What’s happening with solar buyback rates?

Ongoing increases in household power prices and reductions in the cost of solar panels and installation point to New Zealand passing its solar tipping point so we expect to see the growth of solar to continue at pace.

According to MBIE’s Energy in New Zealand report, national solar generation increased by 56% in 2025. Kiwis aren't just installing solar at a faster rate, they're also installing larger systems. Electricity Authority data shows the average residential setup has grown from around 5kW in 2020 to over 9kW today. Here at Octopus we’re certainly seeing more solar installs, more upgrades to existing systems, and bigger systems overall.

Right now, only about 4% of Kiwi homes have installed residential solar. We still have a real opportunity to increase the scale of solar, and cut power costs, but the way we think about home generation, and how we measure its worth, needs to change.

Solar buy-back rates come down to supply and demand. When the sun shines, thousands of rooftop systems across the country export excess generation into the local lines simultaneously. Supply surges between 10:00am and 3:00pm, whilst demand drops because most people are away from home and baseline grid consumption is low.

When the market is flooded with power that has nowhere to go, the wholesale value of this midday electricity falls - often to a fraction of a cent.

Across the Tasman they’ve seen buy-back rates plunge by up to 99%, and even wholesale prices going negative in the middle of the day - meaning there’s a charge for exporting to the grid at those times. In New Zealand buyback prices have seen smaller reductions and many have become more aligned to the peak and off peak demand. The days of thinking about rooftop solar as a passive cash-cow from selling power back to the grid are numbered. The real financial value of solar lies in self-consumption, using your own power as it’s generated.

The power you import from the grid includes the cost of the energy plus a per kWh amount for the transmission network that brings it to your door. At peak times the network costs are often more than that of the energy itself. So, rather than exporting the energy for an average of, say, 15c per kWh, using it yourself versus importing it will save you anywhere from 25c to well over 50c per kWh. That makes for a pretty compelling payback on your solar investment.

Households with higher overall consumption, particularly during morning and daytime hours (7:00am to 5:00pm), can make the most of having solar. The more household tasks that are powered by electricity, the more self-generated solar electricity is able to replace grid-imported electricity. This doesn’t mean using more power for the sake of it, instead, shifting your existing usage into these cheaper daytime hours directly cuts your reliance on the grid when prices are highest.

As solar generation increases across New Zealand, daytime wholesale prices will continue to fall. Overseas markets have already shown that as solar expands, midday power costs head toward zero, or even negative rates.

If you look at Australia and Spain, both countries have had rapid uptake of solar over recent years, generating around 20% of their total energy production from solar. They’re now dealing with the impact of a solar-heavy grid. This has led to negative rates, where customers can have to pay to export their solar to the grid at times when there is already an excess of energy. We already have three New Zealand electricity networks who charge for exporting all the time.

This also raises important conversations around energy storage. As consumers, you can invest in your own residential battery storage and bank power to use at times when the sun isn’t shining, but as a country, should New Zealand be looking to install large-scale battery solutions to store excess power on scale?

We expect this shift in market prices to become even more pronounced over the coming years. To keep export rates at a half decent level we need to increase demand to use up this glut of midday power. This means getting customers without solar to increase their usage in the middle of the day.

To encourage this we’ve launched Free Lunch: a power plan that gives customers free power between 11:00am and 2:00pm every day*. This plan will generally be a pretty terrible option for customers with solar - they already get their own “free” energy during the day and are far better placed to benefit from the half-price nights of our other plans.

Free Lunch is designed for retirees, stay at home parents, work from home people, or anyone who is home during the day. They are perfectly positioned to take advantage of some free midday energy to lower their monthly costs.

The solar landscape in New Zealand is changing, but if you have solar the core benefit of using your own power as it is generated to reduce your power bill remains. By shifting heavy appliance use to the middle of the day, looking into battery storage, or taking advantage of daytime power plans, you can lean into these market changes rather than get caught out by them.

And if you can’t install solar because of the upfront cost or because your property is not well suited to it, consider a plan like Free Lunch that takes advantage of the extra kilowatts that aren’t being used by those who do have solar.

*T&Cs and fair use limit applies.