Are solar panels right for your organisation? Here’s what you need to know to help you decide.
Cost: Medium (with rebates)
Difficulty: Low to medium
Installing solar panels is one of the best things your organisation can do to go carbon-neutral.
Solar panels are at the top of the “going green wish list” for most organisations, but there’s a lot of confusion about how much they cost, which ones are good, whether they will save or make you money, and whether you should wait for batteries or invest in them now.
Are solar panels worth it?
The short answer is that if your organisation owns property, solar panels are one of the best investments you can make on your journey towards becoming a net zero organisation.
Solar is a sustainable source of energy that doesn’t release carbon into the atmosphere. Solar panels offer significant opportunities to reduce your energy costs now, and most organisations will see a total return on investment within five years (that is, the cost you pay will be made up by savings on your bills). Financial incentives are available, and there are other ways to help offset the initial cost, too.
Most not-for-profits operate during daylight hours, which is when solar panels produce electricity – right when you need it most. This means your organisation can maximise self-consumption, consuming the power that your solar system generates, and therefore reducing the amount of electricity you need to draw from the grid.
What are solar panels and how do they work?
Solar panels work by absorbing sunlight and converting it into energy you can use to run your electrical appliances. A very basic overview of a solar panel system consists of these steps:
- Solar panels absorb energy from the sun, converting it into DC electricity.
- A solar inverter converts the DC electricity into AC electricity.
- When your appliances draw power, they first use the AC electricity generated from your solar panels. Any extra electricity they need is drawn from the grid.
- Excess energy from your solar panels is sent back to the grid or stored in your battery storage system (if you have one).
kW versus kWh
There are two figures you will hear often when talking about solar panels: kilowatts (kW) and kilowatt hours (kWh).
A kilowatt (kW) is a measure of the maximum amount of energy a system is capable of producing at any given moment (it’s like looking at the size of a tap in your bath).
A kilowatt hour (kWh) is a measure of the amount of energy used or drawn from a system in one hour (it’s like looking at how much water ends up in your bath).
So, a 2kW solar panel system can produce a maximum of 2kW of energy at any given time. In an hour of full sun it would produce 2kWh, in two hours it would produce 4kWh, and so on.
How do solar panels save you money?
Solar panels save you money by reducing the amount of electricity you need to get from the grid. In an ideal scenario, the solar panel system you install produces all the energy your organisation needs, meaning you won’t need to pay for electricity from the grid.
Solar systems can also generate income if you produce more energy than you use. This excess energy is fed back into the grid and your energy retailer will pay a set amount for each kilowatt (kWh) you feed into the system. This amount, commonly known as a feed-in tariff (FiT), varies depending on where you live, your energy retailer, the contract you signed, when you installed the panels and so on. For example, in Victoria in the financial year beginning July 2022, the minimum FiT set by the Essential Services Commission was 5.2 cents per kWh. In contrast, the amount you pay to buy power from the grid will be at least 20 cents per kWh.
You won’t make much money by producing excess energy, which is why there isn’t much point in installing more solar panels than you need. Generally speaking, you will get the best value from your system by using the power you generate from your panels, especially with the rising cost of electricity, not by selling it back to the grid.
There are lots of government programs and rebates available to help offset the upfront cost of installing solar panels. What’s on offer depends on where you live. To find out what rebates and other assistance are available to your organisation, go to https://www.energy.gov.au/rebates.
Small-scale technology certificates
Small-scale technology certificates (STCs) are a form of rebate offered by the federal government. Solar providers usually take into account the value of the STCs (i.e. the value of the government rebate) when they quote the price of a solar system. If you want, you can take ownership of the STCs and sell them yourself (they’re tradable, like shares in a company), but it can be a long and complicated process. We recommend letting your supplier take care of it.
How much will it cost?
The cost depends on the size and quality of the system you want. The most commonly installed household (not commercial) system size in Australia is 5kWh at an cost of about $5200. You should budget on paying anywhere from $700 to $1300 per kWh installed.
You’ll also need to factor in the cost of an inverter and any other equipment or charges – for example, any changes needed to the roof of your building so it can support the panels (these charges should be clearly outlined in your quote).
Most businesses can expect a full return on investment in around five years.
What does a commercial solar panel system consist of?
The most common system installed in Australia is grid-connected solar, meaning that the system is connected to the main electricity network.
This consists of:
- solar PV panels (as many as you need for your energy usage)
- DC to AC inverter (to convert the energy produced by your solar panels into electricity you can use)
- isolation safety switch (in case of emergency)
- switchboard (your existing one will probably be fine)
- meter (for measuring your electricity production and consumption).
Other equipment you may need or want to buy includes:
- new electricity meter
- rooftop angled frames for the panels (to position them to the sun)
- monitoring equipment, tools and other computer systems.
Solar panel systems used for offices and warehouses are basically the same as what’s put on the average house, except that there tend to be more panels (to produce more energy). The larger the building, the more panels can be installed and therefore the bigger the system can be.
Large-scale systems (such as those installed on warehouses or big offices) will need to be installed by specialist commercial solar system installers.
Other types of solar systems include stand-alone systems that are not connected to the grid. These require battery back-up to run at night or when the sun isn’t shining sufficiently. Systems that are connected to the grid but also have battery storage are the best of all worlds, but come at greatly increased cost. See the separate help sheet on batteries for more information.
How many solar panels will my organisation need?
This is a common question, without a simple answer. How many you need depends on many factors, including these:
- Your organisation’s energy needs (you can get an idea of this by looking at your current energy usage - check your bill)
- The size and capability of your property (how big and strong is your roof? Which direction does it face?)
- How much you are willing to pay
- Any restrictions in place (large systems need special permits and permissions).
Your best bet is to find an installer you trust and rely on them to help you answer these questions. You want a system large enough to cover your energy needs during the day, and possibly larger, to produce excess energy if you intend to install batteries as well (or later on).
Solar panel suppliers can provide recommendations (and estimates of savings) on system sizes depending on your electricity use. Working this out yourself can be complicated, but here are some tips:
- Find out your current energy use by looking at a year’s worth of electricity bills. This will give you an average daily electricity usage in kilowatt hours (kWh). Remember that your electricity usage will be different in winter than summer.
- Work out how much electricity different system sizes will produce in your area. Solar systems are marketed based on the amount of power (in kW) they are able to produce in full sun. This amount will be lower if it’s cloudy and/or when the sun is lower in the sky (e.g. winter in Hobart). How much a system will produce in a day thus varies across Australia. The table below indicates how much power a 4kWh system (ideal for a small to medium home) might produce in different parts of the country.
Once you’ve worked out how much electricity systems of different sizes will produce in your area, you can match that up with your average daily energy use. Remember that part of your daily energy use will happen at night when the solar panels can’t help, so you don’t need a system that covers 100% of your daily use. Having this knowledge will help prepare you for a discussion with a supplier who can look in more detail at your electricity bills and when you’re using your power to give you a more optimised system. This is particularly important if you’ve got unusual requirements, such as high power demands at night.
Average daily energy produced by a 4.0kW PV system in various Australian cities
(Data: Clean Energy Council)
|City||Average daily output||Suitable for NFPs with daily use of|
|Hobart||14 kWh||10-20 kWh|
|Melbourne||14 kWh||10-20 kWh|
|Sydney||16 kWh||10-20 kWh|
|Brisbane||17 kWh||10-20 kWh|
|Darwin||18 kWh||10-20 kWh|
What’s an inverter?
Inverters are a fundamental part of any solar system. An inverter is a device that turns direct current (DC) electricity (which is what a solar panel uses) into alternating current (AC) electricity (which is what the power grid uses). Without an inverter, the energy produced by your solar panels could not be fed into the energy grid. Your inverter can also be used to measure how much energy is being produced. It is what consumption measuring devices tap in to.
There are three main types of inverters:
- Microinverters or optimisers – these are the most efficient and reliable but also the most expensive.
- Central inverters – if your system uses one large inverter for all your solar panels, it’s a central inverter. It’s cheaper than having a number of microinverters, but it’s large, and if there’s a problem with it, the whole system goes down.
- String inverters – these are probably the most common type. They are easier and more flexible to install than a large inverter, provide multiple back-ups if there’s a problem, and are cheaper than microinverters.
Choosing the right company to install solar panels
Choosing the right company to install your solar panels is important. Knowing how to find a reputable one is one of the major barriers not-for-profits reported in Our Community’s survey on the sector’s take-up of carbon-free technologies.
The Clean Energy Council of Australia (www.cleanenergycouncil.org.au) is a great place to start. An independent not-for-profit, it runs its own national accreditation system for solar installers, and it can provide a list of accredited suppliers near you.
Most states also have their own government agencies that provide great advice on everything you need to know about choosing an installer.
Another option is SolarQuotes, which operates on a transparent fee-for-referral basis (https://www.solarquotes.com.au/about-us.html).
You will want to make a shortlist of suppliers and then get several quotes so you can compare. Following is a checklist to help.
Obtaining quotes: a checklist
Before you contact installers for quotes, it’s a good idea to have a sense of the following:
- Your organisation’s needs. How much energy do you use and what size solar system will cover it?
- The costs and savings. How much are you currently paying for electricity, and what might you save? (Current usage plus service charges from retailer) minus (solar energy produced by panels) equals potential savings.
- Your current contract with your energy provider. What are the service charges? How long is your contract? What feed-in tariff (FiT) do they offer on solar power?
You should also ask the suppliers:
- Are you accredited by the Clean Energy Council?
- What restrictions and limitations are there (permission from the grid supplier to connect etc)?
Do they answer all your questions clearly and respectfully? Be wary of suppliers doing the hard sell on you. You should never feel pressured to buy.
Once you’ve got a rough sense of what you need and you’ve got several quotes in hand, you can compare them. A quote should be detailed and professional, yet easy to understand, and it should include:
- an analysis of your energy use and expected energy generation
- a design specific to your building, including the number of panels to be installed and where they will go
- warranty terms, a full list of components, and servicing expectations
- a clear breakdown of costs, including any rebates or STCs if applicable
- full terms and conditions of sale.
By asking all these questions and comparing quotes, you should get a good sense of the supplier you want to use.
Using the information outlined above will help you to find a reputable solar panel installer. In general, though, it’s best to avoid “installers” who come to you by cold calling, by door knocking or through social media. Definitely don’t choose a company that tries to get you to sign up on the spot, makes vague claims about government rebates, offers to upgrade solar panels for free and so on. If you feel confused, pressured or just unsure about a provider, find another one.
Paying upfront from your budget is the best way to get the lowest price, but not all organisations have the resources to fund such a major investment like this. Other options include these:
- Green loans – there are good low-interest loans available for green investments. CommBank offers Energy Efficient Equipment Finance Loans, for example, while Corena is a not-for-profit, volunteer-run organisation that provides zero-interest loans to pay for projects like installation of solar panels.
- Environmental Upgrade Finance is a relatively new scheme currently available only in Victoria, NSW and South Australia. It offers loans to business owners, community groups and others to enable upgrades that improve the environmental performance of existing buildings. More information: https://sustainableaustraliafund.com.au/.
- “Behind the meter” is a type of power purchase agreement (PPA) where an energy provider installs renewable energy equipment (typically solar panels) on a business’s site. The energy provider owns and maintains it. This means you don’t have to pay upfront for the system, yet you benefit from access to solar power. However, you must buy all the electricity generated by the system, whether or not you use it. Seek expert advice before entering into a PPA.
- Many grantmakers provide grants for solar and similar projects. As part of the Net Hero Zeroes initiative, Our Community (ICDA's parent company) has provided cost-free access to the section of the Funding Centre database that links green grants - see here: https://www.fundingcentre.com....
What about batteries?
Solar panels have three major limitations – they don’t work at night, they don’t work if the sun isn’t shining, and they don’t work in a blackout. Batteries overcome all of these problems by storing energy for use when it is needed. They are expensive, though, and they add significantly to the cost of installing a solar system. Depending on how much power you use, they may not store enough to provide you with 100% of your needs when the sun is not shining and the power is out.
For most not-for-profits, batteries are “nice to have” and definitely not a “need to have”. You shouldn’t wait to install solar panels until you can afford batteries. Batteries are relatively easy to retrofit to existing systems.
Whether or not it makes sense for your organisation to install batteries at the same time as a solar panels depends on many factors, which we discuss in our separate help sheet on batteries.