Solar Leasing vs. Buying: Which Option Is Best for Your NZ Business?

Even as solar generation technology has made leaps and bounds throughout the decades, its price tag remains hefty. According to Powerswitch, a free power plan search service by Consumer NZ, the price of utilising solar energy is around NZD$2,000 per kilowatt (kW) of generation capacity. Therefore, a standard 5kW system costs around NZD$10,000. (1)

While business owners are generally in a better position to invest in solar, not everyone can afford to pay that much upfront. Because of this, solar installation services provide two ways to adopt solar: own a system or rent it out. Here’s an in-depth look at the pros and cons of the two and the situations where they really shine.

Comparing the Two

For starters, commercial solar power systems have higher generation capacities (up to 100 kW). This is because they come with far more solar panels and more generation capacity per panel than residential systems. (2)

The ownership route needs no introduction. As soon as the customer pays for their solar power system in full, it’s theirs to keep forever. Only a few does this, even if it results in assuming full ownership immediately. The more popular option involves taking out low-interest or interest-free green loans. The Big Four banks – ANZ, BNZ, ASB and Westpac – are the usual sources of such loans.

Meanwhile, the leasing route’s main selling point is cost predictability. The lessee doesn’t have to pay for the system’s installation, instead paying a fixed monthly rate over the lease duration. The lessor is responsible for the system’s maintenance and repair.

Unlike solar loans, customers pay for the solar lease upfront. The rate depends on the system’s size and the type of lease, of which there are two.

• Fixed monthly lease: The lessee pays a rate that stays the same despite changing conditions based on their average energy bill.
• Power purchasing agreement: The lessee pays a rate based on the cost of electricity in their local area.

Both types of solar lease typically come with what the industry calls an escalator clause. This part of the agreement lets the lessor increase the rate to help keep up with price fluctuations and other market factors. The escalator rate varies by service provider.

In other words, a “fixed monthly lease” is somewhat of a misnomer. The rate will remain fixed for the current year, after which the escalator clause raises it for the following year.

Pros and Cons: Buying the System

Pros and Cons: Leasing the System

To Own or To Lease?

We offer a range of financing and leasing options that work for a wide range of commercial entities. The question is: “Which one works well for what situation?”

Solar Ownership

Many service providers urge their customers to go for full ownership, especially following the SolarZero debacle. In fact, solar financing options have become more affordable over the years due to lenders leaning toward low or zero-interest perks.

But with the cost of typical commercial systems starting at about NZD$22,000, the need to break even only seems reasonable. We discussed return on investment (ROI) in a previous post, but here’s a quick look at the data we published there. (2)

¹Average daily energy consumption
²Internal Rate of Return
³Over a 25-year period

Based on the numbers above, five years seems to be the magic number. Ownership makes sense if a business has no plans of moving to another location within five years of installing the system. The data above isn’t universal, but the Energy Efficiency and Conservation Authority says an IRR higher than 8.6% means the system is a profitable investment. (3)

Solar Leasing

Some solar leases tend to last as long as the system’s lifespan, which is around 25 years. This is a major drawback as rapid improvements in solar generation technology can render the current system obsolete before the lease is over.

Solar leasing makes more sense when employed over the short term – about five to seven years. Once the lease arrangement has ended, the lessor formally turns over the system to the lessee. Some technological progress is still inevitable during this period, but the owner is now free to upgrade the system.

Conclusion

Choosing between owning and leasing solar is a matter of capital and circumstance. Solar ownership is ideal for businesses with large enough capital and no plans to relocate in the long term. Meanwhile, solar leasing is a viable option for businesses wanting to go green quickly and for a lower cost.

References:

1. Edmunds S. Is it worth getting a solar power system? [Internet]. RNZ. 2024 [cited 2025 Apr 22]. Available from:https://www.rnz.co.nz/news/business/535482/is-it-worth-getting-a-solar-power-system
2. Commercial Solar Power Systems - NZ Solar Power Installers [Internet]. www.mysolarquotes.co.nz. Available from:https://www.mysolarquotes.co.nz/about-solar-power/commercial/about-commercial-grid-connect/
3. EECA. Commercial-scale solar in New Zealand [Internet]. EECA. Available from:https://www.eeca.govt.nz/insights/eeca-insights/commercial-scale-solar-in-new-zealand/