Solar power systems with a capacity of 20 kilowatts (kW) are gaining popularity as a compelling and appealing investment option for small to medium businesses, as well as households with substantial energy needs, throughout Australia. In most regions of the country, the payback periods for these systems typically fall within the 3-5 year range.
This article offers an overview of the pricing, energy production (measured in kilowatt-hours), and financial returns that businesses can anticipate from a standard 20kW solar photovoltaic (PV) system.
What is the cost of a 20kW solar system?
As of July 2023, data from Solar Choice’s installer network database indicates that the installation cost for a fully equipped 20kW solar system ranges from approximately $15,000 to $20,000. These estimates encompass the upfront ‘discount’ or incentive provided by the federal government’s Renewable Energy Target for systems with an output capacity below 100kW, and they also include the Goods and Services Tax (GST).
Within this price range, small and medium-sized enterprises (SMEs) grappling with the escalating costs of grid electricity can now access clean and affordable energy solutions.
Solar Choice has been monitoring commercial solar system prices since May 2014 through regular updates in the Commercial Solar PV Price Index. While specific tracking for 20kW solar systems is not provided, our index does include pricing trends for 10kW and 30kW systems. The historical pricing trends for 30kW systems can be observed in the graphs below.
What is the energy output of a 20kW solar system?
The actual power generated by a 20kW solar power system can vary based on several factors, including:
1. Geographical location, considering the expected daily and annual solar irradiation and cloud cover levels.
2. Orientation and tilt angle of the solar panel array.
3. Presence of shade affecting the panels.
4. Operating temperature of the panels.
5. Accurate matching of solar panel array capacity to inverter capacity.
6. Performance of individual components, such as the panels and the inverter.
The table below offers a general estimate of the daily energy production (averaged over the year) for a 20kW solar system in Australia’s capital cities.
|20kW Solar System Energy Output
|Approx average daily energy production*
|*Assumes north-facing with no shading, 75% system efficiency. Information via PVWatts & Bureau of Meteorology
Consider that the values in this table represent yearly averages. Daily energy production tends to be higher during the summer and lower during the winter, given the variation in day length. During winter, the system might produce 20-40% less energy, whereas in the summer, it may generate 20-40% more.
Is a 20kW solar system the appropriate size for your business?
Determining the ideal solar system size for your business boils down to three key factors:
1. Roof space availability: A 20kW system necessitates a minimum of approximately 100-136m2 of area, with the actual requirement potentially higher depending on panel wattage and the need for tilt frames.
2. Energy consumption patterns: In many Australian regions, solar feed-in credits are not provided for energy excess beyond 10kW solar system capacity. Consequently, any surplus solar energy not directly used does not yield financial benefits. It’s crucial to align your system size with your business’s energy consumption needs. Consult with Solar Choice experts to determine the optimal system size for your energy usage.
3. Budget considerations: If you have sufficient roof space for the recommended solar system size, the final decision hinges on whether your budget allows for the investment in such a system.
IS THE 20KW SOLAR SYSTEM SUITABLE FOR YOU?
To determine if the 20kW solar system is the right fit for your needs, the first step is to assess your average daily electricity consumption. This information is readily available on your most recent quarterly power bill. If your daily consumption falls within the range of 60 to 80kWh, the 20kW system would be well-suited.
The 20kW solar system is designed to generate an average amount of energy comparable to your daily usage, providing the flexibility to comfortably accommodate any potential increase in your daily consumption.
To optimize the returns from the solar system, it is advisable to conduct an audit of your current electricity usage habits. Identify activities that consume a significant amount of power, such as washing machines, dishwashers, dryers, etc., and implement a plan to schedule these appliances and activities during sunlight hours. (Note: Avoid running heavy appliances simultaneously; stagger their usage to ensure the solar system can meet your power needs effectively.)
What are the typical return on investment (ROI) and payback duration for a 20kW solar system?
Based on our data, gathered from nearly 300 business cases in 2023, the payback periods for appropriately sized commercial-scale solar systems in Australia average around 2 years. This calculation takes into account the government Small-scale Technology Certificate (STC) rebate and tax incentives applicable to solar projects.
The individual circumstances and preferences of each business owner can influence the ROI. Key factors affecting ROI include:
1. System cost – encompassing both upfront and ongoing expenses.
2. Grid electricity prices.
3. Payment method for the system – whether through cash, financing, solar Power Purchase Agreement (PPA), etc.
4. Feasibility of obtaining a feed-in-tariff for selling excess power back to the grid.
1) Total System Cost
The estimated cost of the 20kW solar system mentioned earlier (approximately $15,000-$20,000, including GST in Sydney as of late 2023) serves as an approximation for standard installations without significant additional expenses for complications.
Our tender management service provides insight into installers’ costs for essential extras, such as switchboard upgrades, crane hire, ground-mounted systems, tilt frames, or micro-inverter systems. For optimal pricing and value, it is advisable to obtain quotes from multiple qualified installers.
2) Electricity Rates
If you operate a single shop and purchase electricity, your bargaining power is likely lower compared to a chain of stores that can secure a collective agreement. Commercial electricity rates fluctuate based on factors such as purchasing power, location, and the recency of rate comparisons.
Generally, the value of solar power increases when paying higher rates for grid electricity. Conversely, if on a competitive rate, the payback period for installing solar may be slightly longer.
3) System Financing
While solar systems can be funded upfront with a payback period of 2-5 years, many businesses opt for cash flow-positive financing arrangements. Under such agreements, loan repayments are less than the savings generated by the solar system.
This approach results in moderate savings throughout the loan’s duration, with a significant decrease in operational costs at the end of a 5-10 year finance agreement. Solar financing rates typically range from 4-6%, contingent on project size and credit rating. For a comprehensive review of commercial solar financing options, refer to our full guide.
4) Solar Feed-In Tariffs
Securing a feed-in tariff for a 20kW solar system is often possible. If the property is on a 3-phase system, there are usually no restrictions on exporting power to the grid, unlike larger solar system sizes. Negotiating rates with a retailer determines the feed-in tariff, and published rates can be found for reference.
While feed-in tariffs contribute to the benefits of solar installation, it is advisable to view them as an additional perk. The business case should primarily align with reducing the reliance on grid-purchased power.
Savings and Return on Investment for 20kW Solar Systems
The actual savings derived from a 20kW solar system on your roof depend largely on the effective utilization of the generated solar power and the terms of your Feed-in Tariff agreement, which governs the export of excess unused solar energy back to the power grid.
During the offer stage, our team will furnish you with a detailed Site-Specific Solar Performance estimate, clearly outlining your projected annual savings.
For a quick estimate, you can utilize our Solar savings calculator. To ensure you secure the most favorable terms with your Electricity Retailer, we recommend visiting www.energymadeeasy.gov.au—a Federal initiative providing a platform to compare the best options from all available retailers.