Investing In A Solar Power System

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Investing In A Solar Power System

A solar power system produces a high return on investment (ROI) and is far more attractive than putting your money in bank term deposits or similar investments.

Factors that will determine your ROI include:

  • The size of system installed

  • The roof angle and slope the solar panels are installed on.

  • How much power is used when solar power is generated (solar power self-consumption)

  • The buy-back rate received for excess solar power

Considering the variables will determine your ROI. Generally the range is between 7% and 15% ROI.

Energy Retailers Solar Power Buy-Back Plans 

Energy retailers offer between 7¢ and 16¢ per kWh exported to the grid.

Buy back-rates are low from energy retailers. Aim to get a solar power system size that matches the amount of power you use during the day, when maximum solar power will be generated (rather than relying on good buy back rates for a high return on investment). Achieving higher self-consumption is easier than ever.

Example ROI Calculation For A Solar Power System

“What if I exported half my solar power to the grid?”

As an example, we can calculate an estimate return on investment by using Contacts Energy’s buy-back plan of 8c. Consider you consume half of your generated solar power, with the other half of solar power being exported to the grid, we can then determine the estimate on the return on your investment. See below:

A 3kW solar power system in Auckland generates 3,741 kWh/yr, the purchase price for this size system is approximately $9,000.

Half the solar generation amount is 1870.5kWh (of 3,741 kWh)

  • 1870.5 x $0.30 = $561.15 (this is the value gained in offsetting your normal electrical use)

  • 1870.5 x $0.08 = $149.64 (this is the half that is exported to the grid-paid for by Contact Energy)

  • Total saved= $710/year

The return on investment calculation is $710 / $9,000 = 7.9% ROI

Remember: this is tax-free – and a reasonably impressive return for your investment! (Note: This calculation assumes a rate of 30 cents/kWh for electricity.)

Return On Investment Graph

The graph below demonstrates the return on investment for the example case (see above) over the period of 25 years. It shows that the system would save the owner $17,750 in power bills over 25 years (if there was no inflation in power prices over 25 years). Factor in that power prices are expected to rise at a rate of 4% (**MBIE, 2015) every year for the next 25 years, and the savings will be $27,830.

Solar Power Return on Investment with half of the solar power exported to the grid

If All Solar Power Was Directly Consumed

If you use all of the solar power generated i.e full solar power self-consumption, this is what the ROI calculation would look like.

  • 3741 x $0.30 = $1,122.30

The return on investment calculation is $1,122.30 / $9,000 =  12.47% ROI

Return on Investment Graph - If all solar power is directly consumed

The graph below shows the return on investment if all solar power is directly consumed (no excess solar power). This system would save the owner $28,058 in power bills over 25 years. As previously mentioned, power prices are expected to rise at a rate of 4% every year for the next 25 years, so savings should be closer to $48,180. The example demonstrates how much money can be saved if solar power is consumed directly. Rather than exporting power, find out how you can directly consume more solar power, at the My Solar Quotes solar power self-consumption page.


Increased solar power self-consumption graph


Disclaimer: Information in this website is general in nature. It is NOT a recommendation to anyone and has not been prepared on the basis of the financial profile of any particular person. It is important not make any decision on the basis of this information without first assessing its suitability for your own objectives, financial situation or particular needs.  For accurate quotes and investment figure please obtain 3 free quotes here.

**Energy in New Zealand 2015, MBIE Report, 2015, P.50.