Cold called re free solar panels.

EricMears

zeupater wrote: »

What seems to have been missed is that if the system was to be fully funded from savings, there is no return at all until the capital has been returned - the loss of interest on the sum 'invested' needs to be considered too ....

Z

My 'headline' ROI is 13.7%. Loss of interest from ISAs is currently 3% leaving me 10.7% up on the deal before calculating electricity bill savings.

Can't agree that there's no return on an investment before original capital has ben recovered. You could equally argue that there's no return on money in bank until you've drawn it out again.

My original investment was long term savings for which I anticipate no requirement to use before funeral expenses (hopefully not just yet). It's far better employed pre-paying all my electricity bills for the next 25 years than sitting around earning less than inflation.

I certainly wouldn't have considered borrowing at 10% interest to fund original investment but extending a mortgage (at I believe around half of that) still strikes me as worth considering.

Martyn1981

@ KTMS - hiya Ian, you've certainly done your homework. Given that you're a pensioner, I can't see that PV is going to be viable for you if you have to finance it. Also, remember PV isn't really an energy saving device, it just 'changes' the source of some of your leccy (and your neighbours when you export excess). So it's really a long term investment.

Have you explored all of the cheaper options, loft insulation, wall insulation, low energy lighting etc? They are cheaper and have faster paybacks. But from your posts, I assume you are well informed on all of this already.

@ Zeup and Eric - you've got me pondering now on returns. If the entire install cost is written off as an immediate loss, then I suppose you do have to refill the pot (including a cost of capital element) before profits. But has the install cost been lost?

A taxi driver wouldn't put the full cost of a new car down as a loss in year one, instead the annual cost would be depreciation plus loan/cost of capital.

Surely the PV install retains value, even if only the locked in FITs rate. I was asked a while back for suggestions on valuing a PV system for a house sale (it was on original FITs). My suggestion was to compile a spreadsheet for the potential buyers showing repayments on a 80% mortgage over 25 years. Then to compile a second spreadsheet adding £10k to the mortgage, but deducting the original mortgage payments and the FITs+export+leccy savings. After including 0.5% annual performance reduction, 3% inflation increases, and £1k for inverter after year 10, the compounding effect knocked 4 years off the mortgage term!

[Edit: A better suggestion than mine, and far easier, was to tell potential buyers that they (effectively) wouldn't have to pay council tax for the next 23 years!]

So I think a system retains 'some' value, and profits are made when annual costs are covered, rather than when the full replacement of original cost is covered.

Appreciate that finding the retained value is not easy, but last year I personally think we saw a huge change in peoples thoughts on PV, and general acceptance by householders and potential householders, that must have had some positive effect on value.

Mart.

Fruit_and_Nut_Case

Martyn1981 wrote: »

A better suggestion than mine, and far easier, was to tell potential buyers that they (effectively) wouldn't have to pay council tax for the next 23 years!

:T
That is quite a neat way of putting it and won't be far off in quite a few cases. I must remember that when it comes time to selling the old homestead.

InVestor_2

My first year ROI was 15.19% (based on FiT payments) Index linked & Tax free. Taking into account leccy (& some gas savings) return was over 17%.

I am now much more attuned to maximising use of my free leccy, the panels having changed the way I do things.

My spreadsheet is estimating capital repaid somewhere between 5 & 6 years.

I think there might be something left over for repairs to my PV system (after the 10 & 25 year warranties have run out). My roof is only a few years old, really can't see much chance of having to repair it any time soon. Surely, anyone with a much older or suspect roof would have had problems fixed before/during getting panels fitted.

I have had my system independently valued at £20,000 (far more than I paid for it) for resale purposes (added to the house price sale). Of course, proof would be in the pudding. But I really can't see how it hasn't added value.

I think it's quite funny, people saying it wasn't a good investment. I'm certainly very happy.

For Cardew:

I do, however, console myself that you are paying, through a levy on your electricity bill, towards the FIT of those who could afford a PV system .

grahamc2003

InVestor wrote: »

I think it's quite funny, people saying it wasn't a good investment. I'm certainly very happy.

For Cardew:

I do, however, console myself that you are paying, through a levy on your electricity bill, towards the FIT of those who could afford a PV system .

I'm not sure anyone's saying systems on the max fit rate are not a good investment for the owners are they? But as for society as a whole, they are undoubtably a terrible investment - so you have to be careful to understand exactly what is being criticised by those who take a societal view, rather than a personal view.

Not sure I understand the last sentence. I doubt most people posting here have any problems paying the extra so you and I can have our Fits - but there are many people now who are in fuel poverty who can't afford the extra, and it's for those who the fit system is very unfair. I can't really see any sensible argument against that unfairness, even after 2 years worth of reading every case put forward - but anyhow, it's nothing to feel 'consolation' about is it? I expect most with the fit sometimes feel a tinge of guilt rather than consolation.

EricMears

[QUOTE=Martyn1981;59191757



[Edit: A better suggestion than mine, and far easier, was to tell potential buyers that they (effectively) wouldn't have to pay council tax for the next 23 years!]


Mart.[/QUOTE]

Still prefer my view that electricity bills have been paid for balance of the FIT term (23½y at present). In fact FIT payments are around twice my electricity bills so a lot of room for differences in inflation rates to worsen this estimate. But exactly which inflation rate is being applied to FIT payments ? I had some idea that it was supposed to be in line with average electricity price rises although the increases I have seen seem to quote RPI (and of course there's another dozen or so potential candidates to be the actual rate used).

But there is a perfectly good accounting model for calculating present value of an income stream (don't ask me to explain it !) which I'd hope an estate agent ought to be able to use when estimating a house's value. Sounds as though InVestor's system has had that applied.

Afraid when our house is sold I'm expecting to be dead or 'gaga' so won't be able to put them straight.

InVestor_2

grahamc2003 wrote: »

I'm not sure anyone's saying systems on the max fit rate are not a good investment for the owners are they? [/QUOTE]

I'm not sure anyone's saying systems on the present FiT rate are not a good investment for the owners are they? What's your point?

But as for society as a whole, they are undoubtably (undoubtedly?) a terrible investment - so you have to be careful to understand exactly what is being criticised by those who take a societal view, rather than a personal view.

Isn't the whole point of FiTs to give people an incentive (and clearly, a decent return on their investment as part of that incentive)? I think you have to be careful to understand exactly what FiT is for before critising it incorrectly. If you are whining about FiT payments not reducing fast enough in the past, you may have a point (in the past).

Not sure I understand the last sentence. I doubt most people posting here have any problems paying the extra so you and I can have our Fits - but there are many people now who are in fuel poverty who can't afford the extra, and it's for those who the fit system is very unfair. I can't really see any sensible argument against that unfairness, even after 2 years worth of reading every case put forward - but anyhow, it's nothing to feel 'consolation' about is it? I expect most with the fit sometimes feel a tinge of guilt rather than consolation.

People can cry and whine about probably 100's of things which they think are unfair. I generally find it's because they missed out for some reason or other. I'm sure I pay for lots of things I don't greatly benefit from. I certainly do not feel any guilt for the probably 0.000000000001p I take each year from people for my FiT.

zeupater

EricMears wrote: »

My 'headline' ROI is 13.7%. Loss of interest from ISAs is currently 3% leaving me 10.7% up on the deal before calculating electricity bill savings.

Can't agree that there's no return on an investment before original capital has ben recovered. You could equally argue that there's no return on money in bank until you've drawn it out again.

My original investment was long term savings for which I anticipate no requirement to use before funeral expenses (hopefully not just yet). It's far better employed pre-paying all my electricity bills for the next 25 years than sitting around earning less than inflation.

I certainly wouldn't have considered borrowing at 10% interest to fund original investment but extending a mortgage (at I believe around half of that) still strikes me as worth considering.

Hi Eric

The point made was that for a pv installation which was fully funded from savings, there would be a net loss position until the FiT+EnergySaving had recovered the capital amount.

Think of it as being a company. The capital is invested in a new asset which has very little residual value if it needs to be sold, therefore effectively written off over a very short period (/immediately), so a NBV of zero, or close to zero ... therefore, even considering the generated income a massive loss in year one. Now consider an alternative where the asset is straight-line depreciated over, let's say, five years, so a NBV of 80% after year1. 60% year2 etc. The depreciation is in each year still higher than the income, therefore a loss in each and every year until the capital is written off. Considering that there isn't a particularly mature market for used solar panels at high prices, it would probably be better to not depreciate over too long a period ....

Taking asset depreciation into account for a fully funded system and showing a real loss for a period is therefore no different than funding through the 'green deal' as there will be a front-end period of 'loss', hopefully followed by a later period of 'profit' in both cases.

There would be a valid argument that installing solar pv would enhance property values, so let's look quickly at that aspect. Two identical houses for sale, both recently installed pv, one fully funded, the other with a 'green-deal' loan .... considering the loan repayment passes to the purchaser through energy bills - which house is more attractive to a purchaser ?, and which would be more likely to have a higher price offered ? .... So, does self-funded pv really enhance the value of a property, and is so, by how much - would a recently installed pv system add more than the installation cost, or less ? .... well, considering that you could buy a property without pv and then have it installed later, you would at least be saving the stamp duty on the enhanced value ... so wouldn't the maximum increase in property value be (CurrentpvPrice-StampDuty%) ? ... for older systems which were more expensive and locked into higher FiT rates the situation might be different, but that's really down to the property market at the time of sale and the prospective buyer's view on the advantages of pv and the associated FiTs when making an offer ....

HTH
Z

InVestor_2

EricMears wrote: »

But there is a perfectly good accounting model for calculating present value of an income stream (don't ask me to explain it !) which I'd hope an estate agent ought to be able to use when estimating a house's value. Sounds as though InVestor's system has had that applied.

My valuation was done by an independent Surveyor. The estate agents I spoke to prior to fitting my panels 2 years ago all said no added value, and one said maybe less as 'people may be put off'. But I would think that a lot of that was because they didn't understand the value of them.

I'm sure with time (and electricity bills rising higher than inflation) more and more people will appreciate solar panels and FiT payments.

When I showed her my spreadsheet, and projections, she was very impressed, and the final report gave a value £20,000 higher.

KeenToMakeSavings

You are absolutely correct, and we are told the levy will progressively increase so those who can't afford solar PV will continue to fund those who can at an increasing level, making the level of unfairness even greater.

I despair at the thought process (or their lack of) of politicians and civil servants who put these sorts of policies together without appearing to think though their consequences. How can it ever be called reasonable to expect those who can't have to fund those who already can have?

Ian