What do potential lower energy prices mean for your solar return on investment

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As the government is working on tax relief legislation, there are some that are asking the government to do something about the energy price increases first. Stating that there’s a potential that any benefit from the tax relief legislation could be nullified by energy price hikes.

In this article we look at a couple of scenarios and what that would mean for your return on investment for solar power. For either a system you already have or a system you’re considering.

Your return on investment with lower energy prices

The numbers

For the past 10 years, the cost of electricity has gone up by about 8% per year. That means the cost for your electricity usage has more than doubled in that time. More than four times the average price increase across other sectors.

With an average electricity bill of $425 per quarter in Australia, those numbers can add up quickly and that’s a big reason why more and more Australians are getting solar power installed. But with the potential of electricity prices going down, does it still make that much sense?

Will energy prices ever actually go down?

Like stock prices, the cost of energy fluctuates and that fluctuation is based on a wide range of factors. An example can be that global demand for coal goes down, which means the energy companies can get coal a little cheaper that month. That might translate into the prices of energy temporarily going down a little bit. And obviously the opposite is also true. Prices change constantly which is why your energy costs next year might well be a couple of cents lower than this year.

When looking at the averages over a couple of years at a time however, all those fluctuations averaged out into an energy price that has only gone up. By over 120% in the past decade alone, meaning it’s now twice as expensive to turn on a light, watch TV or do your laundry.

That’s the primary reason why the big push for greener appliances and the ban of incandescent lighting hasn’t resulted in any tangible savings on our bills. As we started consuming less, energy companies increased pricing at a similar rate.

So, realistically we expect that at best, the energy prices will be frozen for the duration the current government is in office.

What would that situation look like for my return on investment

Let’s assume that for the next 4 years, the cost of electricity won’t change. We’ll even ignore inflation. Your average electricity bill of $425 now will stay $425 for all 16 upcoming quarters.

In those 4 years, even without any price increases, you will still have spent $6,800 on electricity. The same money is enough for a good solar power system. Especially when combined with the $2,225 solar power rebate the government is offering.

The solar power difference

Whether you choose to keep paying your bills like normal, or you got a solar power system installed, you will have spent a similar amount of money. The difference is that without solar power, you will continue to spend the same amount of money, and likely more, for as long as you plan on using electricity.

With solar power you generate most, if not all of the electricity you need instead of buying it from a company that has to make a profit. Saving you hundreds, sometimes even thousands per year. 

Those savings will add up quickly. A solar power system can easily last you 20 years. Yet the average time a solar power system needs to pay for itself is just 5 years, meaning that every dollar you save after those 5 years is a net profit. With current electricity prices that would add up to over $25,000.

And that’s assuming current electricity prices are never going to go up. If electricity prices continue to go up like they have in the past 10 years however, you can expect savings for well over $40,000

We are often called the lucky country. We get more sun than almost anywhere in the world. Instead of continuing to do the same thing we’ve been doing for decades we have the opportunity to change the way Australia thinks about energy. Energy can be more than burning coal and having the bill for that come in every quarter.

If you would like to know how much you can save, fill in the form on www.solarpowerco.com.au or give us a call on 1300 765 502.