Solar Panel Guide Discussion

Cardew

Caerhendy wrote: »

Thanks for the explanations TD & Z.
I've had my first quote:-
2.45kWp at £10,450
Total Income £1060

Disappointed with 10yr payback.
Hope the others are better.
Rob

That isn't a '10 year payback' - it is much longer!

If you invest £10,450 long term you will get around £400 pa interest - that has to be factored in any payback calculation

Studlea_Phatt_Katt

Lck wrote: »

I had solar panels fitted on Friday, the installation went online around 3 pm and since then the panels have produced 4.3 kw on the meter (that's as at 12 noon today so 45 hours from installation). That doesn't sound like much to me.

The PV Solar set up we won is a 3.5 kwp system and has produced 45.1kw from 5pm Monday 3rd to 5pm Monday 10th. Best day was 12kw. Latter half of the week has been cloudy.

Early days of course but an average so far of 6.4 per day with a mostly south facing array/roof.

SPK

keith_r59

Cardew wrote: »

That isn't a '10 year payback' - it is much longer!

If you invest £10,450 long term you will get around £400 pa interest - that has to be factored in any payback calculation

I don't know how accurate Wikipedia is but the definition for Payback period is as follows:

Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment. For example, a $1000 investment which returned $500 per year would have a two year payback period.

The time value of money is not taken into account so you must not factor in any interest on the original investment, therefore the original poster's payback calculation appears to be correct.

http://en.wikipedia.org/wiki/Payback_period

John_Pierpoint

Let us call it the "opportunity cost" of installing solar PV.

http://en.wikipedia.org/wiki/Opportunity_cost

Don't forget that this is an annuity return - at the end of 25 years you might need to pay to have obsolete junk removed from your roof.
So after the "payback" start saving up for the repairs and replacements.

keith_r59

John_Pierpoint wrote: »

Let us call it the "opportunity cost" of installing solar PV.

http://en.wikipedia.org/wiki/Opportunity_cost

Don't forget that this is an annuity return - at the end of 25 years you might need to pay to have obsolete junk removed from your roof.
So after the "payback" start saving up for the repairs and replacements.

Let us call it a "write off" as the money used to purchase Solar PV would probably have been spent on something else anyway, e.g. new kitchen, luxury holiday etc.

The "payback" would then be immediate.

mardycow

Have just signed with Solar Style ltd, 4kw ish system , 17 x ET panels, Aurora inverter, very competetive price.

Cardew

keith_r59 wrote: »

I don't know how accurate Wikipedia is but the definition for Payback period is as follows:

Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment. For example, a $1000 investment which returned $500 per year would have a two year payback period.

The time value of money is not taken into account so you must not factor in any interest on the original investment, therefore the original poster's payback calculation appears to be correct.

http://en.wikipedia.org/wiki/Payback_period

Mmmm

Then try telling your building society that if you borrow on a mortgage, say, £100,000 and pay it back at £10,000 a year, you will have paid off the mortgage in 10 years!!!!!

Of course you must factor in any lost interest on the capital cost of a PV system when calculating payback.

If Caerhendy had borrowed the £10,450 for his system would his annual income of £1,060 have paid off his loan in 10 years? of course it wouldn't(unless he could get an interest free loan)

TrickyDicky101

mardycow wrote: »

Have just signed with Solar Style ltd, 4kw ish system , 17 x ET panels, Aurora inverter, very competetive price.

What price did you end up paying? I have just signed up to a 3.5kWP system using (expensive) Sanyos for £12900 (I have space issues so to maximise system kWP size required the Sanyos).

keith_r59

Cardew wrote: »

Mmmm

Then try telling your building society that if you borrow on a mortgage, say, £100,000 and pay it back at £10,000 a year, you will have paid off the mortgage in 10 years!!!!!

Of course you must factor in any lost interest on the capital cost of a PV system when calculating payback.

If Caerhendy had borrowed the £10,450 for his system would his annual income of £1,060 have paid off his loan in 10 years? of course it wouldn't(unless he could get an interest free loan)

You are not comparing like with like so it is a specious argument regardless of how many exclamation marks you put at the end of your sentence.

So no, you must not factor in lost interest on the capital investment when you calculate the "payback period". I thought that was very clear in the definition provided.

zeupater

keith_r59 wrote: »

You are not comparing like with like so it is a specious argument regardless of how many exclamation marks you put at the end of your sentence.

So no, you must not factor in lost interest on the capital investment when you calculate the "payback period". I thought that was very clear in the definition provided.

Hi

If you're looking purely at semantics then you are correct .... if looking from a logical point of view you need to include lost opportunity on the sum invested and/or any cost of financing the project and therefore Cardew is correct .....

Base (System) Cost+Incidental costs+Lost Interest(Term)+Interest paid(Term) = Total Cost (on a present value basis) ..... it is the Total Cost which should be used as the cost in the payback calculation in order to make any logical sense, for example, if the combined income & savings from the expenditure equalled the Interest paid over the total life of a system then it would never pay back the original investment ..... It's probably the use of simplistic payback calculations which cause the the public sector to continually make gross errors on expenditure planning :D.

HTH
Z