My solar PV first year payback calculation

Mcfi5dhc

Photo_Stylus wrote: »

Cat amongst the pigeons, How much interest would you earn on the initial £5450?

I would guestimate, about £270 for the first year, then slowly rising if compounded each year. As I said earlier though, I have not had solar panels fitted to make more money than if I had just banked the money, though saying that, I could well beat it long term.

Photo_Stylus wrote: »

Did the installers say it could take 30 years to payback or did they say less than 10?

No - but I worked it out as such before ordering. I did not ask them for a payback time, I only asked for an estimate of number of units produced each year, which was given promptly.

Photo_Stylus wrote: »

Did watchdog do a report on a company saying their system will pay for itself in 3 years?

Yes, but this was about solar hot water, mine make electricity. This was a very rogue company, who are hopefully not trading anymore.

Photo_Stylus wrote: »

Good idea but it needs to be cheap enough to pay for itself inside 5 years really.

I could only really answer this with "Why?". I was happy with a 30 year payback and I am ecstatic with an 8 year payback. I think it is all a matter of personal preferences.



Being a financial forum, a great deal of people here will be thinking solely of the financial return, but I think to do that, we need to factor in other things, which unfortunantly are not tangible. Such as:

• Price of gas/oil - if these rise again, electrcity will rise
• Price of wind turbines - We will all have to pay for these eventually (even Darling has admitted that)
• Greed of electric companies - lets face it, if we are not protesting now about the price of electricity, it will never drop below todays price
• Price of dirty fuel - no doubt it is on the agenda we would have to pay for not having green electric

Assuming my panels last 25 years, it means they will have cost me £218 for every year they are around (note - I know I haven't factored in lost interest here!)

Also, assuming they continue to perform as they did last year, each unit over the 25 years will have cost less than 19p a unit.

So this is my target - if I can get electricity on average for 25 years for less than 19p, I've lost out financially. If electric goes up, I'm a winner. Though personally, I think I have had a victory already. My bills are lower, and I have an element of security in the future.

Mcfi5dhc

retrocarclub wrote: »

Are the panels covered under any type of warranty? i.e. if they break after 3 years, can you get them replaced?

Yes, 25 year manufacturers warranty, so if they break as a result of a manufacturing defect, then yes, I can get them replaced.

Solar PV panels are well known to be very reliable - they don't have moving parts, so I don't think I'll be contacting them for a long long time (if ever).

If I broke one myself (i.e. through misadventure, natural disaster or accident), I could have just the broken panel removed and a new one slotted in, or just remove the broken one from the system altogether(the system can run with up to 2 less panels, or up to three more, so between 6 and 11 as I have 8 at the moment). I couldn't do this myself though, as I am not in the solar industry, or electrically trained, so there would be a cost involved.

Cardew

Mcif5dhc,

I think that everyone would agree that in getting any form of renewable energy, there are two issues; namely the 'Green' considerations and finance.

Your initial post only went into the latter issue and concentrated on Return on Investment(ROI) or payback periods.

As this is a money saving website, not unnaturally it is the financial issues that concern many people.

The difficulty, as you state in the latter posts, is that nobody has any idea what will happen to electricity prices in the long term.

The very fact that those like yourself getting large subsidies through the feed in tariffs, plus other green measures, will inevitably drive up prices - the media have been speculating on £200 per household.

Whilst this debate is interesting, IMO you have painted far too rosy picture on payback times. The points I have made above are still valid. e.g.

1. In England we get only £400 grant toward instalation, and will those continue when feed in tariffs start? Wales presumably get higher grants.

2. 15p/kWh costing is too high - 10p is more realistic.

3. The loss(or payment if a loan) of interest on the £7,500 capital required is a huge consideration when calculating any pay back time and must be taken into account. (whilst you got a year's grace borrowing with your credit card 'dodge', you are still going to have to pay interest after that year.) That makes your figures of 19p/kWh and £218 in post #12 meaningless.

4. The panels themselves should be trouble free, but the guarantee for the complete system - cables/electronics etc is how long - 2 years? 5 years?

Again as stated above I don't think at current prices, it is an economic proposition. If the predicted huge reductions in the price of solar panels materialize then things might change, but will the Government then cut the price of the feed-in tariff?

A_fiend_for_life

The government is / was expected to introduce feed in tariffs at around 25p to 30p for all those exported. At least one person wants 'feed in tariffs' at around 38p for all units generated which is neither equitable nor the best way forward since it doesn't encourage producers to conserve energy.

Microgeneration has been criticized as being uneconomical and to that end it should focus on community level set ups to stimulate the market and possibly schools since they mostly stand empty for six or seven weeks in the summer. Managing such installations at the LEA level might be the way forward - since it is more affordable and the benefits can be shared between shools within the LEA or preferably reinvested.

There is an annual round of grants of up to £50,000 for such schemes I think based on matched funding.

Installing higher capacity I would imagine is far better than several lower capacity set-ups in terms of added equipment for exporting the energy and in erecting and maintaining the equipment.

PS FITS are expected to reduce with affordability of the equipment.

Mcfi5dhc

Cardew wrote: »

Mcif5dhc,
The very fact that those like yourself getting large subsidies through the feed in tariffs, plus other green measures, will inevitably drive up prices - the media have been speculating on £200 per household.

These will happen regardless of how many people (to an upper limit) take up the FIT, or other offers. If I was the only one, everyone with dirty energy would still have to pay the £90 to £250 (depends which newspaper you read)

Cardew wrote: »

Whilst this debate is interesting, IMO you have painted far too rosy picture on payback times. The points I have made above are still valid. e.g.

1. In England we get only £400 grant toward instalation, and will those continue when feed in tariffs start? Wales presumably get higher grants.

2. 15p/kWh costing is too high - 10p is more realistic.

Happy to oblige, though I would call my entries 'fair' not rosy (I don't work in the solar industry, so I have nothing to gain). Using £400 grant, 10p a unit (for all the calculation), but all the other original figures you would get:

Initial Cost: £7950
Grant: £400
Units generated in one year: 1186
Feed-in-tariff: £432.89
Amount saved off bill (assuming each unit is 10p): £118.60
Annual saving: £551.49
Payback assuming everything stays the same: 13.7 years

(though I think 10p a unit on a long term basis is very very low)

Cardew wrote: »

3. The loss(or payment if a loan) of interest on the £7,500 capital required is a huge consideration when calculating any pay back time and must be taken into account. (whilst you got a year's grace borrowing with your credit card 'dodge', you are still going to have to pay interest after that year.) That makes your figures of 19p/kWh and £218 in post #12 meaningless.

As I posted earlier, I am not proposing Solar PV as a money making scheme - however, it is important to note, that you will get payback in what I would call a reasonable timeframe. You will lose out on interest if you already have the capital, but it will be recouped in my opinion (energy prices are guaranteed to rise, savings rates aren't)

Cardew wrote: »

4. The panels themselves should be trouble free, but the guarantee for the complete system - cables/electronics etc is how long - 2 years? 5 years?

2 years (found the paperwork today). I am happy with this warranty.

Cardew wrote: »

Again as stated above I don't think at current prices, it is an economic proposition. If the predicted huge reductions in the price of solar panels materialize then things might change, but will the Government then cut the price of the feed-in tariff?

Kind of agree, kind of disagree. If I had eight grand in the bank, and wanted to make some money, then no, I wouldn't go for Solar Panels. However, if I wanted to guarantee immunity from fuel price rises forever, and be green AND make a little money, then I would.

And FITs will fall in time, as will hopefully solar panel costs.

I started this forum, because I have seen highly inaccurate payback times of 50+ years in the press, and these are false. At least with the numbers in this forum, people can make up their own mind.

It would be interesting to see what the small wind turbine owners come back with.

Thanks

Mcfi5dhc

Cardew

Mcfi5dhc wrote: »

Happy to oblige, though I would call my entries 'fair' not rosy (I don't work in the solar industry, so I have nothing to gain). Using £400 grant, 10p a unit (for all the calculation), but all the other original figures you would get:

Initial Cost: £7950
Grant: £400
Units generated in one year: 1186
Feed-in-tariff: £432.89
Amount saved off bill (assuming each unit is 10p): £118.60
Annual saving: £551.49
Payback assuming everything stays the same: 13.7 years

I am sorry but this is where your calculations are absolutely wrong.

As I said above you simply cannot ignore the cost of borrowing the £7,550 or the loss of interest on that £7,550.

It is like saying I have a £100,000 mortgage at 6% interest and if I pay £5,000 per year it will be paid off in 20 years.

As said earlier £7,550 invested at 5% will realise £377.50(which will be compounded) and every likelyhood of rates increasing. It will cost you a lot more than that to borrow £7,550. You have to deduct those costs from your savings

So even assuming that your feed in tariff remains that high(doubtful) you are talking of a payback period of some 50 years. which makes the reports you have seen in the press about correct.

The other issue is the system guarantee. Only 2 years is a lot different to 25 years. It is inevitable that with cables, connectors and electronics that there will be failures and considerable costs to remedy. If it were not expected to have failures why ony a 2 year guarantee.

If it is like much of the 'small print' on solar I have seen they require an annual inspection.

We might have to agree to disagree!:beer:

nearlynew

Cardew wrote: »

Mcif5dhc,

I think that everyone would agree that in getting any form of renewable energy, there are two issues; namely the 'Green' considerations and finance.

I wouldn't.

I would say there are three, the third of which you continually overlook.

Namely.................energy security.

Mcfi5dhc

Nearlynew

Totally agree with you

Also, I like the idea of npower/BG and co not having my money, and the tables being turned.

Thanks

Mcfi5dhc

jonesjw

Solar
A £177.90 saving on a £5450 investment is giving you a return of 3.26%. There are many investments available which give you a higher return.
Also, I understand the efficiency of the cells may fall slightly as they age.

Ground Source Heat Pump
A good proportion of the electricity used to power your heat pump will be generated using CO2 generating fossil fuels at something like 35% efficiency. So you should take that into account when calculating the overall efficiency of the heat pump.

jerseylil

Mcfi5dhc wrote: »

Hi - I've not quite grapsed out to quote people yet, so here's the answers to some of the questions:

I live in North Wales, near the border with England

Please can you tell me who did your installation? I live in South Wales and am looking for an installer?

Thanks