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nigelpm

Martyn1981 wrote: »

Add on the lost ISA interest of 3% (that you mentioned) and that comes to a 10% return.

I'm not against this practice, and there may be an argument for 'forcing' this kind of investment on new builds, but I disagree with the 3% return you state, especially since the 'investor' has also lost the income on their cash.

Mart.

Don't understand this concept of "lost interest".

The point is a return of 3% matches the ISA interest so it's as good as sticking the money in an ISA which was my point.

oldskoo1

tunnel wrote: »

Did anyone watch this this morning?
http://www.bbc.co.uk/iplayer/episode/b05whf7b/dont-get-done-get-dom-series-9-12-solar-panels

Scary!

I think i missed where it said which year this was.

But simply these guys were sold 2-3kW systems for 11k but actually with loan payments its going to cost them 18k.

I'm amazed, 1 that the company had the gall to charge this and secondly that these people did not do their homework.

It is simply second nature to me to get several quotes, explore and research different options and negotiate on the deal.

At the end of the day i always calculate the outlay with a pessimistic margin of error when forecasted numbers are used, such as future solar earnings. I also factor in the cost of maintenance such as replacing or fixing an inverter. Then at least i get my worse case scenario.

nigelpm

Nope! Just trying to be thorough, since the two investments are of different types, (one retains the capital, the other 'loses' it at the start) and therefore can't be compared directly in terms of % return without considering all costs (lost capital (depreciation), running costs, cost of capital (lost interest)).


Sorry mart. Don't want to keep going round in circles but your point is flawed. You can't take account of the initial investment AND put in an arbitrary amount for depreciation.

It would be fine to choose one or t'other but NOT both.

Since we are dealing with cash flows it strikes me as most sensible to just look at the cash movements.

You are right that you don't get your initial investment back at the end of the 25 years but the calculation accounts for this by having a large negative cash flow at year 0.

Like I said stick the numbers in Excel and you'll see for yourself.

nigelpm

I got all excited and have created a parametrised one:

https://docs.google.com/spreadsheets/d/1jfM2pXZjUJRG3RFzozV4heT_wqj3r3dDRBtwBfyAEik/edit?usp=sharing

Martyn1981

tunnel wrote: »

Did anyone watch this this morning?
http://www.bbc.co.uk/iplayer/episode/b05whf7b/dont-get-done-get-dom-series-9-12-solar-panels

T, why not post that on the myplanet thread. [Not right for me to steal your post.] It may be a different company, but certainly similar practices.

Mart.

nigelpm

Martyn1981 wrote: »

Nothing wrong with it

Mart.

So you accept that 8-15% is vastly greater than the 3% you'd get from an ISA then over the same period and the government scheme is ludicrously good value which is what my original point was all about?

Martyn1981

nigelpm wrote: »

It's all there in black and white - if you can't see it fine.

Firstly apologies, I've had a play with the spreadsheet, but now realised it's been left open so my changes/alterations appear to have been saved.

Secondly, to check it out in black and white, as you suggested, I entered a gross income figure of 8% (£480 against an investment of £6k) and the 3% ISA came out better. At a 10% gross figure (£600) they came out roughly the same. [Edit: no that's not fair, the PV is a bit better, but not 'vastly'.]

So yes it works. Try it, if you still don't believe I'm right.

Mart.

nigelpm

Fair enough with those parameters it's barely comparable to cash but taking more realistic :

£6k initial cost
3,500 Kw/h per annum
35% gen usage

You get 9.5% ROI - well above cash and a no-brainer

My own parameters:

£6.5k initial cost
4,500 Kw/h per annum
40% gen usage

gives 14%

Perhaps why I take the bullish view.

Hope the model is useful though.

Cheers.

nigelpm

£6k @ 3% = £180.

£6k @ 8% = £480. Less £300 (the lost capital of £6k/20yr) = £180

Looking back this is where the confusion occurred!

That £480 isn't 8% - it's more like 3.6% ROI. I think that explains the differences in viewpoint.

Martyn1981

nigelpm wrote: »

£6k @ 3% = £180.

£6k @ 8% = £480. Less £300 (the lost capital of £6k/20yr) = £180

Looking back this is where the confusion occurred!

That £480 isn't 8% - it's more like 3.6% ROI. I think that explains the differences in viewpoint.

Thanks Nigel, I was dreading logging on this morning and continuing the same discussion.

You're absolutely right that the above is where the confusion lies. I fully accept that a depreciation model may seem strange, but for a single year slice comparing percentages, it's (boringly) important to include the 'lost' capital element and then the running costs. Hence why I had to be so boringly adamant on the point.


I was thinking about your term 'vastly greater' than a 3% ISA return. And once you get past the 9 to 10% mark to cover the ISA and costs, then that term gets interesting.

I think it depends on the individual, but I'm not sure I'd say 15% (the upper figure) is vastly more, but I did agree way back that it's certainly a FAT FiT now. However, another point I made yesterday is I think important.

Warning - more boring numbers.

Can we still get to 15%, yes, let's say a simple install, southern based, south facing, costing £5k and generating 4,000kWh pa, so income of £750 (£630 FiT & export plus £120 leccy savings). £750/£5,000 = 15%. Very generous.

But take the exact same subsidy scheme and apply it to a more northern install, that is more complicated (£6k) using an E/W split roof and generating 3,000kWh. Then you get £600 (£480 + £120). £600/£6,000 = 10%. After maintenance costs, only slightly better than leaving the money in the ISA.

Personally, I still think that's a good investment, but as I said yesterday, PV'ers are comfortable with the tech whilst others need some persuading. I also think we have to consider the clean leccy that gets generated, but weirdly, this can sometimes provoke criticism even on this board, so I usually concentrate solely on the economics.

So to make the scheme viable for all (well, most) reasonably decent PV rooves it will be FAT in places.

So the issue really is what is a fair system for all. Can a one size FiTs (;)) all scheme ever be truly fair and reasonable? Probably not. Perhaps a FiT cap might work. Basically the same system, possibly a slightly higher FiT, but you only get it on the first ...... say ....... 2,000kWh. Cheaper systems still gain from a larger ROI as the investment part is smaller, and those that generate more still benefit from the increased export and leccy savings. My concern there is that some good locations may underutilise their roof space. You just can't win.

I believe the govt is going to revue the FiT scheme, so they may make some changes going forward, but with the current level of degressions they may simply let things sort themselves out.

Mart.