Is solar a no brainer? 🤔
Speaking to hundreds of solar buyers, we’ve identified that most people want to contribute to a cleaner & greener environment, but generally only proceed with solar when the value enters the ‘no-brainer’ category.
So, I guess the question is; what counts as a no brainer investment?
There are two angles here, buyers using home equity and buyers using cash.
Sorry to make it black and white, but this is the reality of it.
In this blog, we touch on both!
If it costs you nothing each month, its got to be a no brainer. Lets unpack that.
Part of the premise for this blog is - Solar is totally worth doing, even without a battery. The ‘ol video from our early days unpacks solar, without a battery.
Definitely worth a watch!
Solar only - no battery
Despite contention around NZ solar buyback rates, solar only makes a ton of sense.
And yup - the buyback rates could be better! But with panel only systems being very affordable, todays buyback rates are seriously lucrative.
Solar only can replace up to 50% of your homes energy usage. But without a battery, you end up with a lot of spare solar - which can be sold to the grid for a decent credit from your energy retailer.
A setup like this can reduce your powerbills by 40 - 70%. It’s typical for summer bills to be ~75% off and winter bills to be ~35% off.
And yup… That’s without a battery.
The investment tends to pay for itself in around 6 years.
IE; spend $18,000 now for 20 panels, and save $3,000 per year.
🫨 That’s a 6 year payback, without even factoring in the dreadful inflation expectations!
The repayments on a loan with 0% or 1% interest, on a 5-year term, would only be marginally higher than the average monthly solar system savings.
But with a 1% loan, over a 10-year period (ASB, ANZ, and BNZ offer this). The repayments are $158 per month - a lot less than the average system savings of $250.
After 3 years is up - you’d refix that loan at the going rate. But even then, your solar savings may have gone up due to inflation - so you’d be in the green by a long shot.
Is that a no brainer? Repayments that are less than the solar savings, by ~$92 per month?
Solar with a battery
Batteries help you use more solar, so - you sell less to the grid, and the savings go up.
In todays market, you can get 20 panels and a 10kWh battery for around $27,000. Maybe a little cheaper if you’re happy to consider the ‘cheaper but great value’ gear.
Running the same numbers, lets say the battery lifted your savings to $3,750 per year.
Same story - maybe you take out a ‘mortgage top up’ loan from your bank, with a ~10 year term. (People get these all the time for cars, boats, and holidays.)
But ANZ, BNZ and ASB might only charge your 1% interest for the first few years… 😎
At $27,000 with a battery, the repayments are $237 a month. That’s $75 less than the solar savings!
Forget the payback period! A system that puts money in your pocket is a no brainer, even if it means a little more lending at the bank.
Do you see the picture? You can take a 10-year loan, and the system puts money in your pocket from day 1.
Inflation on your solar savings eats the inflation on your interest rate after the first 3 years are up.
What what - inflation on solar savings?
Yeah! Exactly. Your solar savings aren’t fixed. They go up, every year.
Its intangible, but its legit.
With solar, you barely notice the impact of rising power prices.
Now:
$3,000 in savings without a battery
$3,750 in savings with a battery
5 years from now:
$3,500 in savings without a battery (indicatively)
$4,500 in savings with a battery (indicatively)
A bit more boring - how does solar compare to other investments?
‘Cos yeah, does solar stack up as a cold hard investment?
Setting the premise, it's important to consider risk, and the emotional rollercoaster attached to varying levels of risk. For example; I have a friend who always talks about bitcoin as the best place to park cash, but there's a serious disconnect between his words and reality, because he checks the price of bitcoin every other hour.
An investment should be measured by two main things.
The investment returns
The time, energy and effort required by the asset owner to achieve said returns.
Further to point above, my friend with the bitcoin might do well in the long term, but that's only if he doesn't sell next time it drops 50%. And further to that, is it really considered winning if a $20,000 investment doubles, at the cost of sleep and time with the little ones?
The main investment options - based on a $15,000 investment
Stocks.
We're all stock investors by means of our Kiwisaver, and the NZ government super fund. History shows that stocks provide returns in the vicinity of 6 - 8% over the long term. Included in that 6-8% is dividends, which typically make up less than .2% of the 6-8%, and capital gains, which reflect rising equity prices.
Stocks come with a similar emotional rollercoaster to Bitcoin, as in, they go down from time to time. But over a 15 - 20 year period, it's safe to assume the asset holder will yield a 7% return every year, which compounds.
If you put $15,000 in the stock market, you could reasonably expect that investment to be worth $81,000 after 25 years, assuming you reinvested the dividends.
But of course, in a stock market downturn, that $81,000 could be discounted due to 'Mr Market', and therefore, may only be worth $60,000 or something close to that. Swings and roundabouts, that's the nature of stocks. The minimal tax cost on dividends has not been factored.Term deposits.
This conversation is interesting, because term deposit yields are all over the place, and depending how you structure the term, the returns don't compound.
Just a few years ago, term deposits were yielding less than 2%, and now they're sitting around 6%.
Nobody can crystal ball the deposit rate, for if they could, they'd be infinitely rich.
So, lets assume a 25 year average deposit rate of 4%, which may actually be too high. And lets assume that the holder takes out bi-annual deposit terms to allow the interest to compound (somewhat).
$15,000 invested in 2 year term deposits, yielding a 4% interest rate, compounding every 2 years, comes in at just over $38,000.
But, assuming a 25% tax rate on the interest earned, the $15,000 only grows into $33,000.
If a lower tax rate is assumed, say 17.5%, the $15,000 grows to something closer to $35,000.
Of course, term deposits come with practically no risk and no heartache.Investment trusts.
A lot of kiwis like to place their cash in investment trusts that hold loans secured by property. Returns in these asset classes typically pull in about 7%, annually, and you can generally opt to have the returns reinvested to keep the compound machine in motion.
However, just like term deposits, you are liable for tax on those quarterly dividend payments.
In this case, I'll assume a 17.5% tax rate. This is pretty standard, but also conservative.
Assuming a 7% annual dividend, taxed at 17.5%, and reinvested annually, $15,000 grows to $63,735.
So, how does solar compare over 25 years?
Lets recap on a $15,000 investment.
Stocks -> 15k turns into 85k if you time it right. (Assuming 7.5% compounded return, which includes dividend reinvestment and no tax on the capital gains).
Term deposits -> 15k grows to $35k with small tax rate.
Investment trusts -> $58,000 assuming a 7% compounded return, taxed at 17.5% before reinvestment.
Solar without a battery has a 6 year payback period.
That’s a 16.66% 1st year return.
On a 1st year basis, solar beats the low risk options with respect to the return, coupon, dividend, however you wish to call it.
Over 25 years, $15,000 in solar yields savings of over $100,000 - which beats everything, and it helps the planet for very low risk.
That's assuming:
17c solar buyback rates, no GST payable.
35c per kW excluding GST.
40% of the homes energy use occurs at daytime, to benefit from solar. (Easy with a hot water cylinder heating during sunlight hours).
3% power inflation rate.
.55% annual solar panel degradation.
The great thing about solar is that you're relying on the sun rising. If you use more energy in your home, your savings go up respectively.
Check out our solar calculator to test these numbers.
Residential solar WITH a battery, tends to come with a 7.5 year payback, and even shorter in some cases, as the battery mostly mitigates the latest face melting peak rates.
That’s a 12.9% 1st year return.
As at 2026, solar and a battery is now beating the other low risk investments. (Watch this video to see how).
Over 25 years, $27,000 in solar and batteries would yield savings of $127,000- but you have to replace the battery, so lets use $115,000.
That's assuming:
17c solar buyback rates, no GST payable.
35c per kW excluding GST.
70% of the homes energy is covered by solar. (Easy with some timed loads and a battery to even it all out).
3% power inflation rate.
.55% annual solar panel degradation.
Our two cents
Solar checks out as a great investment (see our solar ROI comparison blog). There's no panic involved. The sun the rises, and you save money.
The returns are positive. Not immensely better than the other options available to you, but in the long run everything checks out.
What's of utmost importance, is caring for our environment. We need more solar, and we need more EVs powered by solar panels.
As the world gets better at producing solar batteries, they'll come down in price. With power prices going up, and batteries coming down, solar buyers can look forward to getting very positive investment returns on solar + batteries.
We will explore the benefit of batteries in a future blog.
For now, why not 'engage a solar broker'; so we can mutually explore the right system for your home, and get to work on getting you the ideal system at the ideal price.
