Ch 4. Should I buy solar? Financial return, ROI, payback period for solar

Yes! Well, for many people it is a resounding “yes”, 20% of Australian households now have solar. Whether you should buy solar, really depends on your reason for wanting solar, and the region that you are in. The main reasons that people buy solar are 1. Financial, 2. Environmental and 3. Energy Independence, or a combination of the three. Let’s look at those individually:


Whether solar makes financial sense largely depends on where you live. Your location will dictate how much solar you can produce and the relative cost of solar energy vs buying energy from the grid (factors that dictate your return on investment). There are very detailed answers, and many variables for these different factors, so for this guide we will give an overview of the average payback period for solar in some key regions, and point you to where you can find more detailed information.

Australia has some of the best payback periods worldwide, due to having lots of sun, good government support, and relatively expensive conventional electricity. The average payback period for a 5kW solar system in Australia, if you use 50% of that solar you produce, is around 4 years (in 2018). According to the consumer advocacy group Choice, that varies from as little as 2-3 years in Adelaide, up to 5-6 years in Melbourne, Hobart, and Darwin.

In the US, the average payback on a residential solar system is 6-8 years, according to the solar quote comparison website, EnergySage. Interestingly, according to Indian Solar market, the payback period for residential systems in India is also approximately 6-8 years.


With increasing awareness of climate change, more people are going solar for environmental reasons. You might have heard it said that due to the embodied carbon in manufacturing solar panels, going solar actually increases carbon emissions. This is fortunately far from the truth. The carbon payback period of solar does depend on location (due to how much sunlight there is, and how carbon intensive the grid energy is in a particular location), however in most parts of Australia, US and Europe, using 2019 figures, your solar panels will become carbon neutral after about 1 - 1.5 years. This is based on energy it takes to build and transport the panels, divided by how much carbon the solar panels offset when installed [1]. That means, the next 20 plus years that your system should be operating, it is offsetting carbon from fossil fuel power plants.

Another significant point in the environmental benefit of your solar system, is how reliable, high quality, and high performing your system is. Essentially, the longer your system is producing power, and the more efficient it operates, the more carbon intensive energy it will offset. So buy spending a little more on quality products, and a quality install, you will be increasing the carbon payback of your solar install.

Battery storage adds to the carbon payback. Due to the fact that your solar power is offsetting fossil fuel energy regardless of whether your household is using it via battery storage, or whether it’s being used by your neighbours when you export it, battery storage does not make environmental sense if your home is connected to the grid.

Energy Independence

Similar to the desire for us to provide a safe and comfortable home for our family, many humans also seem to have an innate, evolutionary desire to be able to have full control of our energy needs. However, this desire is usually at odds with both the financial and environmental reasons for going solar. In order to be fully energy independent you need to be completely off-grid, which means you’ll need an awful lot of solar, batteries and a backup generator to keep you going in the depths of winter. However, if you live or are moving to an area without the grid, you have little choice but to be energy independent.

Going solar (without batteries) will not give you much energy independence, it will allow you to consume some power that you produce, but if the grid goes down your solar system is designed to go down with it (lest exporting energy to the grid and electrocuting anyone working on getting it back up again).

Installing some battery storage can give you a higher level of energy independence than having solar alone. We will talk about whether it is worth doing that in the last chapter of this guide “Should I get batteries”.

[1] Sources:

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