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What is the payback period?

By Mike Bassett-Smith and Shane Robinson
Powersmart NZ Limited
www.powersmartsolar.co.nz

“What is the payback period?”

This is the most common question asked on the subject of solar electricity.

We seem to be naturally curious about a technology that can produce a long-term supply of electricity with no continuous financial input, environmental side effect, or significant change to our lifestyle. Yet industry, consumers, and government only seem able to relate the value of the investment to its energy ‘payback’.

At best, simple energy payback is a very weak tool for describing the financial value of an investment in a solar electricity system, and has done little to encourage adoption. Fortunately, it is possible to value investments insolar in ways that make it comparable to other types of investments, supported by research and financial analysis (i). As you will read in this article, most places in NZ can achieve a solid return on solar investments right now.

This article investigates the financial returns for grid connected solar installations that provide the benefits of solar electricity without the limitations associated with off-grid systems and batteries.

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