Are Solar Panels Worth The Investment?

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Are Solar Panels Worth The Investment?

A solar power system has a high return on investment (ROI), and is an attractive investment, offering much more than bank term deposits or similar investments. A grid-connected solar power system in New Zealand can achieve an ROI between 10% and 15%.

One of the main reasons New Zealanders invest in solar power systems is to save money on power bills; solar power heavily reduces the ongoing cost of grid electricity, as grid electricity prices continue to skyrocket.

An investment in a solar power system is a fixed, upfront cost.  Most homeowners can expect to reach a payback period within 8 years, after that the system can generate electricity from the solar panels, without cost, for at least 20 years or more.

Factors that determine ROI and payback from installing solar power systems include:

  • The size of the solar power 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.

  • The price you pay for power from the grid.

To get an estimated return on investment for solar power on your own home, click here to get 3 free quotes from SEANZ approved solar panel installers.  Installers will be in touch with information regarding the price to install the solar power system, how much power the chosen system can generate, along with the ROI and payback.

Solar Investment Calculator

My Solar Quotes has developed one of the most comprehensive solar calculators available in New Zealand, and it's completely free to use.

Find out how much you can save by going solar.

The calculator generates the following information for any home or residence in New Zealand;

  • First-year savings
  • First-year ROI
  • Payback period
  • Savings over 25 years
  • The amount of solar power generated
  • Carbon emissions avoidance
  • Savings from installing solar batteries

The calculating process takes 3 minutes to complete. Click here to start the solar calculator.

Solar Investment Case Studies

The Real Numbers: A Detailed Look at Residential Solar PV Return On Investment, Payback, and Overall Value to Consumers 21 Case Studies from across New Zealand

SEANZ (NZ's solar industry association) and the team at My Solar Quotes conducted a study in 2019 named 'The Real Numbers: A Detailed Look at Residential Solar PV Return On Investment, Payback, and Overall Value to Consumers'. The study aimed to give examples of returns that solar customers are currently experiencing throughout New Zealand.  

Although this study is outdated (due to the change in solar power system prices and higher electricity prices), what this study shows is that even back in 2019 homes with solar power were getting great returns, and saving thousands of dollars each year on power bills.

View the 21 case studies here.

Solar ROI Key Factors

Below are the key factors that determine the investment return achieved 

  1. Buy-back rates
  2. Electricity prices
  3. Life-expectancy of the system
  4. Initial investment (cost of the solar power system installed)
  5. Solar generation conditions

1. Energy Retailers Solar Power Buy-Back Plans

A grid-connected solar power system comes with the benefit of being able to use solar power as it is being generated, while also being able to draw grid power when needed, that’s hassle-free power 24/7.

When excess solar power is generated, (more than what the homes require), it is exported to the grid. Energy retailers pay for this power, rather than the power going to waste.

Energy retailers offer between 7¢ and 17¢ per kWh for excess solar power. Depending on the amount of solar power being exported, the price paid per kWh can have a large impact on the system’s ROI.

The typical price of power is 30¢ per kWh, as this is higher than the buy back price of solar power, the bigger benefit of solar power will come if power use is off-set by using solar, rather than solar power being exported to the grid.

Ultimately a solar power system is designed with the idea of exporting only a small amount of power to the grid.  

The ratio of using solar power directly rather than it being exported is known as a self-consumption rate.  A solar self-consumption rate above 50% is great, and will lead to good investment returns. Ways to increase the self-consumption rate can be found here.

Solar Calculator Tips:

  • When using the MSQ solar calculator, try entering a low export price, then click the button ‘change solar calculator details’ in the summary, then enter a high export price to see how this rate would impact your return on a solar power system.
  • On the results page, try moving the solar self-consumption rate slider up and down to see how much this will affect the savings.

2. Electricity Price To Continue To Rise

The trajectory of power prices* in New Zealand is always on an upwards trend.  Every year New Zealanders pay more for electricity.  By investing in a solar power system, the rising costs of electricity stop (at least for the portion of power you are able to offset by generating/consuming solar power). Investing in solar power now means monthly costs are wiped out for over 25 years.  

3. A Solar Power System’s Expected Life

Solar panels sold by reputable companies in New Zealand usually have a performance warranty  range between 25 and 30 years.  The panel's product warranty can range between 10 years and 25 years.  This tells us we can expect solar panels to last at least 25 years which is a factor when figuring out the payback on investing in solar.  

Solar panels have the ability to last over 50 years, but for sensible return on investment calculations, you can safely say the panels will last 25 years and the amount of savings can be estimated over this time.

The weak link of a solar power system is the inverter, it’s not expected to last as long as the solar panels.  During a 25-year lifetime of a solar power system, you could expect to replace the inverter at least once.  

4. Initial Investment (The cost of the solar power system installed)

The price you pay for a solar power system will affect the ROI and payback period for a solar power system investment.  The variation between quotes can vary by thousands of dollars.  But of course the solar power system that is the cheapest isn’t necessarily the best.  Weighing price against quality isn’t important too because a system that last longer has a higher value. We highly recommend getting 3 quotes before going ahead with a solar power system purchase.

5. Solar Generation Conditions

The amount of solar power a system can generate over a year can vary depending on the positioning on the panels, sunshine hours in the location and other factors like shading.

The solar calculator takes into account the angle and orientation of your roof and the expected sunshine in your location to give the best estimate for the annual solar generation.

The more favourable the conditions are, the higher the annual solar generation, the higher the ROI will be.

Example ROI Calculation For A Solar Power System

We have an incredible online solar calculator that will calculate the savings and ROI for you.  But for those that like to dig into the numbers, below is an example of a savings and ROI calculation for a home in Auckland.

Example 1 'What if I exported half my solar power to the grid?'

From using the solar calculator, the estimated annual solar generation can be found for any home in New Zealand.

Using the example of a 5kW solar power system on a 20-degree, north-facing roof on a home in Grey Lynn, Auckland, the solar power system will generate 7,030kWh of solar energy in a year.

For the sake of the example, we will use Electric Kiwi’s buy-back plan of 12.5¢ /kWh and a typical energy price in Auckland of 30¢ /kWh. Also assuming the installed price for the solar power system is $13,500.

If the household consumed half of the generated solar power, with the other half of solar power exported to the grid, we can then determine the estimated return on investment with these calculations;

Half the solar generation amount is 3,515 kWh (from 7,030 kWh)

  • 3,515 x $0.30 = $1054.50 (this is the value gained in offsetting your normal electrical use)
  • 3,515 x $0.125 = $439.375 (this is the half that is exported to the grid, the credited amount Electric Kiwi will provide)
  • Total saved= $1493.88 in the first year

The return on investment calculation is $1493.88 / $13,500 = 11.1% ROI

Remember: this is tax-free, a reasonably impressive return for your investment! 

The graph below demonstrates the return on investment for the example case (see above) over the period of 25 years. Factor in that power prices are expected to rise at a rate of at least 2% every year for the next 25 years, and the savings will be $42,950.
Solar savings graph over time nz

Example 2 'What if If All Solar Power Was Directly Consumed"

Reaching 100% solar power self-consumption is difficult, as appliances in the home are hardly ever drawing power all the time when the sun is out.  But using more than 50% of the solar power generated is achievable. We are showing what the return on investment would look like if solar power was 100% consumed to give you a taste of what kind of savings could be achieved.

Here we go…

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

  • 7,030 x $0.30 = $2,109

The return on investment calculation is $2,109 / $13,500 = 15.62% ROI

The graph below shows the savings if all solar power is directly consumed (no excess solar power). This system would save the owner $63,792 in power bills over 25 years. 

solar power savings graph - all power consumed - nz

Solar Power Savings Payback

Considering the 50% self-consumption rate example above is more realistic than 100%... although it's conservative, we’ll use that one to show the payback of the solar power system.

With the upfront cost of $13,500, after 9 years is when the solar power system would have paid for itself.

solar power payback graph nz

Return On Investment, Savings And Payback For Christchurch

Just to prove solar power is worthwhile not just in the North Island, but also in the South, below is a breakdown of the savings calculations for a home in Christchurch.

Location: Christchurch City
Roof: 20 degrees facing north
System size: 5kW - $13,500 installed
Self-consumption rate: 50%
Electricity rate: $0.30, Buyback rate: $0.125

First year savings: $1,538.72
Savings over 25 years: $44,239
ROI: 11.40%
Payback: 9 years

Below is a screenshot of the solar savings estimates for the Christchurch example, from the solar calculator.

christchurch solar savings example from the solar calculator

Give the solar calculator a go to find out how much money you can save on electricity costs and what return you’d get on a solar power investment.

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.