Small-scale Renewable Energy Scheme

The main federal incentive for rooftop solar is the Small-scale Renewable Energy Scheme, run by the Clean Energy Regulator. Eligible systems up to 100 kW create small-scale technology certificates (STCs). The number of certificates depends on the system's size, the zone it's installed in and the number of years left until the scheme ends in 2030. That means a given system earns fewer certificates each year the scheme runs.

Most buyers assign their STCs to the installer in exchange for a lower upfront price. Certificate prices move with the market, so the discount on your quote reflects current conditions. To be eligible, the system generally needs approved components and an installer accredited under the scheme's rules.

Systems above 100 kW work differently. They can be accredited as power stations and create large-scale generation certificates, which are sold over time rather than taken as an upfront discount. Some states and territories also run their own rebates or loans, and these change often. Check the Clean Energy Regulator and your state energy department for current rules rather than relying on a sales brochure.

When comparing quotes, compare the net price after certificates, and check that the number of STCs shown matches the system size.

Solar payback period and ROI: a worked example

The numbers below are hypothetical round figures to show the method. They are not quotes, prices or predictions for any real system.

The three formulas

• Annual saving = (kWh self-consumed × import rate) + (kWh exported × feed-in rate)
• Payback period = net system cost ÷ annual saving
• Simple ROI = annual saving ÷ net system cost × 100

Example one: a family home

• Net cost after the certificate discount: $6,000
• Annual generation: 9,000 kWh
• Self-consumed: 40%, or 3,600 kWh at 30c = $1,080
• Exported: 60%, or 5,400 kWh at 5c = $270
• Annual saving: $1,350
• Payback: about 4.4 years. Simple ROI: about 22% a year

Now change one input. If the same household only uses 20% of its solar, the saving drops to $900, made up of $540 from self-consumption and $360 from exports. Payback stretches to about 6.7 years and simple ROI falls to 15%. Same system, very different result.

Example two: a small business

• Net cost after the certificate discount: $30,000
• Annual generation: 40,000 kWh
• Self-consumed: 80%, or 32,000 kWh at 25c = $8,000
• Exported: 20%, or 8,000 kWh at 4c = $320
• Annual saving: $8,320
• Payback: about 3.6 years. Simple ROI: about 28% a year

What simple ROI leaves out

Simple ROI is a starting point. A fuller view adds panel degradation, likely changes in power prices, an inverter replacement partway through the system's life, any loan interest, and the return you give up by not investing the money elsewhere. Businesses should also ask their accountant how the system is treated for tax. For a complete picture, model the cash flows year by year over 20 to 25 years.

Are solar batteries worth it in Australia?

A battery stores surplus solar for the evening, so its value comes from the gap between your import rate and your feed-in rate. Using the same hypothetical rates, shifting 8 kWh a day that would otherwise be exported at 5c and bought back at 30c is worth about $2 a day, or roughly $730 a year.

Set that against the battery's net cost and its warranty period, which is often around ten years. Without incentives, many batteries have struggled to pay back within their warranty. Since mid-2025 the federal government has offered a discount on eligible batteries through the Cheaper Home Batteries Program, which runs through the same certificate scheme. Settings can change, so check the current rules with the Clean Energy Regulator.

A battery tends to make more sense when:

• Your evening use is high and your feed-in rate is low.
• You're on a time-of-use tariff with an expensive evening peak.
• You can join a virtual power plant that pays you for access to the battery.
• Backup during blackouts matters to you. Check that the system is set up for it, as not all are.

For businesses, a battery can also target demand charges, which is a separate calculation worth doing properly.

Solar maintenance and long-term costs

Solar needs little maintenance, but little isn't none. Rain keeps panels reasonably clean in most places. Dust, bird droppings and salt spray near the coast can build up, and a gentle clean with water and a soft brush is usually enough. Leave roof work to someone with the right safety gear.

Budget for an inverter replacement. Inverters commonly last around 10 to 15 years, well short of the panels. Have a licensed electrician inspect the system every few years and after major storms, including the isolators, cabling and mounting.

Check your monitoring app regularly. In my view the easiest money lost in solar is a fault nobody notices for months. Keep your warranty documents together: the panel product and performance warranties, the inverter warranty and the installer's workmanship warranty.

One lesson from my years running International LED Lighting Solutions still holds. The cheapest kWh is the one you never use. Efficient lighting, hot water and appliances cut the load, which lets a smaller system cover more of it. For larger commercial projects funded with outside money, I've written separately about capital raising lessons from my years in business.

About the author

Adrian Campbell is an Australian entrepreneur based in Indonesia and the founder and CEO of Kinnara, a global property marketplace. Between 2008 and 2014 he led solar and LED lighting companies in Australia. Read his biography or see his clean energy ventures.

This article is general information only and is not financial or legal advice.