You may be among the many South Africans who have turned to solar power to maintain electricity supply to their homes and businesses when the national grid is out. It’s a good money choice if the cost to install and maintain solar is less than the cost of lost productivity and income during load-shedding.

In theory, the initial cost of installing solar is also offset by less reliance on the national grid and a lower monthly electricity bill. Even so, there’s no denying that a solar installation can be costly. Depending on the size of the system you need, especially the number of batteries, you could spend between R50,000 and R300,000 to secure a reliable electricity supply for your house or small-business premises. 

Cost vs a return on investment

When you consider cost, it’s better to think about the long-term financial impact. There are 3 major factors that can affect the overall cost of installing, maintaining, and running the system:

• The size of the system you need
  How many solar panels and batteries will you need, and what size inverter, to enable your home or business to run seamlessly on solar when the grid fails? How will your needs change over time?
  
  
• The costs of installation and maintenance
  How do you find a qualified, reputable installer who can assess your needs accurately, help you design your system, and install and maintain it for you at an affordable price?
  
  
• The costs of credit
  Will you need finance to pay for the installation?

An important consideration is the overall return on your investment from what is a significant outlay, especially for a home-based system. But there are different ways to think about this, depending on your budget and how you want to pay for your solar system. Different solutions will offer different returns, but you should focus on affordability, savings, what you can power on your premises, and for how long. 

Solar solutions

All the solutions listed here are available through Nedbank’s Avo Solar platform, which provides a 1-stop shop for a range of solar solutions and solar finance options. They will each have slightly different returns on investment, depending on your priorities regarding solar needs and your finance requirements. Remember that no matter what return on investment your chosen option offers, it will only be realised over the long term.  

There are 2 ways in which solar installations can offer a return on investment:

• Cost of the system
  If you choose a midrange solar installation package from Avo – for example, the Gold package at a cost of R147,000, which includes panels with a 4.4 kW generation capacity, a 5.5 kW inverter, a pair of 5 kWh batteries, installation and a 10-year warranty – you will break even on your investment in about 5 years and 6 months, and after 10 years you’ll have recouped the purchase price and banked R180,000 in savings from your investment.
  
  
• Cost of electricity itself, per unit
  The current cost of electricity per unit is around R2.50 on average. This will increase by between 10% and 13% a year, given that Eskom has just had a 13% increase approved by the regulator. Without solar you will be paying R4.43 per unit of electricity in 6 years’ time, and R6.48 per unit in 10 years’ time (assuming averaged annual price increases). A solar system will secure your electricity costs over the next 6 years at R2.83 per unit, and at only R1.81 per unit over the next 10 years.

Financing your solutions

It’s useful to look at financing your solar system with the return on investment in mind. Nedbank offers different options through its stand-alone asset finance company, MFC. Here are some examples to consider, based on an Avo Gold package:

• 6-year finance plan
  If you take finance through MFC over 72 months at prime plus 3%, at a monthly cost of R3,185, potential savings on the solar system start from R1,683 a month and progress to R2,710 a month in year 6. Assuming the interest rates remain stable, your instalments are paid off after year 6 and your cost savings on electricity increase.  
  
  
• 8-year finance plan
  If you take finance through MFC over 96 months at prime plus 2.3%, the monthly cost equals R2,617 a month. Potential electricity savings start from R1,683 and rise to R2,710 per month in year 6.  
  
  
• Home loan options
  If your home loan is with Nedbank, a financing structure for a solar system is available over 10 years, calculated at prime interest rate, with a monthly cost of R2,088 per month. Potential savings through the home loan financing route will start at R1,683 and rise to R2,710 a month in year 6. After year 3, savings potentially offset your solar financing installments, and you can structure a settlement to put as much as R2,240 a month back into your home loan for early settlement.