Ripple Energy wind farm?

k_man

FYI, email from Ripple warning that Kirk Hill is unlikely to be live/energised until next year, rather than Nov as planned.

This is due to delays with the grid connection, which is provided by the DNO, so out of Ripple's control.

mamoulian666

Martyn1981 said: 

To get your figure of £10,495 interest, you need to apply compound interest, leaving the capital and interest to grow.

Ah, thanks! Yes indeed I didn't take compounding the Ripple payments into account.

I think your figures are correct.

Removing compound interest from the calculations, to get a total of £10,400 in yearly interest payments (total rather than yearly to avoid trying to handle the different first year payment) would take 6.78% interest. That looks much better!

But the original investment of £3,835 seems quite likely to be worth £0 by the end of the 40 years.

I'm not sure how to fairly compare taking that into account as any adjustments give lower yearly payments, but overall at 4.28% the total non-compounded interest on £3,835 would be £6,565.52 which would be added to the original £3,835 to give £10,400.52.

What do you think, 4.28% as a rough equivalence guide?

mamoulian666

andyg9053 said:

When I signed up to the first wave, I bought 1900 ish and was expecting less than 200 pa. I have had about 270. 

Why's that? Better generation than expected? Or the saving rate Ripple negotiated with the supplier is higher than laid out originally?

andyg9053 said:

This coming year I should get about 800as the price has been volatile. 

How does that work? I thought the saving rate in pence per kwh was negotiated and fixed for a year upfront? Or have (pre-savings) tariff charges dropped since the last Ripple negotiation?

NedS

mamoulian666 said:

paul991 said:

The point is its not a purely investment point of view.The same when we had pv fitted in 2014 and put money in to Graig Fartha but both now look like very good investments

The first half of my post is from a 'not as investment' point of view. I WANT to co-own my green energy supply but my head needs to get involved as well as my heart. Despite co-owning the energy generation my bill would still be driven by the wholesale energy market that should be no longer relevant. The supplier gets to take an easy no-risk profit of whatever they like.

Yes that's great for those on the earlier projects. But the new project 3 calculator takes into account the current and forecast high prices so unless it turns out that the energy market exceeds that it's going to be that 2.5%.

I had a hard time evaluating Ripple from a traditional investment perspective. On paper, investing in one of the main solar funds in a S&S ISA that pay ~7% dividends (tax free), mainly linked to inflation with the prospect of some capital growth too seems more attractive than investing directly in Ripple where returns look lower and your asset depreciates to nothing.

However, I believe Ripple is best viewed as purchasing a hedge (or insurance) against high energy prices. If energy prices are low, you are happy because you are paying a LOT less for your energy bills, but your Ripple 'investment' will perform relatively poorly, but you'll likely be better off overall due to the LOW energy bills. Conversely, when energy bills are high, Ripple will do really well and offset some of that increase for you, but overall you are probably still worse off despite Ripple performing really strongly. So perversely, you'd probably always wish Ripple performs badly as that will save you the most cash - it's a bit like insurance against high energy prices - you buy it but hope you will not need it.

How you compare an energy price hedge against a traditional investment, I really don't know. I have quite large amounts invested in solar and wind farm funds which generates enough in dividends to cover my electricity bills. I don't need to worry about generating way more electricity than I can use in the summer when it's sunny and giving it back to the grid for peanuts and then buying it back at 10 times the cost over night, or generating next to nothing in the  winter when my bills are sky high - the dividends roll in all year round evenly spread and I benefit from everything produced, and I don't have a depreciating asset on my roof that has to repay my capital outlay.

I also buy crude oil in my S&S ISA when the price is cheap and use it to fund my heating oil purchases when oil prices are high (my oil tank only holds 1000L of physical oil whereas my S&S ISA can hold 100,000L of virtual oil so I can stock up when it's on sale to help smooth price volatility). However, how else would you hedge electricity prices - maybe they correlate with natural gas prices so buying a natural gas ETF when it's cheap and selling it if gas prices spike to help offset electricity price rises. But hopefully electricity prices will not always be linked to gas prices in the UK once renewables and nuclear are dominant and the UK can break that link to gas prices. We have all but eliminated coal and eliminating gas is clearly next.

mamoulian666

NedS said:

However, I believe Ripple is best viewed as purchasing a hedge (or insurance) against high energy prices. If energy prices are low, you are happy because you are paying a LOT less for your energy bills, but your Ripple 'investment' will perform relatively poorly, but you'll likely be better off overall due to the LOW energy bills. Conversely, when energy bills are high, Ripple will do really well and offset some of that increase for you, but overall you are probably still worse off despite Ripple performing really strongly. 

Thanks for the reply.

This is a major reason I want to buy into Ripple but on reading how they arrange things I'm not sure it's quite as good as I'd like.

Suppliers can increase their tariff mid-year and our bills would go up but savings would not.

The yearly negotiation seems to be closed and we don't know how much clout Ripple have going into them. Could they get us better savings? Don't know. They're not particularly incentivised to do so.

So comparison wise I'm left at - from earlier post - 4.28% based on their calculator based on the highest government estimates. More if those estimates turn out to be low. Less depending on the mid-year timing.

As you say I have to consider this vs say 7% ISA investing in renewables, or getting my own solar panels and battery system. Either of those also provide better returns when the wholesale energy market is higher.

Martyn1981

mamoulian666 said:

NedS said:

However, I believe Ripple is best viewed as purchasing a hedge (or insurance) against high energy prices. If energy prices are low, you are happy because you are paying a LOT less for your energy bills, but your Ripple 'investment' will perform relatively poorly, but you'll likely be better off overall due to the LOW energy bills. Conversely, when energy bills are high, Ripple will do really well and offset some of that increase for you, but overall you are probably still worse off despite Ripple performing really strongly. 

Thanks for the reply.

This is a major reason I want to buy into Ripple but on reading how they arrange things I'm not sure it's quite as good as I'd like.

Suppliers can increase their tariff mid-year and our bills would go up but savings would not.

The yearly negotiation seems to be closed and we don't know how much clout Ripple have going into them. Could they get us better savings? Don't know. They're not particularly incentivised to do so.

So comparison wise I'm left at - from earlier post - 4.28% based on their calculator based on the highest government estimates. More if those estimates turn out to be low. Less depending on the mid-year timing.

As you say I have to consider this vs say 7% ISA investing in renewables, or getting my own solar panels and battery system. Either of those also provide better returns when the wholesale energy market is higher.

Hiya, only my suggestion, but getting PV (yourself) is almost certainly the better first option. Whilst the capital cost of domestic PV is proportionately more than that for a PV farm, domestic PV has lower (almost nil) OPEX, and offsets retail rates (plus wholesale (export)), whereas the farm sells at wholesale.

However, some snags. Currently, domestic installs are pretty expensive, as demand has rocketed due to the high leccy price and limited installers. I assume some cost impact for a PV farm too, but it may be small, especially now that the cost of silicon wafers and panels(?) is starting to fall fast.

Secondly, there will be folk like me who have PV, but can't add more, due to DNO limitations on their exports. There may be some ways round, such as my hopes to add a small ground mount feeding into a DC input on a battery. But this will require getting a zero export permission from the DNO on the battery install, as it will grid tied.

Thirdly, some folk won't be able to install PV, depending on their circumstances (renting?) or property type (flats?) so being able to directly own PV (or wind) will help to satisfy their desire to invest directly in a scheme linked to their own leccy consumption. [I think this is distinct from just investing in RE funds (which I've done) that offer financial gains, but don't quite feel the same, nor impact bills.]

Lastly (though there may be other reasons I haven't thought of) there is the cost side, and the Ripple model allows for very small investments, and the chance to increase these over time by investing in more schemes. Obviously a home based PV install can't be done that way, certainly not economically, so you get a way to eat the elephant, one slice at a time, perhaps?

Looking at your figure of 4.28%, or thoughts on your own install, plus other options, they all seem reasonable to me. None are perfect, none are poor, so the more options and choice the better. Just a shame we are currently in such an unusual situation, with leccy prices and domestic PV prices being so high due to the war in Ukraine. Hopefully in a few years, as demand for gas falls, some normality will be restored, and it will become easier to compare all of these schemes and ideas, I hope?

Martyn1981

mamoulian666 said:

Martyn1981 said: 

To get your figure of £10,495 interest, you need to apply compound interest, leaving the capital and interest to grow.

Ah, thanks! Yes indeed I didn't take compounding the Ripple payments into account.

I think your figures are correct.

Removing compound interest from the calculations, to get a total of £10,400 in yearly interest payments (total rather than yearly to avoid trying to handle the different first year payment) would take 6.78% interest. That looks much better!

But the original investment of £3,835 seems quite likely to be worth £0 by the end of the 40 years.

I'm not sure how to fairly compare taking that into account as any adjustments give lower yearly payments, but overall at 4.28% the total non-compounded interest on £3,835 would be £6,565.52 which would be added to the original £3,835 to give £10,400.52.

What do you think, 4.28% as a rough equivalence guide?

Just a thought, but something is nagging at me. I'll just say it out loud - index linking?

I'm not sure about this, so don't want to disagree with your 4.28% figure, but the fact that the Ripple income estimate reaches £248 in year 16, and stays at that exact figure through to year 40, makes me suspect it's based on a current cost price, and not index linked.

Obviously, a fixed interest account doesn't benefit from index linking, but if the Ripple model is excluding it (only my suspicion), then the comparable rate will be much higher than 4.28%. For instance at an inflation rate of 3%, then prices will have doubled after 23yrs*, potentially doubling the income estimates.

I'm not sure this is right, so I'm not saying your figure is wrong, it looks correct, but if there is an index linking issue, then the value of the Ripple model is much, much higher.

What do you think? Not trying to put words into your mouth.


*Obviously at the moment we have to consider falling prices, when the market returns to stability, hopefully within 5yrs, certainly within 10yrs, if the European gas demand can be reduced to balance out the 'loss' of Russian gas. But that appears to have been included in the model, given that it shows a rapid decline in income over the first 6yrs of operation (£415 falling to £212), before a small rise, then settling flat.

Just for fun, I added 2% inflation to the £248 in year 16. I didn't change the earlier years as things are so crazy at the moment. Then compounded it going forward, so year 17 was multiplied by 1.02 squared, and so on. This lifted the end total to £23,749. But of course 2% may be too low(?), and a 'normal' inflationary lift should be used for the first 15yrs, aside from falling prices, since these are already reflected. Don't take this too seriously, I've gone down many rabbit holes to get here! 

mamoulian666

Martyn1981 said:

Just a thought, but something is nagging at me. I'll just say it out loud - index linking?

Good thought...

It depends if the wholesale energy market price forecasts that their calculator is based on account for inflation. As they go to 2040 you'd think they would have considered it. I can't see any mention of it in the linked document.

Inflation will probably raise the network and supplier's costs which will push down the savings.

Edit: farm operating costs will probably raise too

Exiled_Tyke

Martyn1981 said:

 Don't take this too seriously, I've gone down many rabbit holes to get here! 

Oh Crikey what holes you have disappeared down now Martyn!!! 

I believe you are right in your assumptions on index linking as the Kirk Hill prospectus estimates a higher unit return for the first year and then settling back to a more modest figure (4.3p?) for the entire remaining term.   I think the argument here would be that as electricity prices will broadly (and more likely in the long term) move in line with general inflation then no inflation adjustment is needed in calculating how much spending power the returns will have in the future.  They should in theory be about the same as today.

However:

1. As we all know after many years of stability in electricity prices they have suddenly become very volatile. And so we are back to the hedging argument. This investment is protection against such volatility and this is probably more important than absolute returns. 

2. Some may believe that electricity inflation may be higher than general inflation for the foreseeable future, in which case this will turn out to be a better investment than it currently appears.  Given uncertainties on the future of gas, renewable energy production levels (short and long term), storage, nuclear roll out delays etc. there may be a case for this argument. 

3. If we are comparing Ripple to other investment opportunities then as you say this suddenly becomes much more significant.  If your and my understanding is correct then this will be a leveller in looking at the attractiveness of Ripple as the alternatives mentioned are in effect index linked. 

Personally I'm not overly concerned about the negotiated rates Ripple can achieve.  I would expect there to be a fairly efficient market in forward contracts for electricity and Ripple will be achieving these alongside other generators. So prices should be fair.  I'm guessing this is the way much of the market works to aid stability to the consumer.  Ripple seems to have performed well at looking after customers so far (ok in a very short timescale) in a volatile market.   There obviously is some exposure to energy companies increasing their rates but less so than without the investment at all. 

andyg9053

mamoulian666 said:

andyg9053 said:

When I signed up to the first wave, I bought 1900 ish and was expecting less than 200 pa. I have had about 270. 

Why's that? Better generation than expected? Or the saving rate Ripple negotiated with the supplier is higher than laid out originally?

andyg9053 said:

This coming year I should get about 800as the price has been volatile. 

How does that work? I thought the saving rate in pence per kwh was negotiated and fixed for a year upfront? Or have (pre-savings) tariff charges dropped since the last Ripple negotiation?

The first year was more than anticipated. This year which started on the 1st of this month has been basically tripled.