Solar panels payoff calculation

Robwiz

Cardew wrote:

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%.

How so?

If you invest in a solar PV system which should generate say 3000 kWh per annum, then you have bought forward that electricity and will receive the FIT for it all. Plus the export rate on 50%. By my calculations, there is a profit locked in compared to the whole life average unit cost. You get paid for the units generated on your roof regardless of who uses them.

Of course, most people won't be able to use all the energy they generate and will still have to import from the grid, particularly between September and March. However, it is still true that an investment in solar PV is a hedge against electricity price inflation.

NB, if you want to be prudent and allow £1000 for a new inverter after 10 years that only increases the average price per kWh generated by 17% which ensures the cost is still lower than the FIT rate.

Cardew

Robwiz wrote: »

Cardew wrote:

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%.

How so?

If you invest in a solar PV system which should generate say 3000 kWh per annum, then you have bought forward that electricity and will receive the FIT for it all. Plus the export rate on 50%. By my calculations, there is a profit locked in compared to the whole life average unit cost. You get paid for the units generated on your roof regardless of who uses them.

Of course, most people won't be able to use all the energy they generate and will still have to import from the grid, particularly between September and March. However, it is still true that an investment in solar PV is a hedge against electricity price inflation.

NB, if you want to be prudent and allow £1000 for a new inverter after 10 years that only increases the average price per kWh generated by 17% which ensures the cost is still lower than the FIT rate.

This is what you stated:

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.

The last part of the quote(in red) is certainly correct.

However to 'buy forward', to reach your conclusion of a price of 9.5p/kWh, you have taken the system cost of £5,700 and divided it by the total generated electricity of 3,000kWh pa over a period of 20 years. i.e. £5,700 divided by 60,000kWh.

Regardless of how many kWh generated by the system, the value of any 'free' energy* from the panels used in the house is simply the kWh used, @ the price of each kWh that would have cost from the electricity company. e.g. 1,200kWh x 14p = £168


* Unless you use that electricity for heating instead of gas/oil/economy 7

silverwhistle

matelodave wrote: »

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).

But I can reinvest my annual £700 return (4kw/south coast) and after 5 years will have over £3.5 grand: I'm not going to get the spreadsheet out for what is just a thought provoker really.

I'm not an accountant, and although I did a few cost/benefits when I was working in IT only did rough figures for myself before installing PV. It's a bit like my paying off my mortgage early: it may not now be the best route financially - particularly with QE and low interest rates - but was when I did it, and both decisions have been right for me at the time and have given peace of mind.

Johnandabby

marcus_h wrote: »

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.

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.

But don't forget that you will only get the higher FIT tariff if your EPC for your house is D rating or better. If you have only electric heating, and poor insulation standards, then you may not achieve this even with the PV system included.

Before you buy you might want to spend £60 and get a local DEA to do a draft EPC with the PV included just to confirm what you could achieve - otherwise all your calculations are based on the wrong tariff...

marcus_h

Thanks for al the responses. Johnandabby - true. I think we will qualify. We had 30 cms of loft insulation on top of a layer that was already in when we bought the place. So far it seems to be working - we stripped out a few of the storage heaters (we planned to get rid of them all) and 3 radiators keeps the house tolerably warm, so that must be down to the insulation. So we will see about getting the rating.

Smiley_Dan

If you're worried you can always get a survey done before and if it's worse than D you can get advice on how to improve. Also remember that the inclusion of the panels themselves improves your rating, so if you are a high E then you might become D by adding the panels.

marcus_h

Thanks Smiley Dan - hadn't thought of that.

Johnandabby

marcus_h wrote: »

Thanks for al the responses. Johnandabby - true. I think we will qualify. We had 30 cms of loft insulation on top of a layer that was already in when we bought the place. So far it seems to be working - we stripped out a few of the storage heaters (we planned to get rid of them all) and 3 radiators keeps the house tolerably warm, so that must be down to the insulation. So we will see about getting the rating.

If you've got a dual rate electricity meter and storage heaters, then get the EPC done before you strip them all out - the EPC rating will be much better with storage heaters than direct electric panel heaters.

Just checked two identical flats I did EPCs for, both with single glazing and no insulation, but one with direct electric panel heaters and one with storage heaters on off-peak - direct electric was F-25 and storage heaters was D-58.

captainhindsight_2

Hi not many people know this but because your house is heated by electric and if you meet the criteria for the affordable warmth part of eco (this usually pays for free boilers) you can qualify for a grant to help pay the cost of solar pv (probably around £2000) because it becomes a part of your heating system. So may be worth looking into depending on your circumstances.

wonderman

The experience from someone who has done this. 4kw system installed (max allowed by grid supply) high quality REC panels, SMA inverter and Immersun device - used local professional installer on unshaded South facing roof; total cost just under £7k just coming up for 12 months old. Overall total FiT plus oil and electricity savings over 12 months will be close to £1k.
If you have the cash in the bank and plan to stay at least 4-5 years then its a no brainer in my view.
Make sure you dont skimp on the system or the installer.