How We Calculate

Overview

Ohm Equity uses a net present value (NPV) model to rank energy upgrades by their financial return. The calculator estimates your baseline energy usage, models every applicable upgrade's costs and savings over time, then finds the installation order that maximises the total value of your upgrade roadmap.

Every calculation runs entirely in your browser: nothing is sent to a server. You can inspect and override every assumption using the "Under the Hood" panel on the calculator page.

Step 1: Estimate Your Baseline Energy Usage

Before we can evaluate upgrades, we need to know how much energy your home uses today. We support three levels of input, each more accurate than the last:

Gas baseline: For homes with a gas connection, we sum per-appliance gas consumption by state. Gas appliances modelled are space heating, water heating, and cooktop. State variation is significant: VIC gas heating is 29.18 kWh/day vs QLD at 6.44 kWh/day, reflecting climate differences. Total gas varies from around 13,000 MJ/year in NSW to around 64,000 MJ/year in ACT, which has cold winters and heavy gas heating reliance. Gas fixed connection costs also vary by state, from $80/year in WA to $297/year in SA. You can override with your actual gas bill data.

Step 2: Postcode, Climate Zone & State Rates

Your postcode determines three things that significantly affect every calculation:

• State: Each state has different electricity rates (from 27c/kWh in Victoria and Tasmania to 43c/kWh in South Australia), gas rates, feed-in tariffs, and government incentive programs.
• Climate zone: Australia is divided into four climate zones: tropical, subtropical, temperate, and cool. Your climate zone affects heating/cooling loads, heat pump efficiency (COP), and insulation savings.
• Peak sun hours: Solar production varies from 3.9 hours/day in Tasmania to 5.5 hours/day in tropical Queensland and Perth. This directly determines what size solar system you need and how much it will generate.

Step 3: Upgrade Cost & Savings Modelling

Every upgrade follows the same seven-step evaluation:

1. Upfront cost: the installed cost of the upgrade. Some upgrades use an incremental cost model: for EVs, we only count the price premium over a petrol car (since you'd buy a replacement car anyway); for heat pump hot water, we subtract the cost of the electric storage tank it replaces.
2. Government incentives: federal STCs for solar and heat pumps, state-specific programs (VIC Solar Homes, NSW Energy Savings Scheme, ACT Sustainable Household Scheme, etc.), and the Cheaper Home Batteries Program. These are subtracted from the upfront cost to give the net cost.
3. Annual energy change: how many kWh of electricity and MJ of gas the upgrade saves (or adds). Solar reduces grid electricity; switching from gas to a heat pump eliminates gas but increases electricity.
4. Annual savings with escalation: energy savings are converted to dollars using your tariff rates, then escalated each year: electricity at 3%/yr, gas at 4%/yr, and petrol at 2.5%/yr. These rates are conservative estimates based on long-term Australian price trends.
5. Maintenance: annual costs like solar inverter servicing ($150/yr) or heat pump maintenance ($80/yr). Gas-switching upgrades get a maintenance credit when they eliminate the gas supply charge.
6. Replacement costs: when an upgrade reaches end of life (e.g. battery at 15 years), a replacement cost is included, inflated by CPI at 2.5%/yr.
7. Year-by-year cash flows: all of the above is combined into a cash flow for each year of the analysis period, with each component escalating at its own rate.

Step 4: NPV, Payback Period & IRR

From the year-by-year cash flows, we calculate three financial metrics:

• Net Present Value (NPV): The sum of all future cash flows, each discounted back to today at 8% per year, minus the net upfront cost. A positive NPV means the upgrade beats investing the same money at 8%, so it is genuinely worth doing. For delayed upgrades (like an EV waiting for your current car to reach end of life), the upfront cost is also discounted to present value.
• Payback period: How many years until the cumulative undiscounted savings equal the upfront cost. This is the simpler, more intuitive metric, but it doesn't account for the time value of money.
• Internal Rate of Return (IRR): The discount rate at which NPV would equal zero. Think of it as the "interest rate" the upgrade earns on your investment. We calculate this using Newton-Raphson iteration.

Why 8%? The discount rate is the opportunity cost of capital, what you could earn investing the same money elsewhere. Long-run nominal share-market returns sit around 8 to 10 percent. We use 8 percent, deliberately a notch below the top of that range, because home-energy savings are far more certain than share returns: you avoid those bills whether or not markets rise. A safer, more certain return deserves a lower discount rate, so an upgrade with a positive NPV at 8 percent beats a risk-adjusted market alternative.

Step 5: Sequential Optimisation

This is the core of what makes Ohm Equity different. Most calculators evaluate each upgrade in isolation. We evaluate them in sequence, because each upgrade changes your energy profile:

• Installing ceiling insulation first reduces your heating and cooling costs, which means you need a smaller (cheaper) solar system.
• Switching from gas hot water to a heat pump increases your electricity usage, which makes solar self-consumption more valuable.
• Adding an EV increases home electricity demand, which can absorb solar excess that would otherwise be exported at the low feed-in tariff.

The greedy algorithm

Our optimiser uses a greedy approach: at each step, it calculates the NPV of every remaining upgrade against the current energy profile (after all previously selected upgrades have been applied). It picks the upgrade with the highest positive NPV, applies its energy changes to the baseline, then repeats until no positive-NPV upgrades remain.

Deferred upgrades

Some upgrades have a natural delay: an EV, for example, is deferred until your current car reaches end of life. If a deferred upgrade has the highest NPV but an immediate upgrade has a shorter payback than the deferral period, the immediate upgrade is slotted in first. This ensures you're not waiting years for savings that could start today.

Gas bundle look-ahead

Switching off gas appliances individually can sometimes look NPV-negative, because the gas supply charge ($80–$297/year depending on state) is only eliminated when all gas appliances are replaced. After the main optimisation loop, we simulate switching all remaining gas appliances together. If the combined bundle, including the supply charge savings, is NPV-positive, all switches are recommended as a group.

When the bundle is NPV-positive, all gas switches are recommended immediately (with zero delay), regardless of individual appliance age. The rationale: eliminating the supply charge sooner outweighs the cost of replacing a working appliance before end of life.

Solar Panels: Sizing & Incentives

System sizing

For solar-only, we target a system that offsets roughly 80% of your current electricity consumption. For the solar+battery combo, we size for 100% of your anticipated future load, including planned gas-to-electric switches and EV charging. The required size is calculated from your usage, your location's peak sun hours, and an 85% system efficiency derating (accounting for inverter losses, wiring, and temperature). Systems are rounded to the nearest 0.5 kW, capped between 3 kW and 15 kW.

Cost

The gross cost (before incentives) is based on $1.15 per watt, sourced from SolarChoice's February 2026 installer survey. This represents the average fully installed price for a quality-brand system.

STC incentive

Small-scale Technology Certificates (STCs) are the main federal incentive for solar. The number of certificates depends on your system size and climate zone:

Zone ratings range from 1.185 in cool climates (Zone 4) to 1.622 in tropical areas (Zone 1). The deeming period is 5 years (2031 minus 2026). At $39 per certificate (near the $40 clearing house cap), STCs typically reduce the cost of a residential system by $2,000–$5,000.

Self-consumption & exports

We split your electricity into daytime and evening-and-overnight load. The daytime share depends on who is home: about 30% of the household's load when everyone is away in the day, 40% for a varied schedule, 50% for work-from-home or retired households, plus 10% for the loads we assume you shift into daylight (hot water on a timer, dishwasher, washing, pool pump). That 10% and the car's daylight charging assume you run the house well; the refine panel lets you say you will do some of it or none, which moves load into the evening and grows the battery. A pool pump is added as daytime load (it runs on a timer) and a heated spa or swim spa as a round-the-clock load with about half of it after dark, on top of the bedroom average, which includes neither. A pool or spa you plan to add is treated the same way, so the solar and battery are sized for the home you will have; only today's bill leaves it out. Heating and cooling are treated separately: they run when the weather demands, mostly late afternoon, evening and overnight, so only 25% to 35% of that load counts as daytime, less again when nobody is home in the day. Solar meets the daytime load directly; the rest is exported. A battery can only shift what is left over, bounded by the evening load, the surplus solar and its own capacity: usable kWh, once a day, on about 85% of days. This is why a large array on a small home exports most of its output, and why "home most days" households gain less from a battery than commuters.

Degradation

Solar panel output degrades at 0.5% per year (NREL median). Feed-in tariffs are assumed to decline at 3% per year as solar penetration increases. Both effects are modelled year-by-year in the cash flows, which is why solar savings gradually decrease over time.

Battery Storage

We pick the battery size that earns the most for your home: each practical size (10 to 50 kWh) is scored on the evening load it can serve from your solar surplus against its installed cost net of the federal rebate, and the most profitable one wins. Most homes land between 10 and 20 kWh. Installed cost follows a tiered curve, about $10,000 for 10 kWh, $14,250 for 15 kWh and $21,250 for 25 kWh before rebates. For the solar+battery combo, the system is sized for your anticipated post-electrification load, including future gas switches and EV charging. The battery earns value through increased solar self-consumption, storing daytime solar for evening use. On a time-of-use tariff, it also captures peak/off-peak arbitrage. Where a regulated free daytime window exists (Solar Sharer in NSW, south-east Queensland and SA, the Midday Power Saver in Victoria from 1 October 2026), a battery without solar can fill from the grid for nothing and discharge into the evening peak; we take that option only when it beats the alternative after the plan's dearer peak rate, higher supply charge and lower feed-in tariff.

EV charging and free daytime windows

We assume you optimise when the car charges. On the days it is at home in daylight (about 85% for households home most days, 55% for a varied schedule, 35% for commuters, or your answer to "is the car usually at home in daylight"), it charges first from a free daytime window if you are on such a plan, then from surplus solar, then from the grid. The rest charges overnight at your off-peak rate if you are on time-of-use, or your flat rate. A 7 kW home charger delivers about 21 kWh in a three-hour window, four days of average driving, so even weekend-only availability covers most of a car's needs. If a free-window plan is available at your postcode and you have not told us otherwise, we assume you would switch to one when it saves money overall.

Both options assume 90% round-trip efficiency, 90% depth of discharge, and 2.5% annual capacity degradation. Battery lifespan is modelled at 15 years with a replacement cost at end of life.

Cheaper Home Batteries Program: From July 2025, the federal government offers an STC-like incentive for home batteries. Before May 2026, the rate is 8.4 STCs per kWh of capacity. From May 2026, it drops to 6.8 STCs per kWh with a tiered structure: the first 14 kWh receives 100% of the rate, 14-28 kWh receives 60%, and 28-50 kWh receives 15%. For a 10 kWh battery before May 2026, this is approximately $3,276 off the purchase price. The program runs until December 2030.

Virtual Power Plant (VPP) revenue: In NEM states (NSW, VIC, SA, QLD, ACT, TAS), we include VPP revenue: payments for allowing your battery to be dispatched during grid peak events. With solar: ~$300/year; without solar: ~$150/year. WA and NT are not included as they operate outside the NEM.

Other Upgrades

Budget-Constrained Mode

If you enter an available budget and monthly savings capacity, the calculator evaluates three funding paths for each upgrade:

1. Pay cash: if you have enough available budget, install immediately.
2. Take a loan: borrow the shortfall at 7% over 5 years. Loan repayments are subtracted from cash flows during the loan term. The calculator checks that monthly repayments are affordable (within your monthly savings plus any energy savings from already-installed upgrades).
3. Save and wait: accumulate monthly savings until you can afford the upgrade. The NPV is reduced to account for the delay.

The best option (highest positive NPV) wins for each upgrade. As you install upgrades, the energy savings they generate add to your monthly income, accelerating your ability to fund the next upgrade.

This is separate from state subsidised-loan schemes, such as the ACT Sustainable Household Scheme and the WA interest-free battery loan. Those schemes are credited as an estimated interest saving (the gap between the subsidised rate and a commercial rate) in your savings and NPV figures, the same as any other incentive. On the results cards, this credit is shown as a financing benefit, not as money off the upfront price: you still pay the full purchase price and repay the loan; the scheme just makes the loan cheaper than borrowing commercially.

Key Assumptions

All of these can be overridden in the "Under the Hood" panel.

Limitations

• Estimates are based on averages. Your actual costs and savings will vary based on installer quotes, specific equipment, and usage patterns. We always recommend getting 2–3 quotes for any upgrade you pursue.
• The per-appliance baseline model is more accurate than a single aggregate state average, but it still uses population averages for each appliance, not measurements from your individual household. Entering your actual bill data in the refinement form will produce a more accurate result.
• Incentive programs change frequently. We update our data regularly but recommend confirming eligibility directly with the program administrator.
• We do not account for property value increases from upgrades, which can be significant for solar and insulation.
• Electricity tariffs are assumed flat-rate unless you specify a time-of-use tariff in Advanced mode. Battery arbitrage benefits are understated on flat tariffs.
• The model uses state-average rates. If you're on an unusually cheap or expensive plan, override the rate in "Under the Hood" for better accuracy.