Councillors at this week's community development committee voted in favour of trialling the waiver, after heated objections to the practice were raised by Cr Fliss Butcher.
The $804 fee, calculated on the typical $5000-$7000 cost of installing solar water heating units, was charged as part of the council's building inspections process.
It amounted to revenue of $16,000-$40,000 each year for the council.
However, Cr Butcher argued council's building inspections staff were simply "ticking boxes" and the fee could not be justified.
Removing the fee would bring Dunedin in line with 11 other local authorities around New Zealand which had already dropped their fees, and was in keeping with the council's own climate commitments, she said.
"We should be encouraging people to do solar-heated water. We shouldn't be clipping the ticket and making it more expensive."
A report to councillors by council chief building control officer Neil McLeod recommended the fee be retained, as waiving it would raise questions about fees applied to other environmentally-friendly building practices.
The council received about $160,000 each year in building consent fees for the installation of glazed windows, more efficient hot water cylinders and solid fuel burners, hot water heat pump systems and other initiatives, such as micro wind turbines.
A recommendation by Cr Butcher to scrap the fee was amended by Deputy Mayor Syd Brown, who proposed a one-year trial waiving of the fee, with a report to councillors next year on the initiative's outcome.
Cr John Bezett objected, saying council staff should be given time to assess the proposed trial's impact before a commitment was given.
However, councillors voted in favour of the move, with only Cr Bezett objecting.
