Payback period is the single most important metric for evaluating a solar investment. It tells you how many years until your savings exceed your costs — after that, everything is pure profit. Here's how it works and what to expect in 2026.
The Calculation
Payback period = Net system cost (after rebates) ÷ Annual energy savings. For example: a 6.6kW system costing $6,500 after STCs, saving $1,800/year = 3.6 year payback. After 3.6 years, you've broken even. For the remaining 20+ years of the system's life, every dollar saved is profit.
What Affects Payback?
The three biggest factors are: (1) your electricity rate — higher rates mean bigger savings and faster payback; (2) your self-consumption ratio — using solar directly saves more than exporting; and (3) your net system cost — rebates and discounts reduce the amount you need to 'pay back.' System quality also matters — cheaper panels may degrade faster, reducing long-term savings.
Average Payback Periods by State (6.6kW, 2026)
South Australia
2.5–4 years — fastest payback thanks to Australia's highest electricity rates
New South Wales
3–4.5 years — high rates and solid sun hours
Queensland
3–4 years — excellent sun compensates for slightly lower rates
Western Australia
3–4.5 years — great sun hours, moderate rates
Victoria
3.5–5 years — lower sun but $1,400 state rebate helps
ACT
3.5–5 years — 0% loans mean no real upfront cost
Tasmania
4.5–6 years — lowest sun hours, but still comfortably positive
Beyond Payback: The Full Picture
Payback period only tells half the story. A solar system with a 4-year payback and a 25-year lifespan delivers 21 years of free electricity. With electricity prices rising 4–6% annually, the value of those later years is enormous. A system that saves $1,800 in year 1 could easily save $3,000+ by year 15 just from rate increases. Over 25 years, total savings can exceed $60,000–$80,000 from a $6,000 investment.