Solar panels payoff calculation

marcus_h

I have been looking into solar panels to provide energy to our house, which is electric only (gas not available). I looked into some other forms of heating, and couldn't really stump the readies for heat pumps etc.

As for the PV panels, I have been using insolation figures for the area (Oxon) which are meant to be accurate, generated for agricultural use etc

I calculated on the basis of an IKEA system of 3.36 kwh costing £5700 (seemed like a solid baseline). In my calculations, I put in the amount the gov't will pay for RHI (14.38p), and get a figure that would suggest it would pay off in about 12 years. However, I am not taking into account that I would not pay for my electricity. Am I mistaken in thinking that I would not pay for my power, saving me 17.6p during the day AND the gov't would give me 14.38 p? Or do I pay 17.6, and the gov't give me 14.38p?

Thanks for any help!

matelodave

You will be able to use any electricity that you generate yourself thus saving you the cost of those units you will also get about 4p a unit for any that you can't use and get fed back into the grid.
However don't forget if you are all electric then you use most of it in the winter and when it's dark. Likewise you use considerably less in the summer when you are at work and can't run the washing machine and tumble dryer when the sun shines. It's usually reckoned that you should be able to use about 50% of what you generate and feed back about 50%
So assuming you can generate about 3000kwh a year you'll get a feed in of £0.1438 x 3000 = £431, you'll save 1500 x 0.176 (your tariff) = £264 and you'll get 1500 x £0.04 = £60 that gets fed back, so theoretically you could gain about £750. So for a system costing £5700 you could pay back in about 7.6 years depending on how reliable the sun is, how much you can actually use and how much electricity prices increase over the period.
You will also have to take into account any interest you lose on your capital (about £1000 over 7 years) or any you pay on borrowing the money (about £2000 over 7 years) to get it installed so your payback is nearer 9-10 years.


In my view you've got to be reasonably confident that you'll stay there long enough to get your money back because once it's screwed to the roof you can't take it with you and will have to pay off the debt if you've borrowed the money.

Robwiz

You could look at this as an opportunity to buy forward about 3000 kWh per year for the next 20 years. On that basis, you would be paying £5700/(20x3000) or 9.5p per kWh. That's quite a good deal to begin with, but in addition, with the Feed in Tariff, you will be paid 14.6p for each of those plus around 4p for 50% of what you generate which is assumed to be exported.

Regardless of precisely how much electricity your panels generate, you would be hedging a proportion of your energy bills against future increases as the FiT is guaranteed index-linked.

marcus_h

Thanks for the feedback. So for that electricity you use, you get both the saving plus the gov't tariff. That does make it much more attractive.

How does the gov't calculate this - is it in retrospect, with access to a meter?

Smiley_Dan

You get the FiT for what you generate, not what you use. You have a generation meter that you read and send to your FiT provider (normally your current supplier). You also get the export tariff based on 50% of what you generate. It's basically all about using as much of what you generate as you can right now (in the future, export meters may make it worth exporting for some e.g those on the gas grid).

Cardew

Robwiz wrote: »

You could look at this as an opportunity to buy forward about 3000 kWh per year for the next 20 years. On that basis, you would be paying £5700/(20x3000) or 9.5p per kWh. That's quite a good deal to begin with, but in addition, with the Feed in Tariff, you will be paid 14.6p for each of those plus around 4p for 50% of what you generate which is assumed to be exported.

.

That only applies if you could use all the 3,000kWh in the house.


In practice most people have to 'work at it' to save 50%.

Cardew

marcus_h wrote: »

Thanks for the feedback. So for that electricity you use, you get both the saving plus the gov't tariff. That does make it much more attractive.

How does the gov't calculate this - is it in retrospect, with access to a meter?

They assume that you export 50%. So as stated above, you get the FIT for all the generated kWh plus 50% of that total @ approx. 4p/kWh.

If export meters(or possibly 'smart meters) are fitted this can tell how much you actually export. This will be a 'double edged sword', some will be better off with the assumed 50% others won't! However the main income will be the FIT.

P.S.
You should factor in costs of possible maintenance in a 20 year period.

macman

In the short term, say five years, the system should be maintenance-free.
But beyond that, and certainly after ten years, you'd have to factor in the possible cost of a replacement inverter.

silverwhistle

Just a gloss on one or two points. MatelotDave's figures for interest foregone look optimistic for some of us: whilst living abroad I couldn't move my rainy day cash ISA but to give you some perspective - my next FIT payment for the poorest quarter will be well over twice the annual interest on the money used to pay for the PV! In a time of quantative easing it's also a good feeling to have a physical investment and one less item on the budget to worry about. (If only I could do something about council tax, which is now my major item!)

I have a system which diverts excess power to my immersion tank and have hardly used my gas CH for hot water since installation last year. This may be a consideration if you have a tank.

As Cardew says, you have to 'work at it a bit' to use your own generation, but I don't think an awareness of energy use is a bad thing.

matelodave

You can get a 5 year cash ISA for between 3% which is about £900 over 5 years on a £5700 investment (and you will still be able to invest it or spend it after then as well). I suspect that interest rates will creep up a bit in the next couple of years so I might have under estimated what you'll lose. Likewise I've guessed that you've borrowed £5700 at about 5% over seven years.

I'm not sure if I'll live for another 10 years or stay here that long either (I'd like to think I would but 10 years is a long time when you are already a few years past retirement age) so I'd rather have the flexibility of having my money available rather than screwed to the roof. I might want to buy a new car for instance

Cardew

silverwhistle wrote: »

I have a system which diverts excess power to my immersion tank and have hardly used my gas CH for hot water since installation last year. This may be a consideration if you have a tank.

As Cardew says, you have to 'work at it a bit' to use your own generation, but I don't think an awareness of energy use is a bad thing.

Just a point on the Immersun or similar(the diversion device for those who don't know) - if you can use excess generated electricity for heating the water, then in any calculations you need the use the cost of the fuel your are saving, e.g. around 4p/kWh for gas, 6p for oil(both affected by boiler efficiency) and around 6p for Economy 7 electricity.


If ever the Government get around to paying for actual electricity exported(instead of the assumed 50%) then you will lose the 4p+/kWh for every kWh you use in the house, so the savings for heating water when you have gas will be marginal.