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 solar PV system will have a big impact on your ROI. A larger system will generally be cheaper on a per Watt basis and may provide greater savings over time. 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. It is, therefore, important to choose a system size that is appropriate for your energy needs 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 affect 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. 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 quality solar installer can assist with.

Incentives and financing

There are certain financing options available for solar PV systems in New Zealand, which can help to reduce the upfront cost and improve your ROI. These are predominantly low-interest loans from the banks. Unfortunately, there are generally not 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 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, and to perform regular maintenance tasks to keep your system running smoothly.

Property value

Installing a solar PV 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 solar PV 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 kWh of installed solar. There are also a number of American studies which support the increase in property values due to the installation of solar.

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.