Simple payback period

Written and checked by the Energy Merchants desk · Reviewed 3 October 2026

Simple payback period is the time for a system’s savings to cover what it cost. The formula is net upfront cost divided by annual saving.

Net cost is the price after the STC discount. The discount is the main reason payback on solar and batteries looks as short as it does, because it is applied on day one.

A worked example

The figures are illustrative. A household pays $6,000 for solar after STCs and saves $1,500 a year on bills. Payback is 6,000 / 1,500 = 4 years.

A battery shows why net cost matters. Take a battery that costs $12,000 before the discount. At the 2026 factor of 6.8, a 10 kWh usable battery creates 68 STCs. At roughly $38 to $40 each at the time of writing, that is about $2,580 to $2,720, so the net cost is about $9,300 to $9,400. If it saves $1,000 a year through tariff shifting and solar self-use, payback is around 9 to 9.5 years. A battery installed after 1 January 2027 earns fewer STCs, with the factor stepping down to 5.7, so the net cost rises and payback lengthens. See STC factor.

In practice

Customers love payback because it is one number. Installers should use it with care.

• State the assumptions: price, tariff, usage and whether the savings figure includes feed-in income.
• Do not assume savings stay flat. Tariffs change, and so does a household’s usage.
• Check the battery’s efficiency. See round-trip efficiency.

The calculators help with the discount side. Use the STC calculator and the battery STC calculator before quoting.

Common confusion

Simple payback ignores what happens after the break-even year, so a system that pays back in six years and lasts twenty is better than one that pays back in six and fails in eight, even though they look the same. It also ignores discounting, which is what NPV corrects.

It is also not a guarantee. It is a model.

For rates and process see /pricing/, battery STCs and the glossary.