On a cost per watt basis, a 5kW solar system is cheaper than a 3kW system, even though the overall cost is higher.

For a reasonable quality system and on a large roof you can upsize from 3 kW to 5 kW for somewhere between $1K to $2K when the STC government incentive is taken into account. Clearly economies of scale come into play – the inverter cost isn’t much more, if you don’t need to do much more wiring and keep all the panels grouped together the labour isn’t much more, the main part of the increased costs is the panels themselves.

For a household with a fairly typical daily electricity consumption of 17 kWh should you spend the extra money on a 5kW system or spend less on a smaller system?

At the very low feed-in-tariff’s across much of Australia a 5kW system won’t offset much more power than a 3 kW system, with almost all of the extra solar production exported. In Victoria at the current FIT of 6.2 cents/kWh, the extra 2 kW will increase the financial benefit of the system by probably around just $140 to $200 a year depending on panel orientation, perhaps a bit more if your retailer gives you 8 cents/kWh, as some are doing.

So economically up-sizing based just on current FIT’s may not be fantastic. But before you reject it outright, consider the following:

  1. Reduced greenhouse gas pollution. Its going to reduce carbon emissions by roughly an extra 3 to 4 tonnes a year, by perhaps as much as 100 tonnes over the system lifetime. An important and often undervalued consideration when it comes to solar. We know government isn’t doing enough.
  2. Makes it easier and probably cheaper to add storage or an electric vehicle down the track. Putting on a 5kW system now will still probably be cheaper than putting on a 3kW system now and then another 2 or 3kW in 3 to 5 years time. So if you are pretty sure you are going to switch to an electric car and/or add storage you might as well put in the bigger system now (although note if an inverter changeover is needed then the cost advantage may be lost…)
  3. It accelerates pressure on the electricity network. As the number of solar connections increases on an electricity network this may, eventually, make it hard for electricity distribution businesses to manage voltages in the network. Mmmm…. isn’t this something we don’t want? Well, as I see it, there are 2 ways of looking at this, and really only two ways it can play out. Either networks can make it harder and harder to connect solar, or else they can finally start embracing it and figuring out ways to make their networks more accommodating of solar. And if they do the latter – well perhaps your larger system has helped accelerate that decision. Its helped them put in network level distributed storage. Its helped reduce dependency on fossil fuel baseload power.
  4. Even if the network doesn’t change its approach, when a 5kW system is installed, you as a householder are going to be more interested in switching to storage. The thinking will be “I’ve got an undervalued asset here – if I add storage I can improve my return on investment.” And having electricity users add storage will help reduce baseload dependency on fossil fuels and give a good feeling and bragging rights to early adopters.
A 3kW or a 5kW system – is it worth the extra $1K to $2K?

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