Will solar power provide a better return than investing in the share market? Let’s take a look and find out.
I’ve been toying with going solar ever since I became a home owner 12 years ago. But I have never been convinced it was a good investment, well that all changed today. We’ve finally gone solar, and I’ll show you why.
My assumptions as at September 2017.
It costs $10,500 for 4.5kw of north west facing solar panels, and a solar power diverter installed in Christchurch, New Zealand.
Amount of solar power generated and consumed as calculated by the energywise solar calculator 3,090kw per year.
Price per kw $0.25 from current electricity provider.
3,090kw x $0.25 equals $772 of solar power per year.
By diverting excess solar power to heat our hot water cylinder, I estimated we will use an extra 1,000kw of our solar electricity per year.
1,000kw x $0.25 equals $250 of excess solar power heating our hot water per year.
$772 + $250 equals $1,022 of solar electricity generated and used per year.
Solar vs investing
$1022 dived by $10,500 equals 9.73% return on investment. Compared with a 7% average return from the share market, this is looking very good.
But wait it gets even better with the 0% financing and no repayments for 21 months being offered by select solar installers.
Instead of paying $10,500 up front for the solar install, say we take the finance deal and invested the $10,500 for 21 months.
$10,500 x 7%(long term average share market return) equals $735 return per year, divided by 12 months equals $61.25 per month x 21 months equals $1,286 earned during the interest free period.
$10,500 – $1,286 gives us the new cost of $9,214.
Let’s not forget we’ve also had the benefit of 21 months of solar power generation without paying a cent.
$1,022 of solar power generated per year dived by 12 months equals $85 per month, x 21 months equals $1,788 of free power.
$9,214 – $1,788 gives us a new price of $7,426 for our solar system.
The best return on your money
Thats right, you can get a 4.5kw solar system installed with no government subsidy for less than $7,500.
So what’s our new annual return on investment? $1,022 dived by $7,426 equals $13.76% return on investment per year, every year for the next 25+ years.
Expect regular updates as we monitor the solar systems performance and back this article up with real data.
Warning to all readers, beware of no interest deals, read the fine print and always repay in full amount before the interest free period is over.