Victoria has announced a $1.24 billion solar panel subsidy scheme.

The State Government will now pay $4,550 upfront to install rooftop solar panels, and require households to repay half the cost over a four-year period.

The Solar Homes scheme is open to any owner-occupied homes with a value of less than $3 million and a combined household income of less than $180,000.

The plan seeks to install solar panels on 650,000 homes over 10 years.

Premier Daniel Andrews said the households would save up to $890 dollars a year on their power bills.

“We were promised that privatisation would lead to lower prices, that simply hasn't happened, every household can tell you that,” he said.

“Now we have a plan for the future that's practical, based on common sense that will happen.”

The scheme should knock about $2,225 off the installation of an average 4kW solar system.

An independent agency, Solar Victoria, will be set up to oversee the scheme. If the Labor government is re-elected, it says $9 million will be spent on the accreditation of 4,500 electricians to install the panels and expand the scheme.