In recent years, solar panels have been established as a growing sustainable energy source in Australia, but have you ever wondered how a solar panel works? 

With Australians having the highest uptake of solar panels globally, it looks like an increasing number of people will want to invest in solar power and use renewable energy to protect the environment. 

Let’s have a look at how this renewable energy source works.

Solar Energy

Solar energy creates an electric current that is captured from the sun and converted into electricity. Solar energy works to power your home and any excess electricity generated  that you don’t use can be stored locally in a battery or put back into the electricity grid.

The Photovoltaic Effect

Solar panels are made up of many photovoltaic cells (also known as semiconductors) which link together. When these solar cells are exposed to sunlight, they generate an electric current. 

Here’s how photovoltaic cells work in three simple steps:

  1. When sunlight hits the solar cells, it sets them into motion

  2. An electrical current creates layers of solar cells

  3. The electricity flows, contributing to solar energy generation

Solar Panels

Solar panels on a terracotta roof in Australia

In Australia, around 30% of homes have rooftop solar panels, with more than 3 million solar PV (photovoltaic) systems installed on rooftops across Australia. [1]

For Australian homes, you’ll want your solar panels to face north ideally, but east or west-facing can still work just as well! The position of your solar energy panels is very important especially if you use more electricity at certain times of the day, such as in the early morning or late in the afternoon.

Solar Grid

Also known as a network, the electricity or solar ‘grid’ transports power between generators through high-voltage power lines, low-voltage power poles and into the homes and businesses of everyday Australians. 

The electricity grid is a great way to sustain solar energy on cloudy or rainy days. Excess electricity is exported to the utility grid and imported to your home appliances so you can stay connected even when it’s not sunny outside.

Solar Batteries

Technical Electrician synchronises the converter and solar battery using a mobile phone

You can add solar batteries to your solar power system to store any excess electricity generated from the solar energy panels. Rechargeable solar batteries serve as a backup energy source for when your solar panels don’t generate enough electricity at night, on cloudy days or during power outages.

Before investing in solar batteries, ensure you assess your home’s energy needs to avoid buying too many or not enough batteries.

How Solar Panels Work Step by Step

  1. Sunlight activates the solar cells

  2. Each solar cell produces a direct electrical current (DC electricity)

  3. The solar inverter converts DC electricity into usable AC electricity (alternating current) for your home appliances

  4. Your home is powered using AC electricity from the solar PV (photovoltaic) modules

  5. A net metre measures your usage (including electricity production and consumption)

  6. Any additional electricity is exported back into the electricity grid which allows your home to stay powered, even when sunshine is in shorter supply


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Alternative Solar Technologies

In the solar industry, there are alternative types of solar technology apart from PV cell-powered panels, with the two most common options being solar hot water and concentrated solar power.

Solar Hot Water

Solar water heater on a terracotta roof

Solar hot water systems capture thermal energy from the sun to heat water for your home. This solar system consists of collectors (panels), a storage tank, a heat exchanger, a controller system, and a backup heater. 

These panels (also known as collectors) are usually installed on the roof of a house and turn sunlight into heat.

Concentrated Solar Power

Concentrated solar power trough collector generates solar power

Also known as concentrating solar power or concentrating solar thermal power, this alternative type of solar energy transforms sunlight into heat. Electricity generates when mirrors are positioned directly towards one focal point. Heat energy is stored away once this is complete.   

Concentrated solar energy is most often used in large-scale installations to an electricity grid and is also a great alternative to fossil fuel-based power plants.


Learn More About Home Building Insurance

Protecting Your Solar Panels with Home Insurance

If you’ve ever wondered if solar panels are covered by home insurance - we’re here to tell you that they are. 

Budget Direct’s Home and Contents Insurance covers loss or damage to energy storage systems and solar panels.


Learn More Today