Solar Loans

davehills

Have been toying with the idea of PV solar for some time now and looked into free solar but was put off by the fact I would have been tied into a 25 year contract.

Have seen some 'solar loans' advertised. Does anyone have any experience of these?

Neighbours have 12/13 panel systems and our roof faces south and is unsheltered. We live central south.

How much would such a system cost and would the income actually cover a loan for this amount?

Obviously, the web sites promise a small surplus of cash but I'd be interested if anyone has figures for a 12 panel system.

rogerblack

What is the rate of the loan you are being offered.
At best, typical returns may be of the order of 12%.
A 4kW system may cost about 6000.
It will produce around 3600 units a year. In total, making optimistic assumptions, this is about 20p/unit, or 720 pounds a year.
Counting that you may face 500 extra cost, this is 720 pounds return for a 6500 pound investment.

Neglecting anything else, you can see that a loan of even 5% is going to make the returns much, much worse.

Fairwinds

Don't know if this is just Fife/Scotland, but we got a £4k interest free loan over 8 years from the Energy Saving trust.

This costs £40/month in repayments, system cost £7k to install. (4kw)

Our first month isn't complete yet, but already we have generated 420kwh, so are due a payment of £95 ( and it's been raining most of the month) and also have 420kwh of free electricity to use.

The loan made it an easy decision for us. Very pleased so far

Fairwinds

Looks like it is just Scotland, but may help others and is quite hard to find

http://www.energysavingtrust.org.uk/scotland/Take-action/Grants-and-offers/Home-loans-scheme

From that page:

What's on offer?
Loans of between £500 and £10,000 are available (please note: loans are only available up to a maximum of £4,000 for solar photovoltaic (PV), wind turbines and small scale hydro technologies
Loans are interest free so you only pay back what you borrow
Applicants can pay back the loan in monthly instalments over a maximum of eight years.

Martyn1981

davehills wrote: »

Neighbours have 12/13 panel systems and our roof faces south and is unsheltered. We live central south.

How much would such a system cost and would the income actually cover a loan for this amount?

Hello Dave. Really there are too many unknowns here, but I can throw together some numbers built up of one assumption on top of another. Here goes.

12 to 13 panels suggests a system size of around 3kWp to 3.5kWp, ranging from 12 * 250W up to 13 * 265W. Lets keep each assumption modest, so go with 3kWp.

Central southern, with south facing non shaded, could be higher, but let's assume generation of 900units per kWp = 2,700kWh pa.

Price, really need to get some quotes and shop around, but fingers crossed for £5k.

Income, FITs 16p per unit + 4.5p for export (assumed to be 50% of generation = 2.25p)

2,700 * 18.25p = £492.75

plus leccy savings of perhaps £100 pa, so round up the total to £600 pa.

I have absolutely no idea what interest rate you'd have to pay, be it tagged on to a mortgage, or a 'nasty' high one, but I'm going to guess at 7%.

Yr 1 Take £5000, add 7% interest, then deduct £600 = £4,750
Yr 2 Take £4,750, add 7% interest, then deduct £618 (inflationary rise) = £4,464

Keep repeating and it hits zero around yr 11, but only if you put all the income and saved leccy money in each year.

The scheme runs for 20 years, so that gives you another 9 years of FITs. Hopefully the system will be good for export and leccy savings for up to 40 years or so, though performance will probably drop off by about 0.25% to 0.5% per year.

Also the inverter should last 8 to 12 years, and may well last for 20+ years, but best to factor in an additional £800 to £1000 every 10 years.

Loads and loads of guesses. Not sure if this is any use to you. Maybe a better start would be to see what loans are available and maybe get some quotes on a system.

Mart.

PS In the above example, the total interest added up to about £2.5k over the 11 years. So if you could get a company to install an interest free system, for less than £7.5k, then that would be similar. M.

davehills

Fabulous! Thanks guys!

Martyn1981, those figures are pretty good assumptions and show that it's most certainly worth further investigation.

Martyn1981

davehills wrote: »

Fabulous! Thanks guys!

Martyn1981, those figures are pretty good assumptions and show that it's most certainly worth further investigation.

Hiya Dave, thinking about this again, and your mentioning a 'free' system at the start, it occurs to me that you're simply cutting out the middle man. After all, the rent-a-roofers will borrow the money to put a system on your roof, then cover their costs with the FITs income.

I find debt financed investments a little scary. To be honest I'm almost certainly over cautious and wrong. I much prefer Martin Lewis' approach that 'debt isn't bad, bad debt is bad'.

Best of luck finding a good quote and a reasonable loan rate. One last point, it can take quite a while to get the FIT application fully processed, then wait for the next meter reading session, then get the first payment - so make sure you can finance any debt for at least the first 6 months, better still a 1 year rolling contingency.

Mart.

Ferdy147

To be honest I wouldn't personally finance this with a loan. Mart's calculations show there's a long time before break even and there's a lot that go wrong in those 10-11 years.

May have been worth the gamble at the higher FIT rates but I certainly wouldn't have thought it was worthwhile at the current rate.

What if you decide to sell the house? Will the buyer be willing to pay an amount equal to the remainder of your loan? If you decide to keep ownership of the panels but sell the house....what impact will that have on their mortgage application and what about the hassle involved with drawing up a contract/maintenance of the system? Also then this income become's taxable too....

A lot of hassle I think....for me anyway!

zeupater

Ferdy147 wrote: »

.... May have been worth the gamble at the higher FIT rates but I certainly wouldn't have thought it was worthwhile at the current rate ....

Hi

If you were of a mindset to 'gamble' at the 'higher FIT rates' I can't really understand why the viewpoint has changed ...

When the FiT tariff was originally set the cost of a 4kWp system was ~£20k+... the FiT has been reduced from ~43p to ~16p so allowing for inflation it's now ~1/3 of what it was, however, systems have fallen too, a 4kWp system now also costs around 1/3 of what it cost three years ago so from the recovery of investment point of view the return is almost exactly the same with the added benefit of less initial capital value exposure ...

It actually gets better than that when you factor in the potential savings on electricity .... consider a typical saving of ~£100/year whether you paid £20k or one-third of that price and it's pretty easy to see that what was a 0.5% annual contribution to the capital cost recovery becomes 1.5% ... the way I see it is that the return (in percentage terms) would be better now than when the scheme was first released ....

HTH
Z

Ferdy147

Agreed....

I guess I'm thinking it's worth the 'gamble' at the price I paid being £7k for a 3.92kw system on the higher rate.

Overall I'd say if you can't pay outright then don't borrow the money. You never know what's around the corner and this is a long term investment and borrowing to invest is, for reasons above, too much of a risk/hassle.

EricMears

Ferdy147 wrote: »

Agreed....

I guess I'm thinking it's worth the 'gamble' at the price I paid being £7k for a 3.92kw system on the higher rate.

Overall I'd say if you can't pay outright then don't borrow the money. You never know what's around the corner and this is a long term investment and borrowing to invest is, for reasons above, too much of a risk/hassle.

There are so many things to which one might apply that principle ! However, if people stopped borrowing, modern society as we know it would probably collapse.

As for borrowing to invest, of course it's 'risky' but without an element of risk there would be no high returns. I don't in fact consider SPs to be that much of a risk. Rate of return is guaranteed for 25y, panels themself also guaranteed for 25y and even the inverters are guaranteed for 10y and even if they failed one day out of warranty, the ROI on a new inverter in 10 years time is very likely to be substantial.