Should I get solar power for my home?

Should I get solar power for my home?

As energy bills continue to increase across Australia, you may be wondering what you can do to reduce this costly utility. If you don’t have the patience to monitor every member of your household and what they’re leaving plugged in, or if you’re looking to reduce your carbon footprint, you could consider getting solar power for your home.

What are the benefits of solar power?

  1. Environmental benefits

Electricity emissions make up a third of Australia’s greenhouse gas emissions, and this number is on the rise. One of the main reasons people switch to solar energy is to reduce their carbon footprint.

Solar energy panels are installed on your roof and used to convert the sun’s energy into electricity. This is a green, clean and renewable energy source as it does not produce greenhouse gases and other pollutants.

  1. Solar panel “rebates”

When considering making the switch to solar energy, a major factor that holds people back is the installation cost. These figures may be intimidating, however it’s worth keeping in mind that you may make the money you spent on installation back in savings over time, and there are still solar panel “schemes” available that help reduce installation costs.

The price of a solar system depends on the size of the installation, and this can be measured in how many kiloWatts (kW) are installed.

According to SolarQuotes, the approximate cost of a “good quality Tier 1” solar system in Australia is:

  • 3kW : $4,000 – $6,000
  • 5kW : $5,000 – $8,500
  • 10kW: $12,000 – $16,000

When it comes to solar panel financial assistance, the Australian Government’s Clean Energy Regulator website recommends the Small-scale Renewable Energy Scheme.

This scheme creates a “financial incentive for individuals and small businesses to install eligible small-scale renewable energy systems such as solar panel systems, small-scale wind systems, small-scale hydro systems, solar water heaters and air source heat pumps.

“It does this through the creation of small-scale technology certificates which Renewable Energy Target liable entities have a legal obligation to buy and surrender to the Clean Energy Regulator on a quarterly basis.

“Small-scale technology certificates are provided ‘up front’ for the systems’ expected power generation over a 15 year period or, from 2017, from the installation year until 2030 when the scheme ends.” 

SolarQuotes explains that these certificates give you back roughly $630 per kW. Therefore if you wanted to install a 3kW solar panel system, you would get approximately $1,890 back.

Example:

Jessica installs a 3kW solar system at $6,000. She gets $1,890 back through a small-scale technology certificate, with the total cost of installation now $4,110.

Further, if you generate extra electricity that your household doesn’t use for that quarter, you may be eligible for electricity feed-in-tariffs. This allows you to be compensated for any electricity you generate and feed back into the grid. This is state dependent so check out whether you qualify here.

  1. Energy bill savings

If these government financial incentives aren’t enough to help you make up your mind on solar panels, the most obvious benefit to weigh up would be potential energy bill savings.

While the average energy bill is a fairly subjective number, we do know that they are increasing in cost across the country. Energy Australia released figures showing that from July 1 2017, electricity costs in New South Wales grew 16.1 per cent, or $282 annually. They also grew 15.9 per cent of $313 annually for South Australia and 3.5 per cent or $61 annually for Queensland.

Take a look at your latest energy bill and find the current price per kWh you pay. Once you have this figure, you can use a solar power savings calculator to determine potential financial benefits.

Example: Jessica lives in NSW, is installing a 3kW system and the out-of-pocket cost quoted for her solar system is $6,000. She currently pays 25c per kWh with her electricity provider.

  • In one year she will have saved approximately $573
  • She would have made back the money spent on solar panel installation in 9 years
  • In 30 years she will have saved approximately $48,666 

What if I can’t afford solar panel installation out of pocket? 

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There are special personal loans available that help consumers to make environmentally friendly products, called ‘green loans’. These are typically used for solar panels or hot water systems.

There are a number of green loans available, including the Community First Credit Union Green Loan. To find the most competitive loan product for your specific financial needs, it’s worth utilising RateCity’s personal loan comparison tools.  

However, you should always keep in mind when taking out a personal loan that they will always cost you in the form of interest and/or fees.

Pros and cons of solar power for your home

As you can see there are a number of factors to consider before installing solar power into your home. While there are environmental and economic benefits, you also need to weigh up the potential downside to this process.

If you’re not planning on staying in the home the solar panels are being installed in for the length of time it takes to make your money back in savings, it may not be worth it for you. It is an investment, and one that you’ll reap the benefits from long term, rather than immediately.

And worse, your neighbours may complain to the council about glare from your solar panels and demand they’re removed, even if you are planning on staying in your home long term. There’s even been reports of neighbours building upwards and blocking direct sunlight from hitting your solar panels, and Australian laws protecting your right to direct sunlight are murky for solar power.

Further, not every roof can handle having solar panels installed, and not every wallet can handle the upfront costs. These are all factors you need to keep in mind before making the decision to install solar power.

Pros
  • Reduce carbon footprint
  • Potential savings over time
  • Government financial assistance
Cons
  • Expensive to install
  • Not worth it if you move home
  • Issues with neighbours may arise

 

 

 

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Learn more about savings accounts

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.