Feed In Tariffs(FIT) Announced.

Cardew

John_Pierpoint wrote: »

Lifted off the interweb to protect the guilty


Give me an example
This is a feed-in tariff example for a 2.16kWp installation of 12 panels:

Annual UK family household electricity bill (5,000kWh@0.14p) - £700
Cost of 2.16kWp system incl 5% VAT - £11,125.80
Electricity savings from system output (assuming 75% used in house)
if used in house - £200
Feed-in tariff on all generated electricity est 1913kWh @41.3p - £790
Electricity exported back to the National Grid (assuming 25%) @5p - £24
Total saving plus income/annum - £1014
Return on Investment - 9%
Payback Time - 11yrs

Observations:
0.14 might be a high price (even when including the VAT) for purchasing grid units.
2.16kW panels costing 11,125.80 sounds a bit small and expensive given a suitable south facing 30 degree roof slope. Stick some more panels up while you are at it! 25% exported back seems a bit low but my understanding is that the payment is only 0.03GBP for exported units.
Until your electricity region gets round to fitting smart meters the slightly higher voltage generated by the panels may
1. make your meter go backwards and/or
2. be assumed to be exporting half the electricity the panels are producing.
If you buy (say) an inflation proof gilt edged bond. When your investment matures you get your capital back as well as having enjoyed some interest in the mean time.
You might have to pay to have your capital (panels) stripped from your roof in 25 years time.
BEWARE of the so called Return on Investment. It has to be good enough to buy a new set of panels ad infinitum

But it is tax free:D

Totally agree with your observations.

You get the impression that the 'example' was posted by someone either with a vested interest in selling systems or someone trying to convince themselves!!

The major item is the FIT rebate although to estimate to exactly 1913kWh seems a little strange(not saying that figure is unreasonable)

To base savings on 14p/kWh and 75% used in the house is totally unrealistic - 9p and 40% might be more reasonable.

I would add that they have made the assumption that there will be no repairs to any of the cables, fixing and electronics.* Also at the risk of upsetting some, you do need to clean the panels for maximum output and this will involve getting on the roof for many.

The also conveniently forget that £11,125.80 invested at, say 4% will have produced over £6000 interest in 11 years; you will have £17,000+ in the bank.

Lastly and surely the major point, is that even accepting the rather optimistic calculations, and allowing for inflation, it is a nonsense to talk of 9% return on investment or 'payback in 11 years'.

* I accept that the panels should be reliable, by why can you only get a 2 year guarantee on the system.

rhiwfield

(EDIT. Have now changed solar case to cancel deduction of capital cost from income stream. Have also made bank interest untaxed. The solar case does not have any interest applied so the case for solar is better than in the spreadsheet.)

Its worth while comparing like with like. So lets compare my system installed in March with the alternative of leaving money in the bank.

I've just run a spreadsheet with the following assumptions

1. Gross cost £8433
2. Net cost £5933 post grant of £2500
3. Annual maintenance cost £100 (or sinking fund for failed part as I will give it the occasional clean myself)
4. Inflation 3% applying to maintenance cost
5. Price inflation of only 3% on tariffs/leccy offset (who believes it will be that low?)
6. No tax charge on income
7. Output 1500 kWh per year compared to pre-installation usage of 4750 kwh.
8. FITs 41.3p, use 60% leccy at 9p offset, export 40% at 3p
9. For alternative of bank deposit assume 3% pa compound pre tax and a tax charge of 20%.

So that gives:

• at end of year 1, £619 on solar array and £6111 in the bank.
• at end of year 5, £3442 on solar array and plus £6878 in the bank
• at end year 10, £7510 on solar array and £7741 in the bank
• at end year 15, £12226 on solar array and £9243 in the bank
• at end year 20, £17693 on solar array and £10715 in the bank
• at end year 25, plus £24030 on solar and £12422 in the bank

The crossover point is year 11.

So which is better? I would have said that the bank was the safer investment but that was before the credit crisis. Solar carries the added risk of failure of, say, an inverter but the panels themselves are unilkely to fail. I havent factored in the slow deterioration of output, nor have I built in the real increase in prices of 20%-60% forecast by OFGEM or the probability that my panels output will exceed expectations as commonly occurs. I've ben unfair to solar in applying compound (untaxed) interest to bank funds but no interest to solar funds.

If my spreadsheet contains any unspotted errors, sorry! Maybe someone else could have a stab at it to confirm workings.

noncom_2

Without checking your maths, my only comments would be that

a) new installers from now on can't get the £2500 grant any more (unless your local council happens to run a scheme for grants themselves, it's always worth checking - mine, Wyre Forest, are currently deciding whether or not to continue with their own £1k grants). You appear to be one of the lucky few that installed at the time when you could both get a grant and then still subsequently qualify for FITs

and b) the total gross cost even ignoring the grant seems rather on the low side, based on ballpark quotes I've had so far. Is it possibly the case that now all installations must be MCS certified to qualify for FITs, the prices have inflated artificially because there is less competition? If not, and you think your installer would still be in the same ballpark now, could you please PM me their details so I can contact them myself for a quote?

Thanks
Andy

rhiwfield

Andy,

Even though I've stacked the case against solar in the spreadsheet it still performs better than a bank loan in the long term using an upfront bank deposit of £8433, though the crossover is put back to year 16.

The system was fully MCS accredited with a rated value of 1.665 kWp. Expected output was independently checked with PVGIS. FITs were promised by Govt when I applied for the grant (December 2009), its just that Govt hadnt confirmed actual FITs levels. I just took a calculated gamble that they wouldnt be worse than the consultation paper.

It may be that prices have increased since my quote, certainly there is currently high demand creating shortages of inverters and panels and the £'s fall in value wont have helped as most kit is sourced from overseas. Against that I'd expect prices to drop in due course as production expands and the initial UK demand peak settles down. Still, my system cost me £5,064 per rated kWp which I thought was not far off market price but I'll gladly be corrected on that.

PM me if you'd like supplier/installer details

On the separate point of meters going backwards, I asked this question of the installers and they said that meters would not advance if power was being exported but would not go backwards. Dont know if this applies to all meters but its correct in my case.

Cardew

rhiwfield wrote: »

Andy,

Even though I've stacked the case against solar in the spreadsheet it still performs better than a bank loan in the long term using an upfront bank deposit of £8433, though the crossover is put back to year 16.

Here lies the difficulty with this type of calculation - there are simply far too many unknowns.

You ask who believes fuel inflation will be less than 3% - well Ofgem talk of a price rise by 2020 anything from 12% upwards - their best guess was 22%. Your spreadsheet at 3% per year assumes 34% by 2020. Who knows which is correct?

3% interest on money deposited is low taking current rates! Nationwide are giving 4.75% for 5 year bonds and the concensus is that interest rates will rise. Don't forget many people will not have funds and will borrow.

On a small system like yours a 60%/40% split is reasonable, but bigger systems will export a higher percentage.

Overall I don't disagree with your 16 year crossover assumption.

However I suspect if you tried to sell any other 'investment' to the general public, with the prospectus stating that they are forecast to break even in 16 years time, you wouldn't get many takers!

rhiwfield

Cardew wrote: »

Here lies the difficulty with this type of calculation - there are simply far too many unknowns.

You ask who believes fuel inflation will be less than 3% - well Ofgem talk of a price rise by 2020 anything from 12% upwards - their best guess was 22%. Your spreadsheet at 3% per year assumes 34% by 2020. Who knows which is correct?

3% interest on money deposited is low taking current rates! Nationwide are giving 4.75% for 5 year bonds and the concensus is that interest rates will rise. Don't forget many people will not have funds and will borrow.

On a small system like yours a 60%/40% split is reasonable, but bigger systems will export a higher percentage.

Overall I don't disagree with your 16 year crossover assumption.

However I suspect if you tried to sell any other 'investment' to the general public, with the prospectus stating that they are forecast to break even in 16 years time, you wouldn't get many takers!

Cardew, like with like remember, OFGEM are forecasting real increases in fuel prices ie above the inflation rate that I've arbitrarily set at 3%!

Beeb said in October:

"Domestic UK energy bills could rise by 60% by 2016 in a worst-case scenario identified by the energy regulator. However, most other estimates outlined in the Ofgem report would see prices rise between 14% and 25% above inflation by 2020."

And if you have to borrow that changes the like with like scenario but it was you who compared it to investing money in a bank.

And you dont comment on my stacking the odds against PV.

Still, its to each of us to decide how we spend our money, I'm not trying to sell Solar PV, just make sure that the facts are openly represented on a like for like basis.

On a personal note I researched PV long and hard before making the commitment to go ahead. Nothing so far has made me question that research, assumptions or decision.

John_Pierpoint

Every one is going to have to pay about an extra 1- 2% to pay for those on FiT.
:mad::beer::mad::D:mad::rotfl::mad:;):mad::p:mad::j:mad::eek::eek::eek::eek::eek::eek::eek::eek::eek:

Cardew

John_Pierpoint wrote: »

Every one is going to have to pay about an extra 1- 2% to pay for those on FiT.
:mad::beer::mad::D:mad::rotfl::mad:;):mad::p:mad::j:mad::eek::eek::eek::eek::eek::eek::eek::eek::eek:

1% or 2%?

Mr Buchanan chief executive of ofgem said in evidence to the House of Commons Energy Select Committe:

that up to 30 per cent of consumers' bills could be made up of green subsidies.

Not sure how much would be for FITs but I suspect a lot more than 1% or 2%.

Cardew

rhiwfield wrote: »

Cardew, like with like remember, OFGEM are forecasting real increases in fuel prices ie above the inflation rate that I've arbitrarily set at 3%!

Beeb said in October:

"Domestic UK energy bills could rise by 60% by 2016 in a worst-case scenario identified by the energy regulator. However, most other estimates outlined in the Ofgem report would see prices rise between 14% and 25% above inflation by 2020."

And if you have to borrow that changes the like with like scenario but it was you who compared it to investing money in a bank.

And you dont comment on my stacking the odds against PV.

Still, its to each of us to decide how we spend our money, I'm not trying to sell Solar PV, just make sure that the facts are openly represented on a like for like basis.

On a personal note I researched PV long and hard before making the commitment to go ahead. Nothing so far has made me question that research, assumptions or decision.

As said above, the problem with such calculations is that there are a whole stack of unknowns.

My point is that people bandy about terms like a 9% return(not you) on an investment in PV and ignore loss of interest in capital invested(or cost of borrowing) repairs etc.

Put simply people must appreciate it is not like getting a return of x% on a bank deposit.

However whichever set of assumptions we make, our best guess would be a minimum of 12 years to break even.

So if people are prepared to take a really long term view, then solar PV could well turn out to be a sensible investment.

rhiwfield

John_Pierpoint wrote: »

Every one is going to have to pay about an extra 1- 2% to pay for those on FiT.
:mad::beer::mad::D:mad::rotfl::mad:;):mad::p:mad::j:mad::eek::eek::eek::eek::eek::eek::eek::eek::eek:

Envy is a great motivator