Green investment - funds vs solar system

Newbie_John

Just curious about your opinion.

I can see around huge interest in people buying solar panels and batteries while at the same time lack of interest in renewable energy investment trusts.

Using basic info from MSE articles, let's pick up a typical solar system with battery that costs £7000 and generates £700 a year of savings.

On the other hand let's create a investment mix of UKW, SEIT, ORIT, FGEN, TRIG, BSIF, NESF, £1000 in each, £7000 total currently yielding 10% in dividends so about £700 a year.

The moment the solar system purchased for £7000 is installed it loses half of its value (labour, scaffolding costs etc. + the same to remove it and install elsewhere) then its value slowly goes down from £3500 over years to £0 one day. 

Sure there is a lot of unknown especially when we want to compare what's going to happen in the next 10 years - electricity price up or down, export rates, export limits, moving houses, funds wind-up, dividends cut, share price loss etc.

How do you compare these two?

InvesterJones

From a pure investment perspective you just have to model out expected return - cost over your investment period and compare it with likely return from any other investment. But that's not the sole reason people install solar on their houses.

Newbie_John

Sure there can be other reasons, but I've asked on the "investment" section just to get some thoughts from investment point of view.

If we take into consideration 10 years window.
- solar system will have negligible value
- electricity demand will only go up with time
- interest rates should be going down improving funds profits (at least in the next few years)

The unknown:
- electricity price, no idea, it can be 40p/kWh or it can be 15p/kWh in 5 years time, but either way, it would impact both investments the same way
- share price, it's been going down for a while but has it reached it's bottom? Will they be worth more or less than now? 
- export rates and limits, with more and more houses getting solar the grid will reach it limit at some point
- political changes impacting net zero policies etc. Vs potential AI bubble burst - either could have impact on share price

Keeping all of this in mind, I think the solar panels option is much more risky investment..

jimjames

Newbie_John said:

Sure there can be other reasons, but I've asked on the "investment" section just to get some thoughts from investment point of view.

If we take into consideration 10 years window.
- solar system will have negligible value
- electricity demand will only go up with time
- interest 

I don't think you're correct assuming zero value after 10 years. Panels should last 25 years or more and have a value especially if electricity prices continue to rise and it's then a good selling point for a property. Slightly different as I get FIT payments but ours had paid for themselves in under 5 years and now generate £2500 a year in payments with another 10 years of index linking to go.

Newbie_John

jimjames said:

Newbie_John said:

Sure there can be other reasons, but I've asked on the "investment" section just to get some thoughts from investment point of view.

If we take into consideration 10 years window.
- solar system will have negligible value
- electricity demand will only go up with time
- interest 

I don't think you're correct assuming zero value after 10 years. Panels should last 25 years or more and have a value especially if electricity prices continue to rise and it's then a good selling point for a property. Slightly different as I get FIT payments but ours had paid for themselves in under 5 years and now generate £2500 a year in payments with another 10 years of index linking to go.

£7000 solar + battery. £2500 panels, £2500 battery, £2000 installation costs (quick example).
After 10 years time it will cost more to take them down than their sale price. That's why I say £0.
Similar with battery, there will still be some value but cost of decommission and transport will take it down close to £0.
Maybe if you sold together with your house but I'm not sure if I'd pay extra for a house with system set up in 2015 😎

FIT is no longer a case. So I will skip it for consideration.

QrizB

This is one of those "Daddy or chips?" questions, isn't it.

https://www.youtube.com/watch?v=ofqE5n5W5-I

You can make a case for or against both, and it will depend on your personal opinion of how to weight the factors.

Personally if I was starting from scratch I'd put panels on my roof in preference to investing in any of the businesses named, but I can see whay you might decide to take the opposite approach.

Newbie_John

I guess thats the case, your belief.
One thing that really puts me of from solar panels is that every one's math is beautified to support their thinking that it pays itself in 5 years:
- always use capped rate in calculations rather than possible ToU rates i.e. used 3000kWh charging car from solar so saved £750 (at 25p rate) rather than some EV rate of 5p and saving £150
- assume SEG rates will last forever, and will go up in price - there are cases in EU countries when grid can't accept anymore and people are not allowed to export etc.

But I guess the same can be done towards funds owning wind and solar farms that one day UK will drop their pledge for net zero and will move back to gas/coal etc...

Oh well..

jimjames

Newbie_John said:

jimjames said:

Newbie_John said:

Sure there can be other reasons, but I've asked on the "investment" section just to get some thoughts from investment point of view.

If we take into consideration 10 years window.
- solar system will have negligible value
- electricity demand will only go up with time
- interest 

I don't think you're correct assuming zero value after 10 years. Panels should last 25 years or more and have a value especially if electricity prices continue to rise and it's then a good selling point for a property. Slightly different as I get FIT payments but ours had paid for themselves in under 5 years and now generate £2500 a year in payments with another 10 years of index linking to go.

£7000 solar + battery. £2500 panels, £2500 battery, £2000 installation costs (quick example).
After 10 years time it will cost more to take them down than their sale price. That's why I say £0.
Similar with battery, there will still be some value but cost of decommission and transport will take it down close to £0.
Maybe if you sold together with your house but I'm not sure if I'd pay extra for a house with system set up in 2015 😎

Why would you take the panels down after 10 years? There would be no point taking them with you and most people would be happy to have panels cutting their electric bills when buying a house

Newbie_John

jimjames said:

Newbie_John said:

jimjames said:

Newbie_John said:

Sure there can be other reasons, but I've asked on the "investment" section just to get some thoughts from investment point of view.

If we take into consideration 10 years window.
- solar system will have negligible value
- electricity demand will only go up with time
- interest 

I don't think you're correct assuming zero value after 10 years. Panels should last 25 years or more and have a value especially if electricity prices continue to rise and it's then a good selling point for a property. Slightly different as I get FIT payments but ours had paid for themselves in under 5 years and now generate £2500 a year in payments with another 10 years of index linking to go.

£7000 solar + battery. £2500 panels, £2500 battery, £2000 installation costs (quick example).
After 10 years time it will cost more to take them down than their sale price. That's why I say £0.
Similar with battery, there will still be some value but cost of decommission and transport will take it down close to £0.
Maybe if you sold together with your house but I'm not sure if I'd pay extra for a house with system set up in 2015 😎

Why would you take the panels down after 10 years? There would be no point taking them with you and most people would be happy to have panels cutting their electric bills when buying a house

Im comparing like for like case. With shares owning part of solar farms you're free to sell them whenever you want - so they hold the value and generate the income through yearly dividends of 10%.

With solar panels they dont really hold the value - they generate income (just like the funds I listed) - but if you need money now, you can't sell them (can't take them off), only as a part of the house sale - but that again, would I pay extra for a house with 10 years old solar? What if all houses have solar in 10 years, would it make any difference to the house price?

If you really believe in Solar - then Octopus Renewables, Bluefield Solar, NESF should be your first choice - not limited by roof size, fully transferable when you move house, income paid every 3 months..

and that's my main question - why bother with solar panels on your roof?
As you said earlier that they're paid themselves after 5 years, and what you mean there is that you actually started making money after 5 years.. but if you invest, you will start making money from NOW, no need to wait 5,7,10 years.

Heedtheadvice

You have ( carefully?) listed many of the unknowns for both 'investments' I.e the financial perpective but, as has been pointed out, the value of the solar system is ulikely to be 0 in ten years time.

It may well be that the sale value is minimal but the value is in part surely related to the 'dividend' that is generated to the owner, is it not. That divi does not fall off a cliff at 10 years so neither does it's worth to the owner.

You also seem to be ignoring one of the main best methods of investing i.e. Diversification.

Why not do both?

You can rightly claim you have some diversification in your funds (but that is very limited) and a solar system even more limited so you should maybe add in property insulation and the direct social green benefit ( less use of fossil fuels  lower fumes and emissions) at point of use, I.e. where you are?

Aretnap

Newbie_John said:

jimjames said:

Newbie_John said:

jimjames said:

Newbie_John said:

Sure there can be other reasons, but I've asked on the "investment" section just to get some thoughts from investment point of view.

If we take into consideration 10 years window.
- solar system will have negligible value
- electricity demand will only go up with time
- interest 

I don't think you're correct assuming zero value after 10 years. Panels should last 25 years or more and have a value especially if electricity prices continue to rise and it's then a good selling point for a property. Slightly different as I get FIT payments but ours had paid for themselves in under 5 years and now generate £2500 a year in payments with another 10 years of index linking to go.

£7000 solar + battery. £2500 panels, £2500 battery, £2000 installation costs (quick example).
After 10 years time it will cost more to take them down than their sale price. That's why I say £0.
Similar with battery, there will still be some value but cost of decommission and transport will take it down close to £0.
Maybe if you sold together with your house but I'm not sure if I'd pay extra for a house with system set up in 2015 😎

Why would you take the panels down after 10 years? There would be no point taking them with you and most people would be happy to have panels cutting their electric bills when buying a house

Im comparing like for like case. With shares owning part of solar farms you're free to sell them whenever you want - so they hold the value and generate the income through yearly dividends of 10%.

With solar panels they dont really hold the value - they generate income (just like the funds I listed) - but if you need money now, you can't sell them (can't take them off), only as a part of the house sale - but that again, would I pay extra for a house with 10 years old solar? What if all houses have solar in 10 years, would it make any difference to the house price?

You're not comparing like with like though, you're comparing apples with oranges. Solar panels are by their nature a very long term investment. Realistically you are not going to be taking them off your roof and selling them second hand, so trying to assign them a resale value is pointless. However, that's not the same as saying that a ten year old set of panels which will continue to generate electricity for you for many years to come has no value - clearly they do.

I'm also sceptical about how much they will add to your house price, so I tend to agree that they are only worthwhile if you plan to stay in your house for very many years (one reason why I haven't got them). However your last question could just as easily be turned around - if nearly all houses have solar panels in 10 years then one without them might turn out to be difficult to sell. Just as having no double glazing or an ancient 70s central heating system would lower the value of your house today.