Solar Panels and savings

nonolerigolo

Hello, I wondered if solar panels give same return as savings/investing as per example below. 

Solar panels plus battery £10,000. Expected electricity bills reduction £500. Rate of bill reduction will reduce with year in service. Solar panels expected to generate electricity for 25 years. 

 Is it effectively the same as a 5% return on saving/investments. Any thoughts appreciated  Thanks

masonic

You could consider solar panels to be equivalent to a long term illiquid investment. The actual returns will vary, depending on the amount of sun, any maintenance costs, and how long the panels will last. Investing in solar panels is not equivalent to savings, where you know exactly what return you will get in the short term, and if the return proves insufficient, you can reinvest elsewhere.

nonolerigolo

Thanks so effectively in my case it is better not to install solar panels as return similar to current investment savings of 5% ish but without highlighted downside (maintenance or not getting enough sun? 

I imagine there may be a point where solar panels may be considered for example if return is >10%. This would not be the case in my case.

grumbler

On the  Energy   and  Green & ethical MoneySaving  boards you are likely to get a better advice on the accuracy of your figures.

nonolerigolo

The figure were provided by an solar panels installers and are specific to my house. 

This takes into account high current electricity price likely to decrease in the second part of the years.  Therefore likely to be less than 5% for the solar panels

wmb194

Don't bother with a battery. How does this change your sums? 

The other thing to bear in mind is the onward march in electricity prices so having panels gives you a hedge. You'll be unlucky if they require any maintenance.

nonolerigolo

Solar panels without battery: £5,200. Estimated electricity savings £400. 

Why not bother about the battery? I thought the battery would be useful as I may not be able to use the electricity at the time it is produced.

spider42

nonolerigolo said:

 Is it effectively the same as a 5% return on saving/investments. Any thoughts appreciated  Thanks

It isn't the same as a savings account. If you put £10,000 in a savings account and leave it there for 25 years, then you get your £10,000 back in 25 years time (plus interest). If the solar panels last 25 years, then at the end of the 25 years, you've completely lost the £10,000, and have only the £500 annual savings.

The £500 annual savings, when combined with a full loss of the capital, are equivalent to an internal rate of return of about 1.8%. But the annual savings will be very difficult to estimate 25 years into the future, so there's a high degree of unreliability in these estimates.

jimjames

nonolerigolo said:

Solar panels without battery: £5,200. Estimated electricity savings £400. 

Why not bother about the battery? I thought the battery would be useful as I may not be able to use the electricity at the time it is produced.

Battery cost £5000 and saves £100 of electricity per year so that's 50 year payback. Solar panels cost £5200 and saves £400 of electricity so 13 year payback. That's the main reason. 

grumbler

nonolerigolo said:

Why not bother about the battery? I thought the battery would be useful as I may not be able to use the electricity at the time it is produced.

Absolutely. And, I'm no expert, but I've heard that there are no decent feed-in tariffs available now. That's why I suggested to ask on other boards where people are more knowledgeable on this.
Your £400 figure is likely to be biased (compared to £500). How much energy do you really use in daytime in summer when the most energy is produced by the batteries? If you have a hot water cylinder, then solar water heating panels can be a more efficient investment.

wmb194

nonolerigolo said:

Solar panels without battery: £5,200. Estimated electricity savings £400. 

Why not bother about the battery? I thought the battery would be useful as I may not be able to use the electricity at the time it is produced.

Because they're very expensive, often don't store much and for a lot of the time you won't be producing much surplus energy anyway e.g., winter. It's also a bomb sitting under your stairs...

Removing them from your calculation has already improved your simple return to 7.7% pa..