Financial factors of solar water heating

There are two financial factors to consider when deciding whether to install a solar water heating system: cost savings and cost outlay.

Savings associated with solar water heating

How much a household can save using solar water heating is really quite varied; each household is different. Some Solar Saver homeowners expect they will be able to pay back their systems from the savings made in approximately ten years. A lot depends on how much hot water is used and the cost of installation of the specific solar system in a particular house. For example, households that don’t use a lot of hot water and require a lot of work to install solar hot water are likely to find the time it takes to recoup the investment to be longer.

Even if it may take a number of years for a household to make back the cost of installation, there are other factors to consider that don't necessarily have to do with cost:

  • There can be variances in prices - get quotes from all the Solar Saver suppliers.
  • Electricity prices will continue to increase, so your ongoing savings from solar hot water will grow in proportion. The price of electricity increased 7.5% in the year between 2007 and 2008, and 41% in the five years between 2003 and 2008 (Source: Ministry of Economic Development, 2008) and are predicted to continue to rise.
  • Solar hot water systems have a life of 20-25 years or more and will go on producing savings well after the Solar Saver ten year loan period.
  • Often cylinders that are replaced under the Solar Saver scheme would need to be replaced sometime in the future anyway. On the recommendation of EECA (the Government energy efficiency experts) the Solar Saver scheme requires replacement of cylinders older than five years to ensure they are suitable and will maximise the savings. If your cylinder needs to be replaced, this will increase your upfront cost, but better ensures a quality and high performing system.
  • Installing solar hot water provides quality of life benefits such as being able to use more hot water that you generate yourself from the renewable energy of the sun without feeling guilty about paying for it.
  • People installing solar hot water are contributing to the reduction in green house gases with each installation reducing CO2 emissions by an average of 1.26 tonnes of greenhouse gas emissions a year, compared to using a standard electric hot water tank. (Assuming an emission factor for water heating of 0.56 t CO2-e/MWh, - sourced from EECA)
  • Installing solar hot water contributes to the local economy and to regional energy security by using a local renewable energy source. It also helps to delay or reduce the need for new power generation and the economic and environmental cost that this imposes.

Cost to install solar water heating

New solar water installations can cost as little as $5,200 for a one or two bedroom home to as much as $10,000 or more for a four bedroom home - it really depends on your home and what you need out of the system. The supplier(s) you contact can give you a thorough review and tell you how the factors associated with your home may affect the pricing.

Overall, Nelson installation prices under the Solar Saver scheme, in comparison to other cities around New Zealand (including big cities like Auckland), tend to be lower because of the discounted prices negotiated by Council. In addition, where some local authorities can charge hundreds for consent fees, Nelson City Council doesn't charge anything for a solar water heating building consent.

You can choose to install solar water heating on your own, or through the Council's Solar Saver scheme.

1 On your own

Nelson City Council's goal is to increase the number of solar water installations regardless of whether homeowners are participating in the Solar Saver Scheme or not. Council, with its partners, will also provide the advantages of the scheme (e.g. reduced prices) to people that don't want to use Council's finance.

If you are able to pay up front for the installation without finance from the Council you are best to go ahead outside the Solar Saver Scheme. You can still access the benefits of the scheme such as the competitive prices offered by suppliers under the scheme, the waiving of the building consent fee, and the EECA subsidy. Read more about EECA's solar water heating grant, including eligibility requirements.

You will also avoid paying interest to the Council. You need to deal directly with the suppliers under this option, you can contact Council on +64 3 546 0200 for the suppliers name.

Free building consent fees for solar hot water heating

To encourage the uptake of solar hot water heating systems, Council has introduced a zero fee policy for the building consent required to install a solar hot water heating system.

2 Council's Solar Saver Scheme

Nelson City Council's innovative scheme gives residents the chance to install a solar water system now and pay back the installation cost as part of their rates over ten years or earlier (after the first year) if they wish. Read more about the solar saver scheme.

Installation costs

The installation costs are determined between you and the supplier you choose.

Interest rate

The Council decided to give certainty to people by giving them a fixed interest rate that is set for the whole ten year loan period. This avoids any unpleasant surprises if general interest rates increase over time. The rate is competitive, as most people would not be able to get a fixed interest rate from a bank for a ten year period, but you can choose to pay the targeted rate off at any time, thereby lowering the overall interest costs. The interest rate is set each year. Check with Council for what rate applies to agreements signed during this current year.

LOAN ESTABLISHMENT FEE

There is a $400 (including GST) loan establishment fee to cover processing costs and the management of the scheme.

Free subsidy

At present the systems qualify for an EECA subsidy that reduces the total cost of the system. The supplier will provide you with a claim form and assist you to claim the subsidy. It is your responsibility to claim the subsidy. The completed form must be received by EECA within 6 weeks of the installation date to be eligible for a grant. The level of the EECA grant paid will depend on whether the system is a registered ENERGY STAR® system and the energy savings performance of the system.

Free building consent fees for solar hot water heating

To encourage the uptake of solar hot water heating systems, Council has introduced a zero fee policy for the building consent application required to install a solar hot water heating system.

Self-installation to save money

Unfortunately, those involved with the Solar Saver Scheme cannot apply for a building consent or install the system themselves in an effort to save money. The Solar Saver Scheme comes as a complete package.