What is solar energy?

Solar power is an energy created by converting the sun rays and the sun's heat into usable electricity or thermal energy. 

Photovoltaic cells (PV) are the building blocks of solar panels, the most widespread of solar technologies. PV cells transform sun rays into direct current (DC) that we can convert into usable electricity on a household level as well as large-scale (solar farms). 

Solar heat may also be used as a solar hot water system during the day, without the electrical component. Large-scale thermal energy systems like Concentrated Solar Thermals (CST) use mirrors to focus sun rays heating a container of liquid to high temperatures. Steam from the liquid then powers turbines and produces electricity. 

Australia’s combined capacity using solar energy, both thermal and electrical has been growing exponentially since 2015 and reached over 12k MW (MegaWatts) in 2019

Source: https://pv-map.apvi.org.au/analyses

What do I need to install a solar power system?

When thinking about solar energy, we often imagine the blue grey, metallic solar panels on households, cars, or the large desert grids. And indeed, solar panels otherwise called photovoltaic cells are essential elements allowing us to convert the energy of the sun into electricity. 

However, the solar power system needs quite a few other parts to work and be cost-effective for your house or company: 

Photovoltaic Cells

Photovoltaic cells (PV) are a core part of your solar panel and convert sun rays into direct current electricity. 

The photovoltaic effect is the creation of voltage and the electric current in materials when they are exposed to sunlight, and it has been known since the 1800s. Functional silicon cells were developed throughout the 19th and 20th century, with varying levels of efficiency. 

The larger-scale PV cells that we use today are made of:

1) crystalline silicon, either monocrystalline or polycrystalline (first-generation PV) 

2) thin layers of photovoltaic semiconductor material (thin-film solar cell, second generation)

3) combination of both (third generation)

PV cells production and disposal have varying levels of environmental impact. There are also polymer cells (OPV) which aren’t as efficient as other PV cells just yet (in range of 1-7%), but they are more environmentally friendly. 

Currently, over 2million Australian houses (±21%) have rooftop solar panels that create over 10GW (gigawatt) energy and more than 3000MW (megawatts) is produced in large-scale Australian solar farms. 

Solar Batteries

Solar power can be converted and fed directly into the grid or stored for later using solar batteries. Solar energy is created only during the day. Solar battery storage allows for storing energy for later use during the night or in case of the central grid outages. It can make your residence more independent and energy-efficient if you sell the excess of energy when there is high energy demand rather than in peak hours. However, solar batteries are also a high cost and offset the payment of solar grid investment from 3-5 years to 5+ years

PV Inverters

Solar panels convert sun rays into direct current energy (DC), which is not directly usable in households because all our appliances are adapted to the alternative current (AC). 

The inverter is an electrical converter that changes DC output to an AC that can be used to power the house feed electricity back to the grid. 

Without PV Inverters, the system cannot create usable electricity. Investing in long-lasting, low maintenance inverter will offset your solar power system’s cost in the long-term. 

The Racking

The racking is the mounting system for your solar panels to securely attach them to your roof or on the ground at the optimal angle. Optimal angle or tilt is important for the power cell efficiency, which generates the most energy when the sun hits them at a 90degrees angle. 

Your optimal angle depends on your location and time of the year. You can calculate yourself. 

In Australia, the optimal angle is usually equal to your location latitude (±31-34degrees) and often equals the angle of your rooftop, which is also the most convenient for installation. The rooftops directed to the north sun perform the best. 

During winter, optimal angles are your latitude minus 15 degrees so approximately ±19 degrees. It’s up to you to calculate if the cost of flexible racking system and reinstallation of the panels at a different angle twice a year is cost-effective against the increase in energy efficiency. 

Proper Roofing

You need a safe and steady roof to be able to install additional weight of panels and the racking safely. Competent installing companies should inform you if there are safety concerns or if your roof angle or position will not provide enough sunlight for optimal functioning of your solar panels. 

Electrical Panel

The Inverter will feed usable AC electricity directly into the electrical panel of your house where the electricity can be measured and send back into the grid. 

Benefits and challenges of using solar electricity?

Solar electricity has many potential advantages for your house, your wallet, and the planet. With properly planned and set up a solar power system, you can: 

  • Reduce energy bills.
  • Optimize energy savings.
  • Generate recurring revenues.
  • Increase the value of your house.
  • Reduce your carbon emissions.
  • Become independent from the grid.

Challenges lie in the overall cost of the installation. 

Till recently, solar electricity systems were expensive and not cost-effective for many households. The limited lifespan or system’s parts created more cost than the overall gain. 

Now, the quickly growing solar market in Australia (21+%) helps push technological innovation and the development of more efficient solar cells and batteries and decrease the cost of installation and maintenance. 

Solar energy is also becoming a perfect investment opportunity, especially in Australia, thanks to government subsidy programs and the ‘feed-in tariff’, which allows you to sell energy back to the grid. 

When to use solar?

Solar energy can be an interesting home investment with predictable cost and a steady stream of revenue thanks to Australian ‘feed tariff’ regulation allowing residences to sell back the excess energy they produce. 

However, solar panels are not a solution for everyone. Before installing solar everyone should conduct a cost analysis. 

Solar energy is most beneficial when your energy bills are significant. You have to calculate your average energy cost against the price of solar panel per watt. You can use an online solar calculator. 

The solar calculator will take into account your location, energy bills, energy use between 8am and 6pm, and your roof characteristics, vs. potential solar energy system setup including the system’s size, cost, and battery. 

Solar power system cost

The solar power grid is a substantial investment of minimum $3500 for a basic setup. Despite large potential benefits, solar energy is a pay-over-time investment and requires careful planning to make it cost-effective for you. 

Things to pay attention to when buying solar power system components: 

PV panels

There are two main types of PV panels, polycrystalline and monocrystalline, that both perform well in the Australian climate. The most important is that you purchase good quality panels with appropriate guarantees which will not break within the 3-5 years. Companies that produce high-quality panels in Australia include: 

X, Y, Z 


The inverter is the most important and burdened element of the system, and it most often wears down and malfunctions. It is prudent to invest in high-quality converters to prevent future replacement cost. 

Solar Batteries

Batteries can be useful, but the small gain from energy storage may not calculate against the cost of the battery, which is anywhere from $4-7k plus installation, maintenance, etc. 

Questions to ask yourself when considering battery purchase are: 

< h3 id="worth-it" >Is a solar energy system worth it?

To assess if solar energy is worth the investment, you have to consider your motivation and other factors: 

  • Are your energy bills and energy consumption high?
  • Are your location sunny with the well-positioned roof?
  • Does your provider have higher prices in peak-demand times?
  • What is your provider’s feed-in tariff?
  • Do you often experience power outages?
  • Do you need an independent and reliable energy source?
  • Do you want to lower your carbon emissions?

To assess if the solar power system is cost-effective for you, you compare the cost of installation per kW energy produced as opposed to your energy bills (for a grid-connected system) or your total energy consumption (for the battery-based system). 

Solar energy is most beneficial when your energy bills are significant. You have to calculate your average energy cost against the price of solar panel per watt. You can use an online solar calculator. The solar calculator will perform some calculations for you based on your location, energy bills, energy use between 8am and 6pm, and your roof characteristics, vs. potential solar energy system setup including the system’s size and cost, with or without the battery. 

Initial investment usually takes from 3-5 years to pay off and more if you purchase a solar battery ($7k+). You should always budget in the components that can last at least twice as long so you can get a return on your investment. 

If the carbon footprint and the environmental impact are your primary motivation, you should look into the more expensive, longer-lasting system components or polymer organic PV panels to further limit the impact from PV cells and batteries production and disposal. 

How much can I save with solar and batteries

How much money you save depends on how much energy you use and the capacity of your solar system, i.e., 2kW, 3kW, 5kW systems. 

In Australia, solar power reduces electricity bills by around $400 per your kW solar capacity per year. With a 5kW solar system, you can save up to $2k per year. 

In the case of setups with a solar battery, you replace your entire power consumption with solar power. You calculate if the investment is worth it by estimating your daily and annual consumption. 

When not to use solar energy

Even if you don’t get a lot of sun in your location, you can still benefit from solar. It all depends on your cost analysis. But there are other reasons why you shouldn't go solar. 

Poor roofing and/or inefficient installation. 

Modern solar installations work on most roofs but not all. If the roof is inadequate for safety or performance reasons, competent installers should redirect you to other products such as Power Factor Correction or Voltage Optimization. 

Suboptimal time-of-use

Many solar companies will perform cost analysis for you without considering your time of use of energy vs. when the time of energy production. If your system has no battery to store energy for later, it is important to calculate at what time of day the solar panels will reach minimum and maximum performance and compare that with your energy consumption pattern. 

If you own a small business and produce most energy between 1pm and 2pm during a lunch break when your machines are not running, that energy will not be used to fuel your energy consumption but fed back to the grid at the feed-in tariff rates which might not be as beneficial for you. 

Cost vs. ROI

If your system cost is close to your return on investment, it’s not economically sound to use solar electricity. You can opt for other green energy options and optimizations if your main motivation is being environmentally friendly. 

If you choose to use low-quality system components you might find out the system needs to be renewed in 3 to 5 years, the time it takes the system to start bringing back the revenue, in which case you will lose money. 

Choosing your basic solar energy system set up

There are a few basic reasons you may want to install the solar panels that will influence your system set up. 

Most often, you want to save money on your energy bills. In that case, you may consider a grid-connected system without the additional cost of the solar battery. 

If you also want to be grid-independent and have your own source of energy day and night, you may consider adding a battery to your system. 

If your only consideration is the environment regardless of the cost, you may choose thermal systems for heating water during the day, the high-quality long-lasting PV cells with less disposable waste over the span of 10-20 years, or organic polymer panels (OPV) which have the lowest environmental impact but also the lowest energy efficiency at the moment. 

When to use batteries?

Batteries will add a considerable cost to your solar energy system and may extend the pay-back on your solar investment by a couple of years. But batteries allow you to be independent of the main grip during nights and potential outages.

It is therefore important to understand when you need solar batteries in your system. 

Do you need a reliable energy source at all times? 

If you need a 100% uptime and a power shortage could lead to strong financial losses, for example when you have a business or a factory reliant on the energy to deliver production quotas, you should consider investing in batteries. The 2016 South Australian blackout had disastrous consequences for many companies. 

Do you want to be independent of the main grid? 

Many residences opt to be independent of the grid and cover their entire energy consumption with solar energy for environmental reasons and/or because it lowers their overall cost. Batteries allow you always to have spare energy to use or sell during high demand hours or during the night. You can also avoid outages and blackouts, which are a nuisance and also take a toll on appliances’ maintenance and lifecycle.

Is your provider charging a premium for peak-demand times?

Energy providers often charge more for electricity when everybody in an area is consuming energy at the same time, and energy generators can’t produce enough power for everyone. This is called peak demand pricing (see more about peak demand here). Having batteries allow you to create and store energy when the price of electricity is low, and use it when the price is high to save on your energy bills. 

Can I sell excess energy back to the energy providers?

Solar energy can be a fantastic small investment in Australia where it’s for households and small businesses to earn a steady revenue from selling their excess produced electricity back to their providers. Australian feed-in tariff scheme is part of the national program to increase already high solar and wind power production. 

What is the feed-in tariff

The feed-in tariff is a governmental scheme allowing households and small businesses to sell an excess of electricity produced using small-scale PV and wind energy systems. All small-scale grid-connected PV systems in Australia can directly send the current from solar panels via the inverter into the main electrical network. 

The amount paid is called the feed-in tariff, and it depends on your electricity provider. You can compare feed-in fares of Australian energy companies via the Victorian Energy Compare website. 

Feed-in tariff fluctuations

If you are looking to install solar panels in your house or company it is, the feed-in tariff is a key metric to calculate your return on investment. That being said, the feed-in rates can change very quickly. When estimating cost on solar panels, pay attention if the feed-in tariff rate is spread over multiple years in a quote as it will likely be inaccurate.

The feed-in tariff often changes depending on the time of day depending on the regional demand for electricity and the grid’s efficiency. 

If you produce energy during the peak demand times, you might be entitled to higher feed-in tariff rates. In Victoria, the feed-in tariff between 3 and 9pm during weekdays is 29c/kWh. 

When producing electricity during off-peak hours, the feed-in tariff can drop to 7.2c/kWh. 

Feed-in tariff fluctuation may be an important factor for you when deciding if you need to purchase the solar energy battery. In Victoria, you can produce electricity during low feed-in tariff hours and send it back to the grid during the peak demand hours to earn more revenue. 

Some States might not grant you the benefits of the feed-in tariff but offer a steady fee or credits per kW energy which you can use during night time for your general grid energy consumption.

What is peak demand?

Peak demand is a time of day when many people are using electricity, and it is difficult for the main grid to meet that demand. During peak time, electricity is usually more expensive for users. 

Optimizing the supply and demand of electricity is an important problem for energy providers. If the demand is too high, the network might not be able to handle the load, and a blackout will occur. Energy companies manage general and industrial energy demand by introducing:

  • higher energy tariffs for peak demand hours
  • energy limits and controlled outages
  • smart grids
  • higher feed-in tariff for small energy producers

In Australia, we have three types of charge:

  • Peak demand charge
  • Energy charge
  • Daily Connection Charge

How to get subsidies for solar power system?

Australia is one of the leading countries in solar energy adoption thanks to its solar-friendly climate but also due to national effort to facilitate and subsidize solar power systems for businesses and household. 

Australian Small-scale Renewable Energy Scheme (SRES) offers benefits to eligible houses and small companies that install a small-scale renewable energy system or a thermal hot water system. 

Eligible systems include small-scale:

  • solar photovoltaic (PV) panels
  • wind turbines
  • hydro systems
  • solar water heaters, and
  • air source heat pumps

By installing the renewable energy system, you create Small-scale Technology Certificates (STCs) which you can sell or re-assign to other people or agents. STCs value depends on the climate region where the system is installed and the amount of renewable electricity in produces or the amount of consumption in reduces. 

STCs can be assigned to an agent in exchange for cash payment or discounts, or sold in the STC open market for the current market price or via STCs Clearing Houses with the price fixed at $40 per STC excl. GST. 

Before investing in a solar panel system, consult your local tax office and your tax advisor because your income from the feed-in tariff may be taxed. The additional revenue stream and STC benefits may also influence other benefits obtained via Centrelink.