Why is Solar Power so Cheap in Australia?

16th Jul 18

Written by James Doyle

If you compare quotes for solar power systems in Australia and the USA, you will notice that Australian prices are 2 to 3 times lower in most cases. Of course, this is assuming you compare solar systems of the same capacity installed on similar buildings. These low solar prices have been possible thanks to a combination of factors.

Australia Can Import Solar Panels at a Low Cost

Consider that China has some of the largest solar module manufacturing operations in the world. For the simple reason that Australia is much closer to China than the USA, the shipping cost of solar panels and other complementary equipment is much less.

Another important factor is how each country has decided to address solar power. Australia is not a major manufacturer of PV modules, but there are many local producers in the USA. In other words, imported solar panels have considerable local competition in the USA market, which is not present in the case of Australia.

  • US-based manufacturers have higher operating costs than Asian manufacturers, which means they cannot beat the price of imported solar modules.
  • In an effort to protect local solar manufacturers, hefty import tariffs have been imposed for solar equipment in the USA.
  • These “protection tariffs” are not present in Australia.

In a few words, Australia is closer to the global manufacturing hubs of the solar industry, and there are no dedicated import tariffs for solar equipment. However, there are additional reasons why solar power is cheap in Australia.

Small-Scale Technology Credits Make Solar Power More Affordable

Australia has subsidy programs for small-scale and large-scale solar power, and Small-Scale Technology Credits (STC) apply for solar installations up to 100 kW. This size threshold covers virtually all residential systems and many commercial systems in small and medium-sized companies. STCs are calculated based on how much generation your solar system can provide by the year 2030, which means the rebate becomes lower each year.

  • As of mid-2018, the STC rebate makes solar power cheaper by around AU$650 per kilowatt, with slight variations depending on where the project is located.
  • Considering that solar systems in Australia cost less than AU$2,000 per kW, the rebate can sometimes bring the net cost below AU$1,000 per kW.

In Australia, you can likely purchase a 5-kW solar system for less than AU$6,000 after subtracting the STC rebate. A system of this capacity can provide around 7,000 kWh per year. This provides savings of AU$1,750 per year for someone paying 25 cents/kWh, and AU$2,800 per year for someone paying a less favorable tariff of 40 cents/kWh. A payback period of 2 to 4 years is excellent for an investment that lasts more than 20 years.

In addition to having more expensive solar panels, the USA lacks a nationwide rebate program that reduces the upfront cost of the technology. There is a federal tax credit for 30% of your investment, but you cannot claim it upfront and instead have to wait until your next tax declaration.

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