Is solar a no brainer? 🤔

*This is an article for residential buyers.

Out there in the marketplace, there’s a ton of articles breaking down the reasons why people consider solar for their home or business.

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’ll talk about the buyers using home equity, or alternative funding such as Q-card or Gem-Visa, as offered by a few solar providers (note; the latter funding methods aren’t home-equity loans, but the buyers evaluate the options through similar lenses).  

So, what it is? What defines a no brainer?

Keeping it simple, and in one point only, our clients have made it very clear that cashflow is the primary consideration. Minimal or no impact to cashflow is what buyers are looking at.

How can you achieve minimal or no impact to cashflow?

Option 1.

Get a solar system without a battery, maximising savings on a great power plan with huge solar buyback rates. (Consider the likes of Meridian or Powershop).
 
With massive buyback credits, and replacing up to 50% of your homes annual energy use with sunshine, you’re likely to achieve a solar system that pays for itself in 5 to 8 years. Say, 12 – 15 panels would be ideal for most homes.
 
IE; spend $12,000 now and save $2,000 per year. This amount of savings, divided into system cost, works out at about a 6-year payback.

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.
 
 

Considering a 1% loan, the repayments are $205 per month. The solar savings would be an average of $166 per month. So, the difference is $39 per month.

Is that a no brainer? $39 a month for a solar system with 12 - 15 panels?

Maybe yes… Maybe not… Some people would say it’s not. And that’s OK.

But, hold the line caller…. Power prices are going up a ton right now, with energy markets forecasting rates may double in the next 10 years. That’s an annual inflation of over 5%!!!

Assuming 3% power inflation, when power prices increase for our hypothetical buyer, they’ll save another $60 next year. And then $62 more the following year. Then $64!!

The $39 monthly cost, or cashflow impact, reduces annually respective to power price increases.

Maybe that’s a no brainer? You decide.

Option 2.

Still get a system without a battery, and let’s assume the same size and same price.
 
 

Obtain a ‘mortgage top up’ loan from your bank, with a longer term such as 10 years.
People get these all the time for cars, boats, and holidays.
 
So, you can get a 10-year term, and if you’re with ANZ or BNZ, the first few years will have an interest rate of only 1%!!!

1%... What do the repayments look like now…

A $12,000 solar system work out at $105 per month. One Hundred and Five.

But the system is saving an average of $166 a month.

So… … … You’ve got cash going into your pocket immediately. 
$61 of cash per month, as an average.

*It’s actually more like $80 in summer and $35 in winter.
*Summer bills usually drop by 70%, and winter by about 30%.

Do you see the picture?
 
You can take a 10-year loan, and the system puts money in your pocket. 

Maybe that’s a no brainer, I’ll let you decide.

…

But wait, what about when interest rates go up?

…

If interest rates go from 1% to 6% in the fourth year, will that negate the cashflow benefits?

The answer, in simplicity, is, no.

If power prices go up by more than 5% within 3 years, your savings from the solar will have gone up respectively. Increased interest costs are likely to be wiped out by increased solar savings.

If it sounds complicated, engage an Equity Solar Broker. 🙌

Equity Solar Broker’s ensures you get the ideal solar system, for the ideal price, by mutually exploring what’s right for your home, and then procuring the apples-to-apples quotes on your behalf.

Getting solar has never been easier.

*We aren’t financial advisors, but we’re good to talk to, and we have a great relationship with some top-notch financial advisors.

Much love.

Rowan Ellis | Founder

Equity Solar Broker’s

rowan@equitysolar.co.nz