Solar instal in Blackpool - lots of questions

[Ian-LS]

Ok its the weekend and I have time to provide some more realistic calculations......

Ok lets say the roof is 15 degrees, south facing and the location is Blackpool. Installed cost is £5,000

Ive inputted inverter and cable losses of 10 % which is on the conservative side as most 3 kW inverters are at least 94% efficient. Using 3 kWp, south facing and 15 degrees with 10 % losses PV GIS Comes out with year one ouput of 2,760 kWh.

Year one annual income and savings;

Feed in Tariff = 15.44p x 2,760 kWh = £426
Export = 50% of 2,760 kWh @ 4.5p/kWh = £62
In house savings with 30% used on site = 0.3 x 2,760 kWh x 13.4p = £111

Total Year One income and savings = £599.

Basic ROI 11.98 % and payback time of 8 years.

20 year income and Savings

£14,905

20 Year Profit

£9,905

Internal Rate of Return (IRR) = 9.91%

* RPI assumed to be 2.5% for FIT and export payments
* Electricity prices rise by 8% for first 5 years and then 5% for remaining 15 years
* Inverter replacement costs of £400 included in year 15

Put the £5000 into an ISA for 20 years at 3% interest you'll end up with £9,030. You'll need an interest rate of 3.5% to match the total profit from a PV system. I'm not saying my assumptions are right but a lot better than the energy saving trusts. I always when doing quotes make sure the finances make sense and offer a good return and are as accurate as possible. As i've said the finances still stack up even for low energy users and are a no brainer for high energy users.

 

[SRE]

Danesol - we're Pansonic Premium installers - but we don't install Panasonic at the minute because for most it doesn't make financial sense. I'd appreciate it - and I'm sure some of the others on this forum would too - if you would stop lumping us in with the shiny suit brigade! It's bad enough having to compete on the ground with the rubbish they spout, without someone tarring us all with the same brush on here. How on earth do you know that I'm out to sell solar no matter what? I've turned down quite a few jobs where I just haven't thought the customer hasn't understood the implications of what they are doing. If someone else wants to do that - it's up them but morally I can't do that.

Take a call today for example. Customer wants 4kwp, has had shiny suit round who has told him he can have it - house will meet D rating no problem. Panels are going on a garage roof - 7m wide (haven't been to measure yet but can you see it being 4m ridge to gutter next to a bungalow??) house can't have cavity wall, has a 7 year old gas back boiler and loft insulation. Can you see a problem??????? I'm going tomorrow to look properly but gut instinct tells me it's going to be too small to be viable and doubtful whether it will hit a D rating even with pv because it's a small system. Why am I going - because we're decent installers who hate to see people screwed over.

Give us a break! There are quite a few on here who do know what they are talking about and do provide really good advice. We're not all out to screw our customers. :frown2:

 

[Gavin A]

Put the £5000 into an ISA for 20 years at 3% interest you'll end up with £9,030. You'll need an interest rate of 3.5% to match the total profit from a PV system. I'm not saying my assumptions are right but a lot better than the energy saving trusts. I always when doing quotes make sure the finances make sense and offer a good return and are as accurate as possible. As i've said the finances still stack up even for low energy users and are a no brainer for high energy users.

It won't you know, as that £9030 includes the initial £5000 investment, whereas including the original investment you'd have £14,905 from the solar.

You'd need around 5.7% compound interest rates on your ISA before you hit those sort of 20 year returns, but with solar you could also be reinvesting each year's incomes (as you are doing with compound interest rates on ISAs), in which case you'd then have a much bigger nest egg at the end of the 20 years, plus a working solar system probably generating something like 85-90% of it's original output, energy savings and hopefully export payments.

So with an ISA investment at 5.7% you need to not touch the income in order to generate the same levels of returns over 20 years, whereas with the solar you can spend your annual savings and income as you earn it and still have had a 20 year 9.9% rate of return - which is what the IRR figure is.

To compare like with like, for an ISA where you could get that return at the same time as spending the interest payments you'd need an interest rate of 9.7%, which is a lot higher than I've seen being offered anywhere.

 

[moggy1968]

well said Gavin, one of the many errors in Danesols calculations is he is taking out the profit from solar, and not from the ISA. If you removed the profits from the ISA every year I don't think the returns would look terribly good!

Any sensible investor knows you should try and use the full amount of your ISA allowance and that includes stocks and shares, not just cash.

If you were to invest just £500 a year from your PV output (a lot less than the actual income) into an ISA achieving the rather poor 2.5% a year suggested by Danesol back into the ISA then you would gain an additional income from your PV, according to my very rough back of a smoke packet calculations around £2500 extra income at the end of 20 years (your ISA would be worth about £12500 compared to the £10000 you have paid in)

It shows your financial naivity that you think 2.5% is a good investment on an ISA. That would mean that in 20 years your money will be worth less than it was when you paid it in, because as sure as eggs is eggs, RPI will be higher than 2.5% over 20 years. PV on the other hand, will keep pace with RPI.

It is also worth pointing out that one of the arguments against solar is that the money you have spent on it is gone, as though you had just thrown it away so it isn't factored in to calculations, but the evidence is that having PV on your roof does actually increase the value of your home.

incindently, my latest ISA, which includes stocks and shares, has gone up 11.5% in the 6 months I have had it, 17% last year and 15% annualised over the last 5 years, but I would still put PV on my roof rather than paying extra into this as PV is one of the best returning and safest invesments you can make.

 

[moggy1968]

No it isnt - thats including the share addition, which is opening another complete can of worms !!

Lets just keep it against the cash part of one person ISA which this year is exactly as follows;

""For the current 2012-13 tax year, the annual ISA allowance is £11,280, but only £5,640 of that may be used for a cash ISA. From April 6 2013, this will increase to £11,520, of which £5,760 can be put in a cash ISA. ""

yes, but thats not what you said.
you said

However, if the OP has say 15K - he would be foolish not to put 5K of bling on his roof as he could only invest two lots of ~£ 5K into 2 ISA's ( him & partner ) - whether fixed or variable, so he would maximise on his monies, especially if he was to have at his disposal over 10K to invest each year - this is why investments are so personal to the individual and why this always have to be seen on a case by case basis.

which is incorrect

you may well have got in when the rates were better, but the systems were also considerably more expensive, especially on Sanyo/panasonic. I would suggest your payback time is probably only 2-3 years better than someone installing a system now.
If they made use of the technologies now available for improving output (such as microinverters) and consumption use (such as immersun) then the figures will be even closer.
Yes I am an installer, but like all the ones who are arguing against you here (all experienced, respected and reputable installers) I am more interested in giving good honest advice than flogging systems, to the point that I have occasionally talked myself out of business.

 

[Earthstore]

I would like to make one point clear here, I am not in this part of the industry at present, so therefore am not trying to sell the OP a system, however due to something larger on the horizon I still follow the industry as I do not want all of my knowledge to go to waste, so therefore have no axe to grind.

Danesol, the OP never mentioned anything about ISA's, that was your doing, and even though you have been advised several times that you calculations are incorrect and the source of your information is incorrect also, which it is, it appears you are trying to convince yourself rather than convince the experts.

At no point has anybody taking up on my point of borrowing the money and paying it back with the income that you gain, which is what the Green Deal is based upon, however if you do it yourself rather than take the GD option the figures stack up much better.

As I have put before there are so many permutations and assumptions that you can use in making these type of calculations, it is easy to convince yourself one way or the other.

For your information, I may be involved in some large scale projects, which will be funded by investors, and trust me if the numbers do not work as you say then these people would not have spent so much time and money to get the project off the ground.

So please, open your eyes here and see the light.

 

[cjapeterborough]

I have looked through the thread and am surprised that there are folk who dont think PV is still worth the investment.

I purchased a 4kw system in mid 2011 so was fortunate to get in at the higher FIT rate but probably paid double than current market prices for my system at that time.
System prices have fallen,fit rates have fallen but investment returns from conventional deposits,annuities and everything else have also fallen if your looking for "risk free"

However if you are an isa investor in Cyprus at the moment the government there has just announced a smash and grab 10% levy on all personal savings deposits to help the national debt.
-I guess they would have a hard job ripping the panels of your roof once on -so what really can be a risk free investment in these times?

My own rough calculations proved to me,that for a one off upfront investment,the annual return would more or less cover my total annual gas and electricity bill for the next 25years

For the £5K upfront investment you are probably going to cover a significant proportion of your total energy bill for the next 20years.


Without turning this into an exact science with the math I am pretty sure inflation will continue to rise and energy costs also.
The government will also no doubt keep interfering with FIT and create more obstacles and rules to follow in the future-after all what else would they do
to justify themselves-sort out some "real" problems -I dont think so?

So it makes sense to buy sooner rather than later.

PV at this time is still a no brainer to invest in -where else can you get the the return against inflation and the nett added benefits of reducing your electricity costs?

ISA's in cash form wont even keep up with inflation so every year your savings will be worth less if you go that route,you could gamble on a horse or perhaps get lucky with
the stockmarket.....but for a virtually risk free investment return then as a householder you cant beat a PV system- provided you have the roof space to put one on!

Oh and if the country goes bust the government is unlikely to come round and nick the panels.........

 

[john999uk]

Thanks for everyone's posts. One thing the posts have highlighted is that PV must be looked at in detail an not just jumped into. As people have said it is not for everyone and everyone's circumstances are different.

Thanks very much for all the info.

 

[moggy1968]

yep, it's a significant investment and doing your homework is a must. Get at least three quotes and, if you decide to go for it, go with the one that seems to be the most honest, the one you feel you can trust and work with rather than necessarilly the cheapest.
Don't be swayed by the glossy brochure, be swayed by the integrity of the person that comes to see you.

 

[danesol]

yes, but thats not what you said.
you said

However, if the OP has say 15K - he would be foolish not to put 5K of bling on his roof as he could only invest two lots of ~£ 5K into 2 ISA's ( him & partner ) - whether fixed or variable, so he would maximise on his monies, especially if he was to have at his disposal over 10K to invest each year - this is why investments are so personal to the individual and why this always have to be seen on a case by case basis.

which is incorrect

It is not !

you may well have got in when the rates were better, but the systems were also considerably more expensive, especially on Sanyo/panasonic. I would suggest your payback time is probably only 2-3 years better than someone installing a system now.
If they made use of the technologies now available for improving output (such as microinverters) and consumption use (such as immersun) then the figures will be even closer.
Yes I am an installer, but like all the ones who are arguing against you here (all experienced, respected and reputable installers) I am more interested in giving good honest advice than flogging systems, to the point that I have occasionally talked myself out of business.

Again you are trying to miss inform and trying to angle this to support your claim, in reality it doesnt really matter that much when payback time - for endusers fortunate such as myself who installed prior to DOS day ( ie. DEC 2011 approx ) we will make a killing thereafter - people installing now wont get the level of income we will command and for 5yrs longer as well !!

Overall, depending on what your installation costs were prior to DOS day vs installations now - the return and investment in general isnt half as good !! FACT