Werribee, just a little further down the Princes Freeway, is second on the list of Victorian solar postcodes. The top five are rounded out by other lower-income, outer-suburban areas: Cranbourne, Caroline Springs and Grovedale in Geelong. Why has solar gripped some outer suburbs more than the green-leaning inner-city? Industry experts say solar companies have targeted mortgage-belt areas with aggressive marketing campaigns, offering ridiculous discounts for bulk purchases by neighbours. Some developers have rolled panels into their plans. But underlying all arguments is the fact that the falling price of solar technology and skyrocketing cost of electricity have rooftop panels on the cusp of being competitive with fossil fuel power - with or without subsidies. This introduces significant ramifications for the electricity grid and government policy. An analysis released this week by the Perth-based Sustainable Energy Association of Australia found that within the next few months one in 10 Australian households will have solar panels. In 2008, 25 megawatts of solar were connected to the grid across the country. Now there are about 1700 - a 6700 per cent rise.

Last year it provided about 1 per cent of the energy used. But as Ric Brazzale, director of consultants Green Energy Markets, puts it, the country will soon have rooftop solar panels with equivalent generation capacity to Loy Yang A, the largest coal-fired power station in the Latrobe Valley. ''It's been happening and people haven't paid much attention to it,'' Brazzale says. ''The cost dynamics of the industry have changed dramatically.'' In the past two years, China has taken over the world's manufacturing of solar panels and driven down the price through sheer economies of scale. At the same time, the high Australian dollar has cut the price of imports. The result, as reported this week by the federal government's Climate Commission, is that the cost of panels has fallen by 70 per cent. In 2008, a standard 1.5-kilowatt system cost $18,000. Now, the Alternative Technology Association says, you can get a good quality system for $4000, a lesser one for as little as $3000 - cheaper still once incentives are factored in.

Kane Thornton, deputy chief executive with industry body the Clean Energy Council, says panels have made the leap from being a major investment to ''almost in credit card range''. It has coincided with Victorian electricity bills rising by 30 per cent over the past three years, with the expectation they will increase by another third over the next three, due to rising infrastructure and retail costs and, to a lesser degree, the introduction of a carbon price. This is the point of carbon pricing: making fossil fuel power more expensive so clean energy becomes more attractive. ''If you look at the marketing, a couple of years ago it was 'do something for the environment'. It was a moral sales pitch. In the last couple of years that's changed dramatically to 'do something to avoid rising electricity prices','' Thornton says. ''I think there is a mental barrier that gets broken when it gets to the level it is at now - people think of the cost as similar to a holiday on the Gold Coast, or buying a home entertainment system.'' Brazzale says the rapid shift in solar economics has meant the Baillieu government's decision last September to cut by more than half the premium payment for electricity fed into the power grid from new solar panels - prompting protests from environmentalists and some, though not all, in the clean energy industry - has done nothing to slow the rate at which they are installed.

His analysis found that, after an initial dip, the number of Renewable Energy Certificates created through the purchase of solar systems in May and June had returned to a similar level to a year earlier. ''We have pretty much reached a point where that reduction in the feed-in-tariff [incentive scheme] has not made any difference,'' he says. Sustainable Energy Association of Australia adviser professor Ray Wills says a threshold has been crossed such that it now makes more sense to put solar on your roof than to buy electricity through the grid. ''Our domestic market is well beyond grid parity. If you are a home owner who is not moving or a long-term resident, the payback time [time taken to get your investment back through savings on bills] could be four or five years.'' For Damien Moyse, energy policy manager at the consumer-focused Alternative Technology Association, the extraordinary cost reduction has changed the type of advice he offers. ''If I knew four years ago what I know now, I would have just told our members to wait,'' he jokes.

''The key thing we're seeing now is that price of panels is not everything. My advice is to get a good panel and inverter that will last 25 years. We're at a point where payback time doesn't really matter, so you are better off getting a quality system that lasts.'' It raises the question of what, if any, subsidy is justified for photovoltaic solar systems. The Australian solar industry has been on a roller-coaster in recent years, with incentives increased and cut with little notice at both state and federal levels. In relative terms, however, Victoria has not suffered the abrupt shocks of other states. The state's scheme - a feed-in-tariff that requires electricity retailers to credit homes a premium rate for energy not used at home and fed into the grid - was cut last year from 60 to 25 cents per kilowatt-hour. At the time, Energy Minister Michael O'Brien argued it remained the second-most generous scheme in the country. Following the election of the knife-wielding Liberal National Party in Queensland, it is the most generous. In basic terms, the Victorian scheme pays nearly the same rate for home-generated energy as electricity retailers charge households. But it is a transitional scheme only. It is expected to be reduced after a review by the Victorian Competition and Efficiency Commission, with households to be paid a wholesale electricity rate of about 6 cents per kilowatt hour, as in other states.

Since their introduction, solar subsidies have been criticised as a highly expensive way to cut greenhouse gases - now-defunct government grant schemes cost the government about $400 for every tonne of carbon dioxide emissions avoided - roughly 20 times more than $23-a-tonne carbon price. Supporters of the solar industry say this is a false analysis, in part because it ignores savings in what would otherwise need to be spent on new power plants, transmission lines and fuel (unlike coal and gas, heat from the sun is free). But most solar advocates interviewed by The Saturday Age believe the time for subsidies has now passed. The federal government is winding back its own incentive scheme for small-scale solar, and the debate has shifted to what constitutes a fair price for energy from rooftop panels. Industry leaders believe it should be the same rate as electricity companies charge their households - approaching 30 cents per kilowatt-hour - or slightly less. The Clean Energy Council's Kane Thornton says: ''The value of electricity is more than just the wholesale price. It should also include other factors such as avoided network costs.''

But Andrew Macintosh, from the Australian National University centre for climate law and policy, says the wholesale price is enough. ''I can't see a coherent policy justification for treating rooftop solar differently to any other generator,'' he says. ''It's getting to the time where we say, you needed a start and you've had it, now stand on your own two feet.'' All argue that fossil fuel subsidies should also be removed to allow a more level playing field with clean energy. ''Take away diesel rebates and suddenly solar is the cheapest game in town for off-grid miners, for example,'' Wills says. Experts also argue that the impact of solar is yet to be properly factored into the extraordinary amount being spent on new transmission infrastructure (poles and wires) - about $45 billion over five years - reflecting forecasts that electricity consumption will continue to soar. Nationally, it is the biggest cause of escalating bills. But for the first time in decades, the forecasts of surging demand for power have not been matched by reality. Since 2009, electricity use has dipped due to a host of factors: falling industrial demand as some manufacturing has shut down, people becoming more energy efficient and the growth in solar panels. This has raised doubts about whether what some have described as the ''gold-plating'' of transmission lines is justified.

''After a pretty cursory analysis, almost anybody would start asking if we are spending too much,'' Macintosh says. While rooftop solar energy has broken through the cost barrier, it is a different story for large-scale solar plants - arrays of photovoltaic panels in the desert, and thermal power stations that use mirrors to concentrate solar energy. The Climate Commission is bullish about the prospects for solar in Victoria, reporting it gets enough usable energy from the sun to run the state twice over. But large projects will require significant help to get off the ground through either the new Australian Renewable Energy Agency or the $10 billion Clean Energy Finance Corporation. At a state level, the Baillieu government appears to have walked away from a pre-election policy of aiming for 5 per cent of the state's electricity coming from solar by 2020, but says it has maintained a pre-existing $50 million grant for a proposed large-scale demonstration plant near Mildura and would have backed a Mallee solar park had it won federal funding. For small-scale solar, the debate at this week's Clean Energy Week conference in Sydney was all about moving ahead to the next challenge: battery storage. John Grimes, chief executive of the Australian Solar Energy Society, says batteries allowing up to 8 kilowatt hours of energy to be stored during the day and used in the evening are now within grasp. Ray Wills highlights existing technology that allows appliances to communicate to manage household energy use across the day, maximising solar energy when it peaks in the afternoon.

Grimes admits he has an industry barrow to push, but predicts the pace of the evolution will surprise people. ''I don't think the government or public have appreciated just how profound or rapid the change will be in the solar market over the next couple of years.''