Solar & battery - are they worth it

Aussie_Tips

Spoiler alert - the answer is yes

I've read a few threads where there is some debate about the ROI of solar.

My view is that whilst a clear ROI might be good, there are a lot of variables (cost & size of system, efficiency of the property, tariff used, dual/single fuel, etc) that can make it look good or less good. Also ROI depends on how much you spend & how much you save. Solar & battery systems can be fully installed for under £1k/kwp of solar & under £500/kWh of battery. So a fair sized system, say 5kwp of solar & 6kwh of battery can be installed for around £8k

So I looked at it another way. Doing a solar/battery install wasn't just about ROI for me. Yes I wanted to get some payback, but I thought about it like replacing a bathroom, kitchen or car. I didn't do an ROI, I more looked at affordability. That said, I wanted any money I spent to provide 

1. Some cost reduction in energy bills

2. Price protection for future rises 

3. Investment in my property rather than the big 6 profits

4. Lastly I'm doing my bit to reduce my carbon footprint

With all that said, I thought it was worth a simple maths experiment for those who think there's no or minimal ROI

Baseline - Imagine a household with an average consumption of 10kwh per day and £8k in the bank. Each year the £8k will earn say £400 in interest (based on 5% return) and their electricity will cost just over £1k (based upon 27p/kWh) - that's a net loss of £600. So after around 13 years the £8k savings would be effectively gone and there would still be an annual bill of £1k. After 20 years they'd be down -£7k and getting worse by £1k every year 

Solar & battery - The market price for 5kwp of solar is around £4k, and a 10kwh battery is around £4k fully installed (I know it varies depending on complexity etc - but this is the market price). So a 4kwp array & 10kwh battery should cost around £8k

If sized correctly, the system would cover a proportion of the household consumption - let's say 50%. So the peak rate part of the annual bill will be say £500, with 1800kwh (5kwh/day) being off-peak via battery. So thats 45p/day (based on off-peak tariff at 9p/kWh) or £160 per year. So the total annual electricity bill would be £660.

We also know that 1kwp of solar will generate roughly 0.8-1Mwh per annum. Using the low end figure of 0.8Mwh, if this was all exported at 15p/kWh it would make £120. So a 5kwp system would return £600 per year if everything was exported. This would give you a net annual electricity bill of around £60. 

Think about that for a minute - that's £60 for the entire year!! 

After 9 years, you've recouped the £8k outlay. Years 10-20 you would be saving £1k per year by not having to pay your electricity bill, so you'd have £11k in the bank. After 20 years that's a net position of being almost £18k better off than the baseline position - and that's before you add interest on those savings.

And all the above doesn't take into account beneficial tariffs like Octopus Cosy where you can get 3 off-peak charges per day 🤯 - which would make this even better - especially if your consumption is driven by a heat pump

Now I know this is "man maths" and based on known knowns like export tariffs, and it doesn't factor in replacement kit over time, but neither does it factor in price rises in electricity costs or reducing costs of solar & battery. It also assumes only a 50% offset of peak rate consumption. If you increase this offset, say to 60% then £400 peak, £200 off-peak - net annual bill £0. Or 70% £300 peak £250 off-peak - net annual bill of £50 credit. 80% £200 peak, off peak £250 or roughly £150 credit on your annual electricity bill. 

Bottom line - if you want to reduce your household running costs it makes more sense to have solar & battery rather than money in the bank, and it only gets better the more you use it.

If you want to read more about my solar journey, have a read of this MSE Forum post
https://forums.moneysavingexpert.com/discussion/6621649/my-experience-of-getting-and-running-solar-and-battery