Is now the right time to go solar?

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.

13 Replies to “Is now the right time to go solar?”

    1. World solar did the install ($9,990 for 4.5kw solar). Their installers are great. Their office staff seem overworked, and aren’t the best at letting you know the schedule.

      I provided the immersun power diverter myself.

      1. Hi David, many thanks for this post.

        Can I ask why you provided the power diverter yourself (did you also install yourself?), and why you chose the ImmerSUN brand specifically?

        1. Hi James, I supplied the power diverter myself because they’re half the price if you buy direct.

          I had originally purchased the solarimmersion for £170 of eBay, but they were taking a long time to ship my order so I ended up buying a refurbished immersun unit directly from the engineer for £180. The new version of the immersin is the Myenergi eddi power diverter.

          Worldsolar did the install for an extra $125.

  1. Where is the 7% return on investment coming from? Are you investing the $10500 not spent on the solar system in the stock market? It sounds like your assuming someone has this money ready to spend but chooses to invest it in the stock market instead. 7% return on the stock market might be historically realistic, but it’s irresponsible to assume it for the future. If I’m wrong about this you’ll have to be clearer in your article about where this extra 7% reduction in cost comes from, I’m genuinely interested in your response…

    1. Thanks for your thoughts. Yes the 7% comes from investing in the stock market. Sure it’s not guaranteed, but none of us can see the future, it may grow 2% over the next 21 months, it might grow 30%, hell it might even shrink and go negative. You are welcome to do your own calculations with your own assumed investment returns. Either way it doesn’t change the fact that going solar has the best guaranteed ROI for any passive investment option.

      For the readers with a mortgage I’ll do a follow up article comparing going solar vs early repayment.

  2. Who are you using as a electricity provider to obtain grid credits? I’m with electric kiwi but they don’t pay you for power. My solar should be installed in 3 weeks from world solar.

    1. Hi Barry, we stayed with electric kiwi (no buy back). My fuzzy maths showed we’d be better off by $40 a year by fully utilising electric kiwis free hour of power vs selling back at 8 cents a kWh.

      It’d be even better if elelectric kiwi offer solar buy back in the future.

      1. We use 3-6 kWh during our free hour of power. To get that back by selling at 8 cents a kw, we’d have to be exporting 9-18 kWh a day.

        1. I’m curious, what appliances do you use during your hour of free power to make it worthwhile and what time of day do you choose?

          1. We set our hour of free power to 5:30 – 6:30 am. Our hot water cylinder and dishwasher get scheduled to come on at 5:30am.

            In winter our heat pumps and underfloor heating for the bathrooms also turn on at 5:30 am.

  3. What sort of household is this based on? 4+ people with people at home during the day and very high power usage? Just seems like huge power usage to able to use 3090kWh (not kw btw) of power during the hours solar panels are generating.

    1. Hi, family of 4 in the south island. We consume around 9,000 kwh per year, which is just inside the low user threshold.

      I believe your power use is not representitive of the typical house hold. However you may be able to eliminate your power bills by oversizing the solar array, and selling of the excess. If half your energy cost is hot water (2,000kwh) and 1,000kwh is you daylight use, that leaves 1,000kwh to buy from the grid.

      Excess solar is typically purchased at 1/3rd of the buy price, so to fully cover the remaining 1000 kwn, you need to export 3,000kwh.

      All up you’d be looking at a system that generates around 6,000kwh per year. A 4.5 kw system similar to what we have installed, north facing, will generate roughly 6,100kwh per year.

      Check out the calculator here to estimate the amount if power various sized solar systems will generate for your address.

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