Is solar a good investment in 2026? For most Victorian homeowners, the answer is a resounding yes. Here's how to calculate your specific return on investment and understand the factors that affect payback.
Solar Investment Overview
Current Costs and Returns
For a typical 6.6 kW system in Victoria:
| Metric | Value |
|---|---|
| System cost (before rebates) | $6,800-$8,000 |
| After rebates (STC + SV) | $4,000-$5,200 |
| With interest-free loan | $2,600-$3,800 upfront |
| Annual savings | $1,200-$1,800 |
| Simple payback | 2.5-4 years |
| 25-year return | $25,000-$40,000 |
Calculating Your Payback
The Simple Method
Payback (years) = Net system cost ÷ Annual savings
Example:
- System cost after rebates: $4,500
- Annual savings: $1,400
- Payback: 4,500 ÷ 1,400 = 3.2 years
More Accurate Method
Include electricity price rises:
| Year | Electricity Cost* | Savings Value |
|---|---|---|
| 1 | $0.30/kWh | $1,400 |
| 2 | $0.31/kWh | $1,446 |
| 3 | $0.33/kWh | $1,510 |
| 4 | $0.34/kWh | $1,575 |
| 5 | $0.35/kWh | $1,643 |
*Assuming 3% annual increase
With price rises factored in, actual payback is often faster.
Variables Affecting ROI
System Size vs Usage
Matching system to consumption matters:
| Scenario | ROI Impact |
|---|---|
| System too small | Higher self-consumption, but limited savings |
| System matched | Optimal balance, best ROI |
| System oversized | More export at low FiT, reduced ROI |
Sweet spot: Generate about 80-100% of annual usage
Self-Consumption Rate
The biggest ROI driver:
| Self-Consumption | Effective Value/kWh | Annual Benefit (10kW) |
|---|---|---|
| 30% | ~$0.14/kWh average | $1,540 |
| 50% | ~$0.18/kWh average | $1,980 |
| 70% | ~$0.23/kWh average | $2,530 |
| 90% | ~$0.27/kWh average | $2,970 |
Higher self-consumption = faster payback
Electricity Prices
Historical Victorian price increases:
| Period | Average Annual Increase |
|---|---|
| 2019-2024 | 7-10% |
| Expected 2025+ | 3-5% |
Every price rise increases your solar savings.
Feed-in Tariff
While lower than historical rates, FiT still contributes:
| FiT Rate | Annual Export Value (5,000 kWh) |
|---|---|
| $0.05/kWh | $250 |
| $0.08/kWh | $400 |
| $0.10/kWh | $500 |
25-Year Projection
Conservative Estimate
Assumptions:
- 6.6 kW system, $4,500 net cost
- 50% self-consumption
- 0.5% annual panel degradation
- 3% annual electricity price increase
- $0.07/kWh feed-in tariff (fixed)
- Inverter replacement at year 12 ($1,500)
| Period | Cumulative Savings | Cumulative Return |
|---|---|---|
| Year 1 | $1,400 | -$3,100 |
| Year 3 | $4,320 | -$180 |
| Year 5 | $7,450 | $2,950 |
| Year 10 | $16,200 | $11,700 |
| Year 15 | $27,100 | $21,100 |
| Year 20 | $40,500 | $34,500 |
| Year 25 | $57,000 | $51,000 |
25-year return: ~11x initial investment
What This Looks Like
Year 0: ████████████████████ Investment: $4,500 Year 3: ████████████████████ Breakeven Year 10: ████████████████████████████████████ $11,700 profit Year 25: ████████████████████████████████████████████████████ $51,000 profit
ROI Comparison
Solar vs Other Investments
| Investment | 25-Year Return | Risk |
|---|---|---|
| 6.6kW solar | ~1,100% | Very low |
| Term deposit (4%) | ~167% | Very low |
| ASX average (7%) | ~443% | Medium |
| Property (5% + rent) | Varies | Medium |
| Bank savings (2%) | ~64% | Very low |
Solar offers exceptional risk-adjusted returns.
Why Solar Returns Are High
- Guaranteed savings: Sun shines; you save
- Rising baseline: Electricity prices increase
- No ongoing costs: Minimal maintenance
- Tax-free returns: Savings aren't income
- Asset value: May increase property value
Factors That Improve ROI
Higher Self-Consumption
Strategies to boost:
| Action | ROI Improvement |
|---|---|
| Run dishwasher/washing during day | 5-10% |
| Timer on hot water (solar soak) | 10-15% |
| Home battery | 20-40% |
| EV charging during day | 15-25% |
| Pool pump to midday | 10-15% |
Optimal System Sizing
| Home Usage | Recommended System | Expected ROI |
|---|---|---|
| 15 kWh/day | 5-6 kW | High |
| 20 kWh/day | 6.6-8 kW | High |
| 30 kWh/day | 10-13 kW | High |
| 40+ kWh/day | 13+ kW | Good-High |
Quality Equipment
Premium panels and inverters:
- Last longer (better 25-year return)
- Higher efficiency (more generation)
- Better warranties (less risk)
- Lower degradation (sustained output)
The $1,000 extra for quality equipment often pays back 3x over system life.
Factors That Reduce ROI
Shading Issues
| Shading Level | Output Reduction | ROI Impact |
|---|---|---|
| None | 0% | Optimal |
| Minor (morning/evening) | 5-10% | Small |
| Moderate (seasonal) | 15-25% | Noticeable |
| Significant | 30%+ | Major |
Address shading or install microinverters.
Poor Orientation
| Roof Direction | Generation vs North |
|---|---|
| North | 100% |
| North-East/West | 90-95% |
| East/West | 80-85% |
| South-East/West | 70-75% |
| South | 60-70% |
East/West still provides good returns; South is marginal.
Low Usage Households
| Usage Profile | Best Strategy |
|---|---|
| Very low (<10 kWh/day) | Smaller system (5 kW) |
| Low (10-15 kWh/day) | Standard system (6.6 kW) |
| Average (15-25 kWh/day) | Match system to usage |
| High (25+ kWh/day) | Maximise roof space |
Don't oversize for low-usage homes.
Battery Storage ROI
Current Battery Economics
Batteries improve self-consumption but have different economics:
| Factor | Solar Only | Solar + Battery |
|---|---|---|
| Upfront cost | $4,500 | $14,000-$18,000 |
| Annual savings | $1,400 | $2,000-$2,400 |
| Simple payback | 3.2 years | 7-9 years |
| Lifespan | 25+ years | 10-15 years |
When Batteries Make Sense
Justified by:
- Blackout protection value
- Time-of-use tariff arbitrage
- VPP participation income
- Avoiding export limits
- Future electricity price rises
Battery ROI Improving
Battery costs continue falling:
- 2020: ~$1,000/kWh installed
- 2023: ~$800/kWh installed
- 2026: ~$650/kWh installed
- Projected 2028: ~$500/kWh installed
Making the Decision
Solar Is Almost Always Worth It If:
- You own your home
- You have suitable roof space
- Your roof is in good condition
- You plan to stay 5+ years
- You can access rebates
Proceed with Caution If:
- Major roof work needed soon
- Significant shading issues
- Very low electricity usage
- Planning to sell within 2 years
- Rental property (different calculation)
Get Multiple Quotes
Compare at least 3 quotes:
- Same system size
- Equivalent equipment quality
- All costs included
- Calculate your specific payback
Quick ROI Calculator
Your inputs:
- System cost after rebates: $______
- Annual electricity bill: $______
- Expected self-consumption: ____%
Calculation:
Estimated savings = Annual bill × 0.6 × (self-consumption/50) Payback = System cost ÷ Estimated savings
Example:
- System: $4,500
- Current bill: $2,400/year
- Self-consumption: 55%
Savings = $2,400 × 0.6 × (55/50) = $1,584 Payback = $4,500 ÷ $1,584 = 2.8 years
The Bottom Line
Solar in Victoria 2026 offers:
- 3-4 year typical payback with current rebates
- $25,000-50,000 lifetime savings over 25 years
- 10-15% annual return on investment
- Hedge against price rises locking in savings
- Very low risk compared to other investments
For most Victorian homeowners, the question isn't "Is solar worth it?" but "Why haven't I done it already?"
Contact H.T Electrics and Solar for a personalised ROI analysis based on your specific usage and property.
