How solar works

Graphic displaying the key componens on how solar works

There are four key components in a typical household solar system:

  1. Solar panels: sit on the roof and convert the energy in sunlight to electrical energy. This is in the form of direct current (DC) electricity.
  2. Inverter: converts DC electricity to alternating current (AC) power. This is the type of power that’s required for your home and the grid.
  3. Switchboard: where the power is sent so it can be used by your household electrical equipment.
  4. Grid/meter: if you aren’t using all the power being produced, the overflow will be transferred back into the grid to be used by other households or businesses. Likewise, when you need more power than you’re producing (like at night) your house will draw electricity from the grid.
energy consumption graph

Where home batteries come in:

Batteries store excess solar power for later use, taking the idea of maximising self-consumption one step further. Batteries can keep your lights on during a blackout and give you the opportunity to purchase grid power at off-peak times or sell stored power back to the grid in return for a credit on your electricity bill.

This diagram is a guide only, and individual usage may be different.

The benefits of solar energy

RACV Solar solutions

Solar Estimator

By entering your average daily energy use and the number of panels you're considering installing, this calculator will estimate the cost of a solar system and the annual savings. 

Assumptions: Solar Feed-in-Tariff of 12 cents/kWh; 50% of generated solar is consumed in the home; solar production of 3.6 kWh daily per kW of solar system; CO2 emissions of 1.35 kg per kWh of electricity consumed; average retail electricity price of 27 cents/kWh. This calculator should only be used as an indicative guide. System cost estimates are based on simple installation on tin roof with standard hardware and no additional requirements.

Our top tips when considering solar

All about solar rebates and incentives

For most households, the financial benefit of installing solar comes from minimising the amount of electricity you need to purchase from the grid. There are also three solar rebate or incentive programs available if you install a solar system on your home in Victoria. 

Victorian Solar Homes scheme

The Victorian Solar Homes scheme was launched on 19 August 2018 and after being paused briefly re-opened from July 1st 2019.

For customers looking for Solar PV (photo-voltaic or electricity producing panels) the rebates available are as follows.

Rebate types

Solar PV up-front rebate

The up-front rebate is passed through to eligible households as a discount on the sale price of 50% of the system cost up to $1,888. There are 3,333 of these rebates available each calendar month and customers will confirm their eligibility through the Solar Victoria Portal.

Solar PV no interest loan

Eligible households can now also apply for a no interest loan over 4 years through Solar Victoria. The loan is optional but if households opt to take it up it must be matched to the up-front rebate amount above.

Battery upfront rebate

Solar Victoria is piloting an up-front rebate for battery storage installed in homes with existing solar systems in select suburbs. The rebate amount is up to 50% of the battery price capped at $4,838 and the existing solar system must have a rated output of at least 5kW and the list of available suburbs can be found here.

Solar PV for landlords and tenants

166 solar PV rebates per month will also be made available to landlords for tenanted properties. As with the standard Solar PV rebates the amount payable is up to 50% of the system cost up to $1,888. No interest loans will also be made available for landlords from late 2019.

Household Eligibility Criteria

For all Solar Victoria Rebates households must fulfil the following criteria:

  • homes valued at less than $3 million,
  • a combined household income of less than $180,000 per annum (before tax).

In addition:

  • The solar PV rebates require no existing system to be installed on the property
  • The battery rebates require and existing system of 5kW or more and the household must be in one of the eligible suburbs.

Small-scale Technology Certificates (STCs)

STCs are part of the Australian Renewable Energy Target which aims to increase the generation of renewable energy in Australia and decrease emissions. To offset carbon emissions, energy retailers purchase certificates created after households and businesses install renewable energy systems such as solar panel systems.

The geographical location of your solar system, installation date, and the amount of energy it generates determines the number of certificates created that you can sell or transfer to 'recoup' costs. Typically, the STC incentive is paid as an upfront discount off the purchase price of a solar system.

Find out more about STCs at and calculate the number of certificates your system is eligible for using the STC Calculator.


The solar Feed-in-Tariff is a credit that you receive from your energy retailer for excess energy you produce and send back to the grid. This helps you ensure that excess solar energy is not going to waste and can help reduce your energy bills ongoing. Find out more about Feed-in-Tariffs on the RACV Solar FAQs page.

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