Solar panels and increasing electricity bills

MusicLover28

We were lucky enough to purchase solar panels when the feed-in tariff was at its highest and that is working well. The solar panel people told us to use our electrical appliances during the day as we would receive free electricity up to the amount we'd generated and then would pay for the balance (if any), which seemed fair. However, our energy company just keeps putting our bills up. I have contacted them on several occasions to see why I'm not getting the benefit of the free/cheap electricity, but they just keep passing me from department to department. No-one wants to take ownership of my issue and give me an honest answer to my question (ie why are my bills going up when I have a method of generating my own energy?). Has anyone else experienced this problem or is it just me?

energyworker

Did you arrange to be moved to a feed-in-tariff with your supplier and did they change your meter that will recognise backwards reading?

[Deleted User]

Can you confirm that that you dont have an old analogue meter that is capable of running backwards ? that will stop proper billing and generate enquiries from supplier

Martyn1981

MusicLover28 wrote: »

The solar panel people told us to use our electrical appliances during the day as we would receive free electricity up to the amount we'd generated and then would pay for the balance (if any), which seemed fair.

Hiya MusicLover.

There are two ways to interpret that sentence, and could explain the issue.

The right way: You need to use the leccy as it's being generated, since there is no storage. If you are generating 2kW and consume 1.9kW then you will purchase no leccy from the grid (and will export 0.1kW). But if you consume 2.1kW then you'll be using the 2kW you are generating and also be buying in an extra 0.1kW from the grid.

The wrong way: "If you generate 5kWh during the day, but consume 6kWh then you'll only pay for the 1kWh difference." WRONG. All of the consumption outside of generation, or in excess of generation will have to be bought, since any export is not netted off against it. So if that 5kWh of generation is during the daytime when you're out, and the 6kWh of consumption is in the evening when PV has stopped generating, then you'll export all your gen, and have to buy all the import.

It's also important to understand the difference between kW and kWh? If you are generating a kW then that is the momentary amount. If you generate that kW for a whole hour, then the amount of leccy generated is 1kWh. Pop a kettle on for 1 minute and it will be drawing 3kW, but total consumption will be 3kW*1min (1/60th of an hour) = 3,000W*0.0167hr = 50Wh or 0.05kWh. So the amount consumed is very small, but for that minute the demand is very high and may exceed generation, resulting in import.

The trick to PV is to use it while you are generating it. Switch items such as washing machines etc on when the weather is good, and at times when your system performs best. Last year my household consumed approx 3,000kWh of leccy, but despite generating 4,600kWh of PV leccy we only consumed 1,400kWh of it and so still had to import (and pay for) 1,600kWh from the grid. The 3,200kWh we exported is not netted off.

Mart.

matelodave

When you say that the leccy co puts your bills up are you actually checking whether it's your consumption is increasing or just the costs.

System

FWiW, the Energy Savings Trust used to indicate that 50% of the predicted annual PV solar output would be used in the home. In truth, the average figure is much less. Why - because people are not at home during the day to use the electricity that PV generates. Some people have installed additional equipment to divert any used generation to the hot water tank immersion heater.

I am retired and at home most days. We have a 2.15kWp system which generates about 1900 kWhs of electricity a year. We work hard to harvest all the 'free' electricity that we can and I estimate that my consumption from the grid has fallen from 3500kWhs to 2400kWhs per year as a result of PV Solar. The important thing to bear in mind is that if electricity prices were to increase by 10% then my bill for the 2400kWhs would increase as a result. To offset this, my FIT payment increases by RPI each year.

fannyadams

So if I have interpreted this correctly. for those of us who are out at work all day it would be inefficient/not very money saving to have solar panels installed to generate electricty to 'sell' to the energy company because we would have to 'buy' electricity at (presumably) a higher price for when we came home.
WOW! I never realised this!

Martyn1981

fannyadams wrote: »

So if I have interpreted this correctly. for those of us who are out at work all day it would be inefficient/not very money saving to have solar panels installed to generate electricty to 'sell' to the energy company because we would have to 'buy' electricity at (presumably) a higher price for when we came home.
WOW! I never realised this!

Hi. There's more to it, and you would need to compare all income against the install cost to work out your individual return on investment.

As well as leccy savings there is also the export payment, and thirdly, the subsidy payment called the feed in tariff or FiT.

Even a household that is out during all daylight hours would still save on their leccy bills due to PV generation covering baseload. Even a small system in poor(ish) weather should cover baseload most of the time during the generation period. So that'll probably add up to £60 to £80.

In reality, on top of that will be additional demand during early evenings (in the BST months) and holidays, weekends etc. Plus any devices set to come on with timers such as dishwashers, washing machines etc.

Some installers will suggest you'll use 50% of what you generate, but that's a very high and hard target, especially for larger systems. I suggest a guesstimate of £120 (£80 - £160) for those pondering PV.

For those considering PV the ROI should be calculated first, to decide if it's 'good enough' to proceed. For example:

If you have a good location, south facing roof, that can accomodate 4kWp of panels, and get a very competitive quote of £5k, then you may see:

FiT 4,000kWhs of generation @ 13.88p* = £555.20
Export (deemed at 50%) 2,000kWhs @ 4.77p = £95.40
Leccy savings £120.
Total £770.60
Gross ROI of 15.4% (£770/£5,000)

But, if a smaller, more tricky, off-south, slightly shaded roof of 3kWp and £4.5kWp, then you may see:

FiT 2,100kWhs of generation @ 13.88p* = £291.48
Export (deemed at 50%) 1,050kWhs @ 4.77p = £50.08
Leccy savings £100.
Total £441.56
Gross ROI of 9.8% (£442/£4,500)

So research, haggling and asking for advice are important.

*The FiT rate will be degressed by 3.5% to approx 13.39p on 1/4/15 for installs on and after that date.

Mart.

Lurker21

Martyn1981 wrote: »

FiT 2,100kWhs of generation @ 13.88p* = £291.48
Export (deemed at 50%) 1,050kWhs @ 4.77p = £50.08
Leccy savings £100.
Total £441.56
Gross ROI of 9.8% (£442/£4,500)

What about the writing off of the capital cost, plus the cost of a new inverter after maybe 10 years? What would that do to the rate of return?

Also, does anyone have any info on whether solar panels affect a property's value? (Upwards or downwards).

Martyn1981

Lurker21 wrote: »

What about the writing off of the capital cost, plus the cost of a new inverter after maybe 10 years? What would that do to the rate of return?

Also, does anyone have any info on whether solar panels affect a property's value? (Upwards or downwards).

Yep, important factors to consider, and why I was careful to say gross ROI.

The panels should be good for 25 to 40 years, but since the FiT is only paid for 20 years, that's probably the appropriate timescale to depreciate the panels, since, as you say the capital is lost. So that's an annual 5% depreciation. Also consider the cost of capital, if you cash in a 2% ISA, then the PV has also cost you that lost 2%. So perhaps (in this example) deduct 7% from the gross ROI to work out if you make a profit (total income less total costs) in year 1.

Calculating for the inverter is going to be harder, since you don't know when it'll fail. Two of my inverters have 5 yr warranties, the other came with a 12yr warranty, which can be extended to 20 years for ~£200. But lets assume 10 to 12 years and a replacement cost of £1,000.

However ........ the FiT and export are index linked and will rise during that 10-12 years. Also, the gross income (including the written of 7% for depreciation and cost of capital) has been building back up in the savings account and earning interest each year too, so both the gross and net ROI will be rising each year.

I appreciate that I'm overcomplicating this, but hopefully you can see that it's not simple to come up with a figure in yr1 that follows through yr2, yr3 and so on.

Another way to do it might be to assume that the install is paid via a repayment mortgage, that way you don't have to worry about cost of capital, or depreciation, just the monthly figure needed to pay it off after 20 or 25 years. You can even add an extra £1k to the outstanding debt after 12 years, for an inverter.

A £5k repayment mortgage @ 4% for 300m (plus the £1k at month 145) works out at £30pm or £360pa. So if you can 'earn' more than that in year 1, then that's probably the point at which it starts to make some sense. But that's just a thought exercise for those wishing to include or account for the capital cost, and cost of capital.

Hope I'm not making this too complicated .......

I suspect most people would simply look for a gross ROI of about 10% (or better) so that the capital will be back in 10 years, and that leaves another 10 years of FiT, plus any extra years of leccy savings after that period.

Mart.

System

Lurker21 wrote: »

What about the writing off of the capital cost, plus the cost of a new inverter after maybe 10 years? What would that do to the rate of return?

Also, does anyone have any info on whether solar panels affect a property's value? (Upwards or downwards).

You need to sit down and do your own sums. Installers will want you to take into account the increase in FIT payments each (RPI increase) and the historic increasing cost of electricity. When I did my sums 4 years, I ignored everything but FIT and export payments at the then rate, and electricity at the then cost. It gave me a 10.5 years RoI which with increasing FITs and electricity savings has come down to 9.5 years. Yes, I am going to have to factor in a replacement inverter but from Year 11 through to Year 25, I will have an income of over £15K.

The FIT payment period has fallen to 20 years, and FIT rates have reduced in line with the fall in PV solar installation cost. This is why people need to take advice and do their own sums. Add a Home Loan (at 10% interest) into the equation and the sums can become very complicated in that the income generated will not cover the loan repayments in all cases.