A 6.6 kW solar system is being quoted at $6,800 installed. The client uses 28 kWh/day. Before signing, they want to know the annual savings, payback period and whether this investment makes sense.
Solar Savings & Payback
Solar
Annual generation ≈ kW × 4.5 sun hrs × 365 × 0.85
Reference: Energy Made Easy — Australian Government
Results are estimates for planning purposes. Verify with current standards and a qualified professional.
1 What this calculator does
Estimates annual solar savings and payback period from system size, installation cost, electricity tariff, feed-in tariff (FiT) and self-consumption rate. Shows the ROI percentage and flags if payback exceeds a typical system lifetime.
2 Formula & professional reasoning
Annual generation (kWh) = System kW x Peak sun hours x 365 x 0.85 efficiency
Self-use value = Annual kWh x Self-use rate% x Electricity tariff ($/kWh)
Export value = Annual kWh x Export rate% x Feed-in tariff ($/kWh)
Annual savings = Self-use value + Export value
Payback (years) = System cost / Annual savings
Solar savings come from two sources: (1) electricity avoided -- solar energy used in the house saves buying it at the retail tariff rate (currently 30-40 cents/kWh in AU), and (2) export payments -- surplus solar exported to the grid earns a feed-in tariff (typically 5-10 cents/kWh in AU 2024). Self-consumption is more valuable than export because avoided retail cost > FiT. The self-consumption rate depends on how much daytime load the household has -- a home with no one during the day may self-consume only 20-30% of generation.
3 Worked examples
⚠️ Illustrative example only — not clinical or professional instruction.
Basic
Residential 6.6 kW system -- standard payback
Given: System: 6.6 kW | Cost: $6,800 | Sun hours: 5.0 | Self-use: 35% | Tariff: 32c/kWh | FiT: 7c/kWh
Working:
Annual gen: 6.6 x 5.0 x 365 x 0.85 = 10,246 kWh | Self-use: 10,246 x 0.35 x 0.32 = $1,148 | Export: 10,246 x 0.65 x 0.07 = $466 | Annual savings: $1,614 | Payback: $6,800/$1,614Answer: Annual savings: $1,614 | Payback: 4.2 years | ROI: 23.7%/yr
💡 4.2-year payback on a system with a 25-year performance warranty is an excellent investment. System will earn approximately $40,000 in savings over 25 years against a $6,800 investment.
Standard
High self-consumption household (battery owner, EV charger)
Given: Same system | Self-use: 70% (EV charging + battery) | Tariff: 35c/kWh | FiT: 5c/kWh
Working:
Self-use value: 10,246 x 0.70 x 0.35 = $2,510 | Export: 10,246 x 0.30 x 0.05 = $154 | Total: $2,664 | Payback: $6,800/$2,664Answer: Annual savings: $2,664 | Payback: 2.6 years | ROI: 39%/yr
💡 High self-consumption dramatically improves savings because avoided retail cost (35c) is 7x higher than the FiT (5c). Battery and EV charging are the best ways to increase self-consumption.
Advanced
Commercial system with demand tariff
Given: 20 kW system | Cost: $18,000 | Self-use: 80% | Tariff: 28c/kWh + $15/kW demand | FiT: 8c/kWh
Working:
Annual gen: 20 x 5.0 x 365 x 0.85 = 31,025 kWh | Self-use savings: 31,025 x 0.80 x 0.28 = $6,950 | Export: 31,025 x 0.20 x 0.08 = $496 | Demand charge saving estimate: ~$3,600/yr | Total: ~$11,046 | Payback: 18000/11046Answer: Annual savings: ~$11,046 | Payback: ~1.6 years
💡 Commercial solar with high daytime self-use and demand charge savings can produce extremely short paybacks. Demand charge reduction is highly site-specific -- requires a detailed analysis of the site's demand profile.
4 Sanity check
Australian FiT rates 2024 (approx)
VIC: 4.9c/kWh | NSW: 5-8c/kWh | QLD: 5-9c/kWh | SA: 6-10c/kWh | WA: 7-10c/kWh
FiT rates change frequently -- confirm with the energy retailer.
Electricity tariff reference
Australian average 2024: 28-38c/kWh depending on state and retailer | Compare with your current bill
Self-consumption rates
Home empty during day: 15-25% | Home occupied during day: 30-50% | Battery installed: 60-80% | EV charging at home: 40-60%
System lifetime
Panel performance warranty: 25 years | Inverter warranty: 10-12 years (factor inverter replacement cost ~$1,500)
5 Common errors
| Error | Cause | Consequence | Fix |
|---|---|---|---|
| Using the current FiT rate without noting that FiT rates change annually | Projecting savings over 10-25 years at today's FiT rate | Payback projections overstated if FiT rates decline (which they have consistently in AU) | Use a conservative FiT assumption (4-6c/kWh) for long-term projections. FiT rates in Australia have declined from 60c+ (2010) to 5-10c (2024). Self-consumption savings are more stable. |
| Not factoring in inverter replacement cost over the system lifetime | Calculating payback without noting the inverter needs replacing after 10-12 years | True 25-year cost overstated -- inverter replacement adds $1,500-$2,500 to the 25-year cost | Add approximately $1,500-$2,000 for inverter replacement in year 10-12 when projecting 25-year returns. |
| Using a self-consumption rate that is too high for a typical working household | Assuming 50-70% self-consumption without checking the household usage profile | Annual savings overstated -- payback will be longer than projected | A household where everyone is away at work or school during the day may self-consume only 20-30% of solar generation. Use a realistic rate based on the household usage profile, not an optimistic assumption. |
| Not accounting for panel degradation in long-term projections | Assuming the same generation in year 25 as year 1 | Later-year savings overstated by 10-20% | Quality panels degrade at approximately 0.5-0.8% per year. By year 25 a panel generating 400W at installation may produce 350-360W. For precise long-term projections, apply an annual degradation factor of 0.7%. |
6 Reference & regulatory links
7 Professional workflow
Common tools used alongside this one:
Solar System Size
Solar System Size Calculator determines the kW input for savings calculation
→
Solar Panel Count
Solar Panel Count confirms the panel number that determines actual system size for savings calculation
→
Solar Inverter Sizing
Solar Inverter Sizing is the final system specification step after savings justify the investment
→