Is Solar Still Worth it in 2024?

It’s the question that rears its head every year – is solar still worth it? Throughout 2021, 2022, and 2023, and now heading into 2024, we’ve seen many changes that have impacted both consumers and markets – from supply chain issues and the impact of COVID-19 to unprecedented electricity price hikes.

Feed-in tariffs are sitting at a historical low and are getting lower every year, while the federal government’s solar rebate also decreased as of January 2022. With all of these factors in play, some people see solar as “not worth it anymore”, a “waste of money” or, in some cases, a “scam”.

In this post, we’re going to break down some of the key discussions surrounding solar’s viability in Australia and whether it’s still worth it in 2024.

Feed-in tariffs

One of the most common misconceptions we hear about residential solar systems is that the only way they save you money is via the feed-in tariff you receive when you send electricity back into the grid. Since this is such a hot topic, we’re going to dedicate an entire section to it.

Why were feed-in tariffs used to be high

The original intention of the feed-in tariff was to encourage people to install solar PV systems and thereby help Australia meet its renewable energy target.

The cost of house solar panels has decreased significantly over the past decade, making them more affordable and therefore more accessible to a greater number of people. When residential solar entered the Australian market in 2009, high feed-in tariffs, along with up-front grants and other state and federal government schemes, were introduced as an incentive for homeowners to install expensive solar systems.

Emphasis on the word EXPENSIVE.

Let’s try to put this into perspective: when feed-in tariffs were at their most generous (two or three times the retail cost of electricity), solar system prices were astronomically (3-to 4 times) higher than they are now. Solar panel prices have dropped almost 80% over the last decade.

Early adopters of new technologies tend to pay high prices for systems that are often less efficient than later designs. When early adopters of solar technology invested, they really needed that feed-in tariff to achieve a decent payback period (the length of time it takes to recover the cost of installation).

By using a feed-in tariff to stimulate demand, governments assisted early adopters financially but also, through increased demand, drove the industry to develop new and more efficient systems.

Although feed-in tariffs have dropped significantly, solar customers today are not only paying significantly less upfront for their systems but are also reaping the benefits of technological advancements that make their systems not only far more efficient but last considerably longer than their early counterparts. Federal and state rebates* to assist with the upfront cost of solar, while also lower than before, are also still available, making the cost of solar very affordable for most Australians. With payback periods typically less than 6 years, any feed-in tariff you receive is really just a bonus.

*Side-note: another common misconception is that the feed-in tariff is Australia’s ‘solar rebate’. The federal rebate is a different incentive offering a point-of-sale discount on the upfront cost of your system.

Why have feed-in tariffs fallen so low?

There are a few reasons why feed-in tariffs have fallen from their early highs. One of these reasons, you may be surprised to hear, is that they were more successful in their original goal than anticipated. In New South Wales, for instance, it was found that incentive-driven solar uptake occurred faster than expected and the scheme’s first renewable target milestone was reached two years ahead. The carrot of high feed-in tariffs did what it was supposed to do.

One of the main reasons is due to reductions in wholesale electricity pricing – a direct result of the successful uptake of solar. Sustained lower wholesale electricity prices generally lead to reductions in feed-in tariffs.

There was also concern that the feed-in tariff, which is paid by retailers, had inflated prices for non-solar households. In addition, there was evidence that some applicants were intentionally adding solar systems beyond their household requirements, and the cuts were intended to minimise windfall profits under the scheme.

The cost of solar panels in 2024

In late 2021, a ‘perfect storm’ of circumstances, including COVID-19, the Chinese energy crisis, and supply-chain pressures, saw the cost of solar panels increase upwards of 15 per cent. While this is unfortunate, the overall impact on your system’s payback period is negligible, especially if you factor in the high cost of grid electricity, which is only expected to increase.

The average retail cost of solar systems in Australia 2024:

  • 6kW: $4,500 to $7,500
  • 10kW: $8,000 to $10,500

The above figures are after the government STC rebate has been applied. Solar systems with premium components from top-tier brands can add an extra 20-30% to the total.

Payback periods for solar panels vary from state to state and depend on the size of your system, but for an average 6.6kW solar system costing around $6,500 to 7,500, you can expect a payback period between 4-6 years. Considering the average life expectancy of solar panels is between 25-30 years, that’s a solid return on investment!

Solar rebates and incentives in 2024

The federal government benefits households that install renewable energy systems, including solar panels, through small-scale technology certificates with a redeemable value.

So, how does the Government determine how many STCs your solar system qualifies for?

The Small-scale Renewable Energy Scheme incentivizes individuals and small businesses to install eligible small-scale renewable energy systems. It does this by creating small-scale technology certificates, which Renewable Energy Target liable entities have a legal obligation to buy and surrender to the Clean Energy Regulator quarterly.

Small-scale technology certificates are provided ‘up front’ for the systems’ expected power generation over 15 years or, from 2017, from the installation year until 2030, when the scheme ends. This renewable electricity replaces electricity generated from non-renewable sources.

Generally, householders who purchase these systems assign the right to create their certificates to an agent in return for a lower purchase price. The level of this benefit differs across the country depending on the level of solar energy.

Small-scale technology certificates can be created following the installation of an eligible system and are calculated based on the amount of electricity a system produces or replaces (that is, electricity from non-renewable sources).

The number of small-scale technology certificates required to be submitted by electricity retailers is set each year by the small-scale technology percentage (STP).

The 2022 small-scale technology percentage (STP) was 27.26%. In 2023, the STP was 16.29%.

To do this, each year, the STP is set to require liable entities to surrender STCs equal to the amount estimated to be created in that year, plus or minus an adjustment for previous under or over-surrenders.

In addition to federal rebates, many states offer incentive programs to promote the uptake of solar. You can find more information on these here.

While you could argue that incentives aren’t as attractive as they used to be, as with feed-in tariffs, it’s important to remember that solar costs have also fallen significantly, making the payback period much shorter.

Electricity prices

Electricity prices skyrocketed across Australia in 2022-2023.

From July 2022, tariffs, known as default market offers, rose between 8.5 per cent and 18.3 per cent in New South Wales, up to 12.6 per cent in South East Queensland and 9.5 per cent in South Australia. The Victorian Default Offer has also increased by approximately 5 per cent. Small business customers are also affected by the changes, with standing offer prices rising to 13.5 per cent depending on the state.

According to the Australian Energy Regulator’s 2023 final determination, residential consumers in south-east Queensland, New South Wales (NSW), and South Australia on the default market offer (DMO) have an increase in their yearly electricity rates of 20–25%.

When electricity prices increase, so too does the business case for solar panels and battery storage. Households with solar panels on their roofs are somewhat insulated from price hikes, as they generate their electricity and can minimise their reliance on the grid. Feed-in Tariffs also tend to improve when the wholesale price of electricity goes up, providing an additional financial incentive for solar households.

The key to solar savings in 2024: self-consumption

Did you know you get much better returns when using your solar-generated electricity? Self-consumption is worth roughly twice as much as your feed-in tariff!

Any electricity you generate with a solar system and don’t feed back into the grid (because you’ve used it to power something in your home), is essentially ‘free’, or 0c per kWh.

We hear you – the sun isn’t out 24 hours a day, so you can only get your ‘free’ electricity from around 8am – 6pm. What if you aren’t home during the day to take advantage of peak solar energy production? If you drive to work in the dark and back home in the dark on weekdays, for example, your daytime energy usage is going to be very low.

If you aren’t at home during daylight hours, the key to reaping the full benefits of solar is to plan ahead with timers on your appliances, charging devices during daylight hours to use at night and schedule energy-intensive activities for the weekend when you at home during the day. This might sound like a hassle, but the small effort it takes to change your consumption habits can save you thousands every year.

Read more about peak solar energy hours

Getting the best value from your excess solar generation

To get the best value for your excess solar generation, be prepared to monitor prices and switch retailers when there’s a better deal. If you have rooftop solar panels and you’re not receiving any feed-in tariff, it probably means your electricity plan doesn’t have a buyback feature. This can be rectified either by changing your energy plan or by changing your electricity retailer. Energy Matters’ fast and free energy comparison tool targets competitive deals in your postcode area and compares against your current energy bill.

Remember that the highest feed-in tariff rate is not necessarily the best. In many cases, energy retailers give with one hand and take with another, so they pay a lot more for your fed-in electricity, but they’ll also charge you a lot more if you want to buy electricity.

Home solar battery storage systems

Of course, you could increase self-consumption significantly with the investment of a solar battery. You can store the energy your panels produce during daylight hours so you have it for use at night time. There’s been much debate about whether batteries are worth it from an economic standpoint. While it’s true that the payback period for battery storage systems is around the same as its warrantied life, the benefits of battery storage go far beyond the monetary.

The peace of mind that comes with less reliance on the grid is priceless. Not to mention, if there’s a power outage, you’ll still have access to electricity. With the energy crisis in full swing, threats of blackouts and the inevitability of surging power costs, batteries are looking like a more and more appealing option for Australians.

Read more about solar battery systems

Is solar still worth it in 2024?

Despite what many think, customers who invest in a solar system today aren’t getting the ‘raw end of the deal’ compared to early adopters. When you consider the dramatically reduced cost of solar combined with the vast improvements in system efficiency and longevity, feed-in tariffs are not the ‘sine qua non’ they once were for making a good return on investment.

The business case for solar in 2024 is exceptionally strong. With electricity prices on a steep rise, decent government incentives available and reasonably low system prices, the investment will pay for itself many times over the lifespan of your system.

To truly make the most of your solar system and your potential savings, you should try to maximise your solar self-consumption by adjusting your consumption habits or adding battery storage (if feasible).

Looking at going solar? Energy Matters can assist you with up to 3 FREE, obligation-free quotes from trusted local installers – it’ll only take you a few minutes. You can also call us on 1800 EMATTERS or email our friendly team for expert, obligation-free advice.

Updated on January 2024

Source: Australian Government – Clean Energy Regulator