Free solar panel discussion

redfibee

I am a newcomer to the world of solar electricity panels. I have a leaflet in front of me, that tells me that payback is at the 11 years point. I've played around with discounted cash flow, and confirmed it for myself.

However, what isn't taken into account is what you could do with your money if you don't spend it on solar electricity panels. If I consistently use a rate of 4% for all my calculations, I am better off investing my money elsewhere until I get to year 23. If I can get a 1% better rate on my investments than RPI, this moves to year 25.

To me, this makes it a much less worthwhile and much riskier deal than I thought. Payback after 11 years is one thing, but 23 years is a very long time to wait.

And there is always the potential for the Govt to retrospectively change the Feed In Tariffs.

So what am I missing? I can't help getting the feeling that everyone except me thinks that this is a wonderful thing.

Pincher

redfibee wrote: »

And there is always the potential for the Govt to retrospectively change the Feed In Tariffs.

So what am I missing? I can't help getting the feeling that everyone except me thinks that this is a wonderful thing.

It's an incentive, not an outright bribe.

If you had to fork out £15,000 upfront for a solar PV system,
with no government incentive, you would NEVER break even.

zeupater

redfibee wrote: »

I am a newcomer to the world of solar electricity panels. I have a leaflet in front of me, that tells me that payback is at the 11 years point. I've played around with discounted cash flow, and confirmed it for myself.

However, what isn't taken into account is what you could do with your money if you don't spend it on solar electricity panels. If I consistently use a rate of 4% for all my calculations, I am better off investing my money elsewhere until I get to year 23. If I can get a 1% better rate on my investments than RPI, this moves to year 25.

To me, this makes it a much less worthwhile and much riskier deal than I thought. Payback after 11 years is one thing, but 23 years is a very long time to wait.

And there is always the potential for the Govt to retrospectively change the Feed In Tariffs.

So what am I missing? I can't help getting the feeling that everyone except me thinks that this is a wonderful thing.

Hi

Some points to consider which may have been missed .....


#positives
Tax on your 4% invested
Investment of FiT & export income
FiT is tax free
Index linking FiT
Displaced energy savings
Inflation on displaced energy savings.

#negatives
possible repair/maintenance
replacement inverter

11 years or so sounds to be in the right ballpark on a direct comparison basis between pv and invested returns, depending on the array size, orientation, location and, of course, equipment & price.

HTH
Z

redfibee

Some points to consider which may have been missed .....


#positives
Tax on your 4% invested
Investment of FiT & export income
FiT is tax free
Index linking FiT
Displaced energy savings
Inflation on displaced energy savings.

Thanks, but I've taken all that into account. Basically, at the 11 year point, it is forecast that your initial investment will have been recovered. Anything after that is yours.

However, if you don't invest in solar panels, the money would be invested in ISA's during those 11 years, and on the whole over the last few years we've always found ISA's that return over RPI.

I am beginning to think that the most cost-efficient way of doing this is to keep my money invested, and go for the free solar panel option.

Equaliser123

redfibee wrote: »

And there is always the potential for the Govt to retrospectively change the Feed In Tariffs.

I don't think that this is a real concern to those who have already signed up as the Government would be liable to those who have already invested.

zeupater

redfibee wrote: »

Some points to consider which may have been missed .....


#positives
Tax on your 4% invested
Investment of FiT & export income
FiT is tax free
Index linking FiT
Displaced energy savings
Inflation on displaced energy savings.

Thanks, but I've taken all that into account. Basically, at the 11 year point, it is forecast that your initial investment will have been recovered. Anything after that is yours.

However, if you don't invest in solar panels, the money would be invested in ISA's during those 11 years, and on the whole over the last few years we've always found ISA's that return over RPI.

I am beginning to think that the most cost-efficient way of doing this is to keep my money invested, and go for the free solar panel option.

Hi

I do suggest that you check your spreadsheet logic ...... taking the very basics, an ISA investment return which would double(/recover) the initial sum over the 11 years you mention would need to return an AER of around 6.5%, which is both not index linked and not typically available .....

HTH
Z

PeterZ_2

redfibee wrote: »

Some points to consider which may have been missed .....


#positives
Tax on your 4% invested
Investment of FiT & export income
FiT is tax free
Index linking FiT
Displaced energy savings
Inflation on displaced energy savings.

Thanks, but I've taken all that into account. Basically, at the 11 year point, it is forecast that your initial investment will have been recovered. Anything after that is yours.

However, if you don't invest in solar panels, the money would be invested in ISA's during those 11 years, and on the whole over the last few years we've always found ISA's that return over RPI.

I am beginning to think that the most cost-efficient way of doing this is to keep my money invested, and go for the free solar panel option.

Lets say you spend £15k today on solar panels. In 11 years time you have recovered your £15k - but the problems is that in 11 years time your £15 is not worth as much due to inflation.

I think the real payback period is around 16 years, taking into account the loss of buying power of the £15k.

People also seem to look at the amount they will make over the lifetime of the FITs but forget that it will take 25 years to make the money.

Money in your pocket today has a much, much higher value than money in your pocket in 25 years.

Which deal is more attractive:

A - Give me £1 and I'll give you back £100 in 1 year
B - Give me £1 and I'll give you back £500 in 100 years

zeupater

PeterZ wrote: »

Money in your pocket today has a much, much higher value than money in your pocket in 25 years.

..... not if the value is index linked ......

Z

redfibee

zeupater wrote: »

Hi

I do suggest that you check your spreadsheet logic ...... taking the very basics, an ISA investment return which would double(/recover) the initial sum over the 11 years you mention would need to return an AER of around 6.5%, which is both not index linked and not typically available .....

HTH
Z

I see what you're saying, but if I spend the money on Solar Panels, the money has gone until / if we are still at this address in (by my calculations) 23 years. If I invest it in ISA's, I haven't spent anything and my money continues to grow.

I think it boils down to two choices:

1. Spend my money now and hope that I get it back in x years' time. An awful lot can change in that time, including governments and government policies.

2. Invest my money and hope to keep up with or beat the RPI with interest earned.

Thanks for your help everyone. It's helped me to make my decision.

PeterZ_2

zeupater wrote: »

..... not if the value is index linked ......

Z

If index linked it should retain its buying power.

However, money today is still worth more than money tomorrow, regardless. You also need to consider opportunity loss and also your own mortality!

No point being the richest man in the graveyard!