The most frequent question anyone in the solar industry gets is ‘what is the cost of a solar power system?’ In fact, it would not be an exaggeration to say that the typical solar expert spends a third of their life answering questions about solar panel pricing.
In 2023, a typical 5 kW solar power system in New Zealand costs around $13,500. Like most other things, the larger a system, the lower its cost per watt. For instance, a small, 2 kW system may cost around $7,500, which comes down to about $3.75/W. On the other hand, a larger, 10 kW system can cost around $25,000, or about $2.5/W.
Let us dive a little deeper.
Understanding the Cost of a Solar Power System
While solar panels steal most of the spotlight in any system, they are only one of the numerous components that make up the system. A typical solar power system consists of the following:
- Solar panels: The lead character of your system, solar panels convert sunlight into electricity, and claim up the largest chunk of your system’s cost.
- Inverter: Inverters convert DC power from the panels into AC power, making it usable for household appliances. Arguably, they are the second most important component, and usually also take up the second largest chunk of your system’s cost.
- Mounting racks: A racking system helps mount the panels on your roof or ground. It securely fixes the panels to the base while also mounting them at a desired angle for maximum sunlight reception.
- Cables: Cables help move the generated electricity from the solar panels to the inverter and further into your home.
- Junction boxes, fuses, and breakers: These components are like those background people who make a music video amazing without ever being famous. Nevertheless, they are essential for the working of a system. Together, junction boxes, fuses and breakers take up important tasks of combining cables, protecting the system from surge currents, and allowing the user to turn the system on or off.
- Battery (optional): A solar battery is a great addition to any solar power system, as it allows users to store and use the energy during the nights and cloudy days. Additionally, batteries can also help power the house during power outages.
In addition to the above, you can opt for other optional items such as power optimizers, EV chargers, etc.
Naturally, your system’s cost will be higher than the sum of the costs of individual components. The final cost will include your installer’s labor and expertise. This includes the consultation, the procurement and transport of equipment, and finally the installation.
Below is a chart that shows the proportion of the total cost claimed by the above-listed components.
Factors Affecting the Cost of a Solar Power System
You may have noticed that every question about the cost of solar is answered with words like ‘average’, or ‘typically’, or to your dismay, ‘depends’! The reason for this is the fact that the cost of a solar power system does really depend on multiple factors. Here’s a list of these factors with some discussion.
Type of Solar Panels
Unlike just a decade ago, solar panels come in a variety of types. Customers can choose from panels based on efficiency, aesthetics, cost, etc. Below are a few examples:
- Regular monocrystalline solar panels
- All-black solar panels
- Half-cell solar panels
- N-type solar panels
- Bifacial solar panels
Each of the above options offers a specific advantage. For instance, all black panels are aesthetically more pleasing, while half cell panels and N-type panels promise better efficiency. Bifacial ones, on the other hand, allow power generation from both sides.
Regular solar panels with monocrystalline cells (or polycrystalline, if you are on a super-tight budget) are the cheapest of the lot, while the other technologies demand higher pricing.
That said, even the same type of panels can have different pricing based on the brand. Highly rated, Tier 1 brands such as REC, Jinko, Q-cells, etc. will be priced higher than lesser known brands. However, we always recommend going with the best brands available to avoid hassles with performance issues and warranties.
Type of Inverter
A majority of solar power systems employ a central or string inverter, which converts direct current from multiple solar panels (usually the whole set) into alternating current. However, microinverters are steadily taking over, thanks to the proven higher performance they can draw from a system.
Microinverters are tiny inverters that go with individual solar panels, converting power at the panel level and even allowing users to monitor each panel separately. They increase the system cost by 10-20%.
Some homeowners also choose to go with the combination of a string inverter and power optimizers. Power optimizers improve panel performance and also allow some monitoring capabilities. They can also raise the system’s cost but are slightly cheaper than microinverters.
Type of Roof and Type of Mounting
You can throw a solar panel on your roof and it will start generating power the moment sunlight strikes it. But that is obviously not the best way to do it, especially when you are expecting a 25 or 30-year performance from it.
Mounting racks help fix panels to the roof or ground. The cost of your system’s racking will be higher if it is on the ground, since you will require a concrete foundation. Similarly, the cost may also go up when the roof is too tall, and moving the equipment to the roof is difficult.
Even for roof-mounted panels, the cost decreases if they are laid flat on the roof instead of installing them at an angle.
In certain cases, customers can have custom requests which can also increase the cost of the solar mounting structures. For instance, a solar carport for parking and charging EVs will cost more than a regular rooftop system.
Choice of Battery
A solar battery is an excellent accessory for any solar power system. However, adding a battery to the system can increase the cost of the setup by 50-100%. While this number looks high, solar batteries are rapidly becoming commonplace, thanks to their ability of powering the home 24x7 as well as adding resilience to a house during debilitating blackouts.
Similar to solar panels, batteries come in several types. Lithium batteries are much more compact, efficient, and durable, but also cost higher than traditional lead-acid batteries. Some companies even offer smart features embedded into a battery product, raising the price slightly higher.
Besides the above, there can be several other factors that affect the price of a solar power system. These include your location and distance from the installation company, or the age and experience of the company. In some cases, homeowners may choose to purchase an extended warranty, or a monitoring package, which may also raise the cost of their system.
That’s not all. If you have an old house and its roof has just a few years of life remaining, most installers recommend replacing the roof before installing solar. Solar panels are expected to last 25-30 years, and if your roof needs replacement in the next 5 years, it is actually cheaper to do it now than spend on the dismantling and reinstalling of the system.
The same stands true for your home’s electrical system - if your meter or switchboard is in need of an upgrade, your installer will upgrade it before installing solar, and this can take up the total cost.
Has the Cost of Solar Increased?
In the 1970’s, the cost of a solar panel was around $150/W. This was just the price of the solar panels - add in all the other costs and a complete system would set you back by about a million dollars. At this price, you could buy a nice big house in almost any neighbourhood in the country.
Fast forward to 2023, and the cost of a solar panel is down to less than $1/W. This plunge can be attributed to large-scale production and simpler manufacturing technologies.
However, the Covid pandemic and the resulting supply chain woes saw the price of solar increase for the first time in its history. While a typical system could be bought for $10,000 a couple of years ago, the price has now gone up a little.
Thankfully, on the scale of the history of solar panels, this price rise is nearly negligible. Moreover, despite the added cost, the technology has become far better, and provides much more value to homeowners for the added cost. In other words, the cost of solar power systems is as justifiable today as it was a few years ago.
Financing Your Solar Power System
The concept of financing is one of the biggest drivers of human progress. Thankfully, just like homes and cars, it applies to solar power systems too. Homeowners who are wary of spending upwards of $10,000 can choose to borrow a solar loan, which allows them to spread the cost of a system over a longer time-span.
A financed system is slightly less profitable than one purchased cash, thanks to added costs such as interest and banking fees. Nevertheless, solar loans are a great way for people to go solar easily.
Fortunately, a number of banks in NZ provide solar loans, with many of them offering ‘soft-loans’, which are low-interest loans that are easier to repay. Here are some examples of this:
- BNZ’s 1% interest loan for solar and batteries
- ASB’s 1% interest loan for solar, EVs, EV chargers, and other energy efficiency upgrades
- ANZ’s Green Business Loan for solar and other energy efficiency upgrades
- Westpac’s zero-interest loan for solar and batteries
Is the Cost of Solar Power Worth It in NZ?
Looking at just the cost of something is like looking at only one side of an equation. The more important question than ‘how much solar costs’ is ‘is the cost worth it?’ Despite the slight rise in prices over the past couple of years, solar power offers remarkable value for money. This is why more and more Kiwis are making the shift to solar. Here’s a graph showing the rise of solar in Aotearoa.
A reason for this is the continuously increasing prices of electricity in the country. It might be slightly more expensive to get solar panels now, but it is also expensive to use grid power - more than before. The worst part is that grid power costs are going to keep climbing for many more decades, and solar is the best weapon to fight it.
Will the Cost of Solar Keep Dropping?
As discussed in one of the earlier sections, we have witnessed a massive 99.9% drop in the cost of solar panels. It is unlikely that the prices of solar will decline with the same speed in the future. While there may be a slight decrease in prices owing to further increase in production capacities, it will likely be negligible.
For those considering going solar, going solar now will save them more money than waiting until the prices drop further.
About 90 years ago, towards the end of his life, a tired Thomas Edison said to his friend Henry Ford, “I'd put my money on the sun and solar energy. What a source of power!” A century ago, it took a visionary to understand the value of solar power; but today, the worth of solar is as obvious as anything.
On the onset, thousands of dollars may look like a big deal, but if you like to choose long-term solutions to long-term problems, you will notice that going solar is one of the best decisions you will ever make!