The Significant Cost Benefits of Solar Panels

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Updated to 31 March 2020




I have created simple tables which show how easy it is to calculate the benefits of installing solar panels, despite a great deal of apparent uncertainty to be found on the internet.


I have also provided a detailed case study based on actual data, over 3.50 years in Adelaide, from a 5.2 kW solar panel installation from 1st December 2013 to 21st May 2017.  This shows a saving in electricity costs of $2,063.96 per annum when compared to not having solar panels.  This value corresponds almost precisely with the tabular data in Table 4 below.


I have omitted controlled load (also known as ancillary, off-peak or J-tariff) in this document because it is not generally pertinent to solar energy generation and storage.


It is also important to understand that the power rating given by the manufacturer of your solar panels will be an idealised number, and that the real power will be less than stated.  Also, the power output of solar panels typically decreases by between 0.4% and 0.5% for every degree centigrade rise in temperature above 25° C, so cool bright days are the best.  Roof mounted panels parallel to the roof can be expected to be 35 C° above the ambient temperature, so on a 40° C day in Adelaide, the panel temperature could be 75° C.  This is 50 C° above the test temperature of 25°C, leading to a decrease in power output of 20% to 25%.  Output also decreases as the panels age with time, albeit measured in decades for quality panels.




In Monthly, seasonal and annual solar production data for Adelaide, I have documented 6.36 years of solar production in Adelaide, and established that the average daily solar energy produced per kW of solar panels is 4.445 kWh.  In the following tables I have used our current AGL GST inclusive general usage (peak) grid tariff of $0.41580, and our current AGL feed-in tariff of $0.20000.


Solar panels produce a finite amount of solar energy, based on the location and number of panels, and they pay for themselves in one of only two ways, and only during sunlight hours.  The first is they allow us to self-consume solar energy, instead of importing it from the grid at $0.41580 per kWh.  The second is they allow us to export what we don’t self-consume at $0.20000 per kWh.


Without solar panels we have to pay $0.41580 per kWh for all the electricity we consume.  Once we have up to 5 kW of solar panels however, the energy we self-consume doesn’t actually save us $0.41580 because, if we didn’t consume it, we would receive $0.20000 per kWh by exporting it.  Therefore, when we self-consume, we save $0.41580 - $0.20000 = $0.21580 per kWh.  If you have more than 5 kW of panels, given that in SA we can only export a maximum of 5 kW, then of course any production over 5 kW that is self-consumed is free.


There are only two variables that we need to consider in calculating the benefits of installing solar panels.


Variable 1 is the number, and rated power, of panels we choose to install, usually limited by cost, or by the amount of roof space available.  This determines the total amount of solar energy we can produce each day.  Currently in South Australia SA Power Networks allows domestic installations to install a total of 10 kW of inverter, but the inverter is only allowed to export 5 kW to the grid.  Installing much more than 10 kW of panels would therefore be counter-productive because anything over 10 kW cannot even be inverted, much less sold to the grid.  Also, modern inverters tend to run most efficiently near their rated output, so over-sizing the inverter is not generally recommended.  Thus, 10 kW is the maximum sensible limit to rooftop solar panels.  East and west facing panels will produce about 85% of what north facing panels will produce, so there is a reasonable argument for fitting above 10 kW, space permitting, in that situation.


Variable 2 is how much of the solar energy we can manage to self-consume during the day.  Since we are saving $0.21580 per kWh by self-consuming, the more we self-consume, the more we save.  The amount of solar energy we export is not a variable by itself, but a by-product of Variable 1 and Variable 2.


This leads us to Table 1 below, based on Adelaide solar radiation levels.  Should you wish to calculate the savings for a different location, the Bureau of Meteorology publishes solar radiation tables, which could be used to scale the Adelaide data.


Table 1.jpg

Column 1 is the total solar panel power (kW) installed on the roof, for 0, 2, 3, 4 and 5 kW of panels.


Column 2 is the daily self-consumption (kWh), from 1 to 10 for each of the 5 solar power levels.


Column 3 is the average daily total solar energy (kWh) generated for the 5 solar power levels, given that, in Adelaide, we generate an average of 4.445 kWh per day per kW of solar panels.


In the remaining columns I have calculated the values of grid imports and exports for four different households, based on total household electricity consumptions of 10, 20, 30 and 40 kWh per day.  This has been done for indicative purposes so you can perhaps relate to your own current electricity costs, but the overall household consumption does not change the savings to be made from solar panels, only self-consumption does.


In each row, the amount of self-consumption is deducted from the total household consumption, to give the number of kWh required to be purchased at the full import tariff, and it is also deducted from the total available solar energy to give the number of kWh qualifying for the export tariff.


Table 2, 3 and 4.jpg


Table 2 above summarise the daily costs of electricity, as derived from Table 1, and based on the current tariffs.


Table 3 above summarise the annual costs of electricity, as derived from Table 1, and based on the current tariffs.  I have included daily and annual electricity costs for various total household consumptions so that you might be able to more easily relate to your own situation.


Table 4 above summarises the annual savings to be made.  Given that a solar panel installation actually operates independently of the household’s total consumption, it is not surprising that the savings are the same, regardless of total household consumption.  In other words, the only things that determine the savings from a solar panel installation are the location of the house, the current import and export tariffs, the quantity and quality of solar panels installed, and the amount of self-consumption of the solar energy produced.  The only two of those that we can do anything about are the panels and self-consumption, with the panels being by far the most important consideration in terms of savings.




As a retired electrical engineer, I have maintained a very detailed spreadsheet of all our monthly electricity costs and energy flows since November 17th 2013, with the earlier quarterly bills converted on a pro rata basis into monthly data.  The analyses in this document are based on two retired people living in a three-bedroom home, and all prices include GST, unless otherwise specified.  All spreadsheet data has been reconciled to the cent.


We added a Sunverge DC coupled solar battery when we joined the AGL Virtual Power Plant (VPP) on 26th May 2017.  From 17th November 2013 to 21st May 2017 we had 20 REC 260 PE watt panels with a total theoretical output of 5.2 kW.  The panels face directly north, they are not shaded, and they are at a pitch of 22.5 degrees above the horizontal.  We also had an SMA 5000TL-21 solar inverter from which I downloaded daily solar production data via Bluetooth. 


The methodology used to estimate what the costs would have been if we hadn’t had solar panels, was to deduct the solar energy exported as feed-in from the solar energy produced, to arrive at the solar energy used in-house.  I then added the solar energy used in-house to the peak energy imported from the grid, this now being the total energy we used in-house.  I then costed those energy flows at the monthly actual discounted energy tariffs we were charged for peak grid electricity.  The costs for the case where we had solar panels are simply taken directly from our actual bills.


The next step was to annualise both sets of results by deriving daily costs and consumptions (by dividing the totals by the number of days in the study) and then multiplying the daily costs by 365, to arrive at comparable annual numbers.


The final step was to determine the average tariffs used over the period for imported and exported energy and measure the percentage changes relative to AGL’s current tariffs.  The costs for both cases were then adjusted by the percentage changes to arrive at an annual comparison based on current tariffs.




Table 5 below shows energy flows, electricity costs, tariffs and electricity provider discounts, covering the period under consideration, but excluding state government pensioner discounts and other minor charges.


There are some anomalies in the data due to converting quarterly bills to monthly bills, and also due to some estimated meter readings.  However, these anomalies do not affect the overall totals because at some point the meter was read, and all totals have been reconciled against overall meter readings and account billing.  One obvious anomaly in the monthly data occurs when it appears that the monthly solar energy exported exceeds the monthly solar energy produced.  I have shown this as a shortfall in Column 10 for the sake of completeness, although clearly this is not physically possible.  Again, this does not affect the total energy flows, or the costs.


Table 5.jpg

Column 6 is the amount of solar energy generated each month, based on the output from the SMA inverter.  By subtracting the energy exported as feed-in (Column 8), we get the amount of solar energy that we actually used in-house (Column 9), and which we would have had to buy as peak energy if we didn’t have solar panels.  If we then add the peak energy that we actually imported (Column 7) to the solar energy that we used in-house, we get the total energy used in-house (Column 11).  Applying the monthly discounted peak tariff (Column 16) to this equivalent in-house energy consumption gives us a very accurate “no solar panels” cost in Column 12.


The PER ANNUM data at the bottom of Table 5 is derived by dividing the TOTAL values by 1278 to give a daily average, and then multiplying by 365 to give an annualised average.




Table 6 below shows the costs, exactly as they occurred, based on having solar panels installed.  The PER ANNUM data at the bottom of Table 6 is also derived by dividing the TOTAL values by 1278 to give a daily average, and then multiplying by 365 to give an annualised average.  In this case we have arrived at the actual annualised cost of peak grid energy, and the annualised benefit of the feed-in rebate, with solar panels installed.


Table 6.jpg



Table 7 below is a summary of the annualised data from Tables 5 and 6.  The annual benefit, or change in net revenue, of $1,813.79 comes from the fact that, with solar panels included in the calculation, we needed to buy less peak energy, and we were able to sell a significant amount as feed-in.  While this is an accurate assessment based on actual data, and a sound methodology, it is also based on the monthly tariffs shown in Tables 5 and 6.


Table 7.jpg

Table 8 below includes current tariffs, and the percentage increase in tariffs relative to the average tariffs used in Table 7.  The peak import costs in Table 8 have increased by 60.3% over Table 7, and feed-in export rebates have decreased by 0.3% over Table 7.


Table 8.jpg

The financial benefit, or change in net revenue, at current tariffs, from installing 5.2 kW of solar panels is $2,063.96 per annum.




The calculated annual savings shown in Table 4 for 5 Kw of panels, at current tariffs, with self-consumption of 6 hours, are $2,095.17.


The case study savings in Table 8 for our average daily household consumption of 10.4 kWh, with 5.2 kW of solar panels, at current tariffs, are $2,063.96.


Clearly the economic benefits of a solar panel installation depend very much on import and export tariffs, but given trends so far have been for both to increase, leading to further savings on both sides, tariffs do not appear to be a serious consideration.  The main conclusion I would draw with regard to the economics of installing solar panels is to always install the maximum possible and allowable.


Technology keeps advancing and solar panels have now gone from about 200 watts per panel some years ago to now nearly 400 watts.  This does suggest installing a bigger inverter than you need initially, even if you can’t afford the panels to run it at full capacity now, as long as inverter efficiency is not an issue.  However, against this argument is the fact that inverter technology keeps improving also.  Sometime soon you may well be able to have more efficient panels with higher output.  In November 2018 I installed a 5.0 kW inverter for 5.2 kW of panels, but now I could fit well over 7 kW of panels in the same space.


We paid $8,200 in December 2013 for our panels, and at the estimated annual return of $2,063.96, we paid them off in September 2018.  Given that the cost per kilowatt of solar panels has decreased significantly since 2013, the payoff time will be much better these days.


Modern inverters have an automatic facility called grid voltage dependent power reduction (GVDPR), which reduces the power output of the inverter by 5.33% per volt above a preset threshold, which is normally set to less than 258 volts by your installer.  The maximum allowable threshold in South Australia is 258 volts, which is also the voltage at which the inverter must shut down completely.   Once the grid voltage falls below 253 volts, the inverter is designed to incrementally power up again.  During over-voltage or GVDPR periods, feed-in revenues will be affected, but it is not a common occurrence, and of no great significance economically.


I should add that the joy of being part of the solution, instead of part of the problem, is something that can’t be quantified, and once the panels are paid off, the joy is even greater.


If you currently don’t have panels installed, and you use electricity to heat your water, I would suggest you read The Significant Cost Benefits of Solar Hot-Water to see if maybe an investment in solar hot water might be more beneficial than solar PV.


Please see my Profile if you’d like to learn more about other articles I have written on solar energy and my  participation in AGL’s Virtual Power Plant solar battery storage program.


AGL Community Manager
1 Reply 22950 Views

Hi @Richard


Thank you so much for your contribution, summary and tips based on your experience with solar panels. You've clearly done your homework and track your progress meticulously. 


Community, if you are looking for an expert in Solar Panels, Richard is your man!


Please give him a like or a reply if you found this helpful. 



2 Replies 22630 Views


I love real data, thought I was the only one who was so meticulous. Great work, good info.

0 Replies 22628 Views

Hi Lew,

Can I ask your background and whether you have joined the VPP?

I’ve just finished an analysis based on 14 months with the VPP and I now have a very different perspective on it.

 I haven’t published yet but will let you know when I do.



0 Replies 22528 Views

Hi Lew,


My email is if you want to contact me directly.