Solar Return on Investment (ROI) 

Is solar worth the investment in New Zealand?

One of the key considerations for most people considering a home solar system is the potential return on their investment (ROI). While the upfront cost of installing a solar system can be significant, the long-term savings on electricity bills and other benefits can make it a smart financial decision in many cases. The solar experts at Current Generation break down the factors that impact your ROI and help you make an informed choice for your home or business.

What impacts the ROI for Solar?

These are some key factors that can affect the ROI of a solar PV (photovoltaic) system:

System size and cost

The size and cost of your PV solar system will have an impact on your ROI. A larger system will generally be cheaper on a per Watt basis and may provide greater savings over time resulting in a higher ROI. However, it will also have a higher upfront cost and, once your self-consumption needs are largely met, there becomes a point where the ROI likely starts to diminish because the additional power produced is never being self-consumed, it is all being exported. While current export rates offered by many power companies are making exporting power and the related ROI significantly more appealing, it is still important to choose a system size that is appropriate for your energy goals and budget.

Electricity usage and tariffs

The amount of electricity your home or business uses, the time of day it is used and the rates you pay for that electricity, will have the biggest effect on your ROI. If you have high electricity usage, use a lot of your electricity during the day and/or have high electricity tariffs, you will likely see greater relative savings from your solar PV system. It is important to review your electricity bills and usage patterns to estimate your potential savings, and to consider any likely changes in your energy needs or tariffs over time. This is something a reputable, experienced solar installer can assist with.

Incentives and financing

There are currently some great financing options available for solar in New Zealand, which can help to reduce the upfront cost. These are predominantly low-interest loans from the banks. With the right financing, you may even see an improved ROI.  

Unfortunately, there are generally no incentives in the form of subsidies or tax credits available for the installation of solar in New Zealand.

System performance and maintenance

The performance and maintenance of your PV solar system will also affect your ROI. A well-designed and properly maintained system will generally produce more energy and last longer, providing greater savings over time. It is important to choose high-quality components and work with a reputable installer to ensure optimal system performance.  While the maintenance requirements shouldn’t be onerous, reasonably regular cleaning of your panels, particularly if you live in an area with a lot of dust, pollen or salt in the air, will help with ongoing performance and, therefore, improved ROI.

Property value

Installing a PV solar system can also increase the value of your property, which can provide an additional financial benefit beyond energy savings. Studies have shown that homes with PV solar systems can sell for a premium compared to similar homes without solar, and that this premium, in some cases, can be significantly more than the initial system cost. A study by homes.co.nz in 2020 showed that a 3kW solar installation could increase the sale price of a house by as much as $35,000 when compared to similar houses. An Australian study also suggested increases in property prices attributable to solar of $6,500 per kW of installed solar. There are also a number of American studies which support the increase in property values due to the installation of solar. As power generation and prices become more challenging in New Zealand, the value placed on PV solar by prospective buyers is only likely to increase.

So, what can you expect in terms of ROI for a solar installation?

While every situation is different, here are some general estimates based on current market conditions:

• Conservatively, with a typical 5kW residential solar PV system costing around $12,000-$15,000, you can expect to save around $1,000-$1,500 per year on your energy bills, depending on your usage and rates. This means that the system could pay for itself in around 8-12 years, and provide ongoing savings and other benefits for the remaining life of the system (25+ years).
• For a commercial 10kW solar PV system costing around $22,000-$26,000, you can expect to save around $3,000-$4,000 per year on your energy bills, depending on your usage and rates. This means that the system could pay for itself in around 6-10 years, and provide ongoing savings and other benefits for the remaining life of the system (25+ years).

Of course, these are just rough estimates, and your actual ROI will depend on your specific circumstances and system design. It’s important to work with a reputable installer who can help develop a detailed ROI analysis for your solar PV system, taking into account all of the relevant factors and assumptions. By doing your research and making informed decisions, you can maximise the financial and environmental benefits of going solar, and enjoy a strong return on your investment for years to come.