Can you run an all electric house for free?

Heedtheadvice

Trying to put some figures on crumpets query regarding investment.

I well remember early in Solar panel considerations, the Consumers Association concluded that you would be better investing your savings than buying solar panels. I forget all the details but taking into account the typical return, inflation and the fact that you still have the asset available to spend if so desired/needed, solar lost out financially.

A lot has changed since their assumptions not least costs and the newer tariffs. However using Solarchasers figure and a very broad brush back of fag packet calculations.

 For ease consider the last five years, assuming that is round about the time the 12.5k was spent.

Today that £12.5k would need to be 16k to keep up with inflation.

Stock market gains and conductance varies enormously and is high risk. As an example ( from my pension) one fund has increased 150% in that time so the 12.5 would have turned into £30k approx. So in real terms a £17500 gain.

That is from a fund thst has done well and no income derived from it.

Those that have provided a typical 4% income have risen about maybe 50% in that time to approx £18.5k.

So beating inflation and producing and increasing £500 per annum.

Very rough calcs but the second case is perhaps useful for a comparison.

Of course, not for the first time, some put their pension in one investment  managed by a leading fund manager and lost the lot!

I like some of both renewable generation and investment diversification....

EricMears

We've had 4kWp of panels on our roof since Sept 2011.  Initial cost was £12,500.  Total receipts from the FIT scheme have been £28,500.

In every complete year since 2011,  our annual FIT income has exceeded our annual electricity bill.  A couple of years ago,  I invested around half of the £16k 'profit' in fitting a home battery system so since then our average cost per kWh has been around 8p.

Solarchaser

Heedtheadvice said:

Trying to put some figures on crumpets query regarding investment.

I well remember early in Solar panel considerations, the Consumers Association concluded that you would be better investing your savings than buying solar panels. I forget all the details but taking into account the typical return, inflation and the fact that you still have the asset available to spend if so desired/needed, solar lost out financially.

A lot has changed since their assumptions not least costs and the newer tariffs. However using Solarchasers figure and a very broad brush back of fag packet calculations.

 For ease consider the last five years, assuming that is round about the time the 12.5k was spent.

Today that £12.5k would need to be 16k to keep up with inflation.

Stock market gains and conductance varies enormously and is high risk. As an example ( from my pension) one fund has increased 150% in that time so the 12.5 would have turned into £30k approx. So in real terms a £17500 gain.

That is from a fund thst has done well and no income derived from it.

Those that have provided a typical 4% income have risen about maybe 50% in that time to approx £18.5k.

So beating inflation and producing and increasing £500 per annum.

Very rough calcs but the second case is perhaps useful for a comparison.

Of course, not for the first time, some put their pension in one investment  managed by a leading fund manager and lost the lot!

I like some of both renewable generation and investment diversification....

I guess if you were to take it purely financial, as you said, it could go up or down.
And perhaps im unique in this, but while I'll admit, I was hoping to save a bit, or break even hopefully, solar was always more of an interesting project for me personally.

The idea that something can just sit on your roof, completely inert, and yet power your house, was just cool.

I mean thermal plants, yeah fair enough, but they mostly just create steam, how very 1800's, nuclear is madness in my opinion, the waste half life is horrific, and wind, cool also, but they have to be huge to be useful and as a rotating mass, need maintenance, but solar, just a panel sitting there, doing nothing, making no noise and powering your house. Madness, very cool madness.

Anyway the 12.5k if we were to adjust for inflation, everything would need to be adjusted really. 
I assume the inverters i got for £750 each would perhaps be £1000 each now... or more likely i could get 1 for £1000 that would do more than both put together.

The 300w solar panels i bought for £80 each, would be replaced by 500w's for the same cost, so for 6600w id need 14 instead of 22, so £1100 instead of £1800.
Inverters are still £60-100 off ebay. 
But 60kwh of batteries are £5400

So the cost of it all comes down in price if bought now would be more like £8500, all things being roughly equal, so a quicker payback.

To be honest one of the children started talking to me in the middle of this post, so im not sure this was what I was trying to say 🤦 but just offering more current calculations.

QrizB

Heedtheadvice said:

Stock market gains and conductance varies enormously and is high risk. 

This gets discussed extensively and in depth over on the "Pensions" forum for all the reasons you'd expect!

One of the forum regulars is a bit of a data wonk. Here's one of their posts from a year or so ago:

https://forums.moneysavingexpert.com/discussion/comment/80783806/#Comment_80783806

In it they suggest that the median annualised real (after inflation) return on stock market investments is around 5%. That might be a reasonable place to start when trying to compare.

Heedtheadvice said:

For ease consider the last five years, assuming that is round about the time the 12.5k was spent.

Five years ago, then, spending the £12.5k would have incurred a cost of £625 (the avoided investment gain of 5%) plus inflation (which was around 0.6% in Dec 2020), another £75. £700 total.

You also need to write down the capital costs. Exactly how long to write them down over can be debated, but shall we say ten years? So £1250 a year for a decade?

So the costs in 2020 would have been £1950.

I don't know how much Solarchaser would have been paying in energy bills in 2020, but his numbers in his opening post suggest he's using 24000 kWh a year:

Solarchaser said:

I bought a total of 29053Kwh.
Of that 4812Kwh was used to charge two electric cars, the rest was house consumption. 

At 2020 prices of 14p/kWh ( ) 24000kWh would have cost £3360. That's quite a bit less than £1950. 

Heedtheadvice said:

Today that £12.5k would need to be 16k to keep up with inflation.

Five years on, of course, and we've already written down 50% (5 years at 10% a year) of the capital costs. That £16k is instead £8k.

Costs for 2025 will be £400 (5% of £8k) plus £304 (3.8% CPI of £8k) plus £1250, total £1954.

Avoided electricity use of 24000 kWh, at today's 25p/kWh, is a £6000 saving.

Put another way:

Amortized over a decade, and assuming 2020 prices, £12.5k will have avoided £33.6k of electricity purchases. That's roughly a 10.5% compound ROI.

At 2025 prices, £16k will avoid £60k of electricity purchases over a decade. That's around 15% compound ROI.

The big caveat, of course, is that we don't know that it will remain possible to arbitrage electricity like this - buy it low, sell it high - for the next decade, and nor do we know what the margin between purchase and sale will be. I occasionally get pooh-poohed in theads like this for reminding people that you shouldn't make long-term investment decisions based on short-term market trends, and it's only been a few years where Octopus has been happy to pay 15p/kWh fixed for export; before that it was quite a lot less. In 2021, for example, Outgoing was only paying 5.5p/kWh. If prices return to those levels the economics will flip around.

Screwdriva

QrizB said:

At 2025 prices, £16k will avoid £60k of electricity purchases over a decade. That's around 15% compound ROI.

£15K will easily purchase a 15kWp of quality panels paired to a Tesla PW3. To your point, I expect the ROI will be closer to 18-20% when leveraging lucrative tariffs like Intelligent Flux (~25p+ per kWh on average), but who knows how long these will be around. 

My contacts at Octopus tell me no plans to change tariffs in the foreseeable and that their company is keen to prioritize renewables over profit, to promote these technologies. Make hay while the sun shines I always say...

Heedtheadvice

Yep, as you both wrote there is more ways than one to skin a cat! Plus all the caveats that we can think of must apply.

I like Solarchasers approach, where would we be without something interesting to do other than work! My 'investment' ( in time and money) in Solar and associated systems is partially along similar lines but also to be greener and being fincially attractive. I guess many posters on GEMS have a similar attitude.

Re pensions and returns, that link gives a very sensible way of perceiving predicted outcomes. Some will do better and some poorer and systematically a Monte Carlo model should  indicate the spread quite well, assuming history is maintained.

I do not feel too bad at both my solar and pension performance :-:smile:

Ectophile

JKenH said:

Ectophile said:

Martyn1981 said:

And there's also the tax side to consider, which hit the news a few days ago.

Over 18,000 UK solar panel owners could face £100 HMRC fine this Friday

Thousands of UK homeowners with solar panels could be hit with unexpected £100 fines this week as the HMRC paper tax return deadline approaches.

Many are unaware that income earned from selling unused solar energy back to the grid could push them over the £1,000 tax-free trading allowance.

With the deadline falling on Friday, homeowners are being urged to check their earnings now to avoid costly penalties.

Of course, not applicable to the majority with small(ish) export earnings.

It's also worth knowing that FIT payments are tax free, but you may get taxed on export payments.

So are you suggesting deemed export will be taxable as well as metered export? I never understood why FiT was tax free.

Good question, well put.

I haven't the faintest idea.  I was comparing FIT to SEG.  But I don't know if deemed export payments are taxable or not.  In my case, they don't amount to much anyway.

FIT was created to encourage people to install solar when it was still expensive.  Giving you an extra income and then immediately taxing you on it would have put a dampener on the whole thing.

debitcardmayhem

If they try to tax-it, can you claim expenditure against it. Mind you Reeves will add NI to it  too.

Qyburn

debitcardmayhem said:

If they try to tax-it, can you claim expenditure against it. Mind you Reeves will add NI to it  too.

You should be able to if they're really treating it like business income. Capital allowance on the original outlay.

greenbee

debitcardmayhem said:

If they try to tax-it, can you claim expenditure against it. Mind you Reeves will add NI to it  too.

I was wondering about this in relation to the post about having to declare SEG income on tax returns. Surely if you're being taxed on the income then you should be able to claim tax relief on the costs? In which case how do you work it out? Do you depreciate (because it's a tangible asset) over the 10 years suggested by @QrizB (or would you calculate the depreciation based on the warranty period for each element of the installation?) and then offset that amount against the income? Or do you claim that in Y1, and then only maintenance/support costs from Y2 onwards?

Presumably someone at HMRC has the answer to this...