When it’s worth installing a R200,000 solar power backup system

Installing a solar backup solution can be worth it in terms of increasing your home’s value, but only for those priced at R6 million and higher, a MyBroadband analysis has revealed.

This is based on an approximate value increase of 4%, but this figure could be as high as 8%, in which case homes valued at R3 million and higher would also immediately end in profit.

We spoke to Only Realty general manager Megan Ladbrook, who said that from what the company has seen, South Africans are spending R180,000 to R200,000 on solar installations for their homes.

“The return on your expenditure, in relation to house price increase must be carefully considered so that you are not over-investing and therefore overcapitalising into the system,” Ladbrook said.

“It is difficult to give an average as the options of systems vary massively in range, but from what we are seeing, inverter and battery-only options that cover only essentials, are around R70,000 installed with full ‘off-grid’ solutions coming in closer to R180,000 to R200,000.”

However, at an average price of R180,000 to R200,000, the systems likely aren’t entirely off-grid and still use Eskom power when solar energy generation is low, or batteries deplete.

A completely off-grid solar power system must account for extended periods of little sunshine, increasing the price significantly.

Ladbrook previously said that backup power solutions could add 3% to 4% to a home’s value but added that the figure could be as high as 8%.

“A lot of people are thinking that it might be a little bit more than that and that this is a conservative estimate. It could actually be up to 8%,” she said.

MyBroadband calculated the value increase from solar installations for home values ranging from R1 to R10 million.

The chart below provides an overview of the cost of installing a R70,000 battery and inverter or R200,00 solar system for your home versus the estimated value increase.

We found that when using the least optimistic figure of 3%, installing a R200,000 solar backup would only be worth it for homes valued at R7 million and above.

The increase for homes valued from R1 million to R6 million doesn’t offset the installation cost. That said, the net gain for homes valued at R7 million would only be R10,000.

South Africans can break even on a R200,000 solar installation if their home is valued at R5 million or above, assuming it increases the property’s value by 4%.

Using the most optimistic figure of 8%, South Africans with homes valued at R3 million or higher see a net gain over the solar installation cost.

However, it should be noted that these are simplified calculations based on average figures and the savings realised from a solar solution will likely add up over time through reduced electricity bills.

A comparison like this also can’t quantify the value of having electricity at home during load-shedding.

It should also be noted that the cost of a solar or inverter installation will probably increase for larger, higher-valued houses as they will likely have higher energy requirements.

According to Ladbrook, homes with already-installed backup power solutions are often a top requirement for prospective buyers with South Africa’s current load-shedding situation.

“We are finding that for so many people, it is obviously top-of-mind. It’s one of the first things that a lot of buyers are asking,” she said.

“Interestingly, a lot of sellers are interested in trying to find ways that they can put their property ahead of the pack, and solar is one of them.”

Ladbrook added that homeowners should consider rent-to-own options for solar installations if the outright cost is too daunting.

“[There are] some other more creative options like rent-to-own systems, where different solar financing companies have offered consumers an option to pay monthly with the understanding that they will own the equipment after a certain period of time,” she said.

“That period is usually five to seven years, which is obviously less than your home loan, but it gives you a bit of flexibility, especially if you are planning on selling.”

We calculated the net gain or loss homeowners would get from installing a R200,000 solar system for a range of home values. The results are provided in the table below.

Gains and losses are highlighted in green and red, respectively. Losses are also indicated with a minus, for the colourblind.

R200,000 solar installation versus home value increase
Home’s value 3% increase Loss/gain 4% increase Loss/gain 8% increase Loss/gain
R1 million R30,000 -R170,000 R40,000 -R160,000 R80,000 -R120,000
R2 million R60,000 -R140,000 R80,000 -R120,000 R160,000 -R40,000
R3 million R90,000 -R110,000 R120,000 -R80,000 R240,000 R40,000
R4 million R120,000 -R80,000 R160,000 -R40,000 R320,000 R120,000
R5 million R150,000 -R50,000 R200,000 R0 R400,000 R200,000
R6 million R180,000 -R20,000 R240,000 R40,000 R480,000 R280,000
R7 million R210,000 R10,000 R280,000 R80,000 R560,000 R360,000
R8 million R240,000 R40,000 R320,000 R120,000 R640,000 R440,000
R9 million R270,000 R70,000 R360,000 R160,000 R720,000 R520,000
R10 million R300,000 R100,000 R400,000 R200,000 R800,000 R600,000

Now read: Eskom load-shedding costs South Africa up to R899 million per day

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When it’s worth installing a R200,000 solar power backup system