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Solar PV: readers' tip of the month

Posted by Cathy Debenham on 20 January 2012 at 3:48 pm

Apart from installing a Clearview Log Burning stove, and living in an above average insulated property, Solar PV is my first major investment in environmentally friendly capital purchases.

There are inevitably many 'cowboys' in the solar PV industry, and I have come across one. PV Solar UK Ltd claimed to be a Which? recommended. Which? has not made any recommendations. Also some of the technical info was rubbish.

Despite the considerable drop in the FIT, at 21p per unit this pays me 50% more than I am paying my supplier, and with the drop in the capital cost, my return is anticipated - by me - to be around 9-10% per annum.

This is one industry of the future, and as Edison suggested back in the 1930s, the sun offers the very best in renewable energy. For me, this is one of my better decisions, and I have no doubts abouts the benefits.

My Tips:

1. Do your research, and do it thoroughly before you start contacting potential installers

2. Don't just rely on the financials, if the sun does not shine, neither will your bank balance.

3. If you are ignorant of the solar PV industry and the technology involved, you are exposed to the cowboy installers.

4. Always, always view personal experiences, and if possible go on recommendations from people you can trust, which is what I did. Talk to them and go and see their installations.

This tip comes from Tony Phillips

Photo by Taran Rampersad

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Comments

5 comments - read them below or add one

NorthGlosEPC

NorthGlosEPCComment left on: 30 January 2012 at 12:18 am

RobertPalgrave,

I think I would broadly agree with your comment.

We keep hearing from varous sources that the "return" on the cash stumped up for solar is 9%, 10% or even more. But these are very misleading figures. Lets say your "investment" is £8k.

Run a profit and loss spreadsheet matrix for the 25 year life of the installation and you'll get a final bottom line result.

Run another profit and loss spreadsheet matrix for 25 years to see what happens if you leave the £8k in a instant access savings deposit account.

There are going to be variables for both scenarios so best estimates or judgements based on the best information available will have to be made. Even if you accept the average annual power generation level the suppliers gives you there are things like furture interest rates, cost of energy in the future, level of FiT index linking, life of the system installed including inverter life etc. etc.

I've done this and my conclusion is that "when" the FiT goes to 21p you might as well leave the cash in the bank risk free and be able to get at it if you need to anytime.

With the FiT at 43p purely on a financial basis the solar route was better, but even then not risk free and remember you're locked in for 25 years. I fully agree that any house sale would be unlikely to provide a vehicle for initial investment recovery. It might even reduce saleability on asthetic grounds in the eyes of some potential buyers. And even if you could recover the initial investment should the solar thing go south you have to actually sell your house to do so.

Now don't get me wrong I'm all for solar PV, it works (technically) but the sales pitch seems based on this mythical return figure being so good it's the best thing since sliced bread, and it's not, and that is the bit I find so irritating because it misleads people.

If your motives are ecological and you want to reduce global Co2 emmissions by all means install Solar PV, I applaud you but I just wish so many people would not keep on about what a "great investment" it is, because in my opinion now the FiT is going to 21p it's not.

However having said all that if there is anyone who can give me a set of figures, including plausible estimates for the unknown factors, which gives an outcome better than my conclusion I like to see them. Believe it or not I'd like to be wrong, but I don't think I am. 

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RobertPalgrave

RobertPalgraveComment left on: 24 January 2012 at 12:44 pm

On the rate of return for solar PV. The 'official' DECC form of calculation is on their website at

http://www.decc.gov.uk/media/viewfile.ashx?filetype=4&filepath=11/consultation/fits-comp-review-p1/3742-explanation-rate-return-calc-domestic-pv.pdf&minwidth=true

This is how they arrived at their 4.5% return for a domestic PV set up which led to 21p. They are open about what parameters they chose - for example the size (2.3kWp I recollect) and the capacity factor ( a reasonable compromise between absolutely ideal siting and reality with off-south orientation and occasional tree shading)

However, DECC allowed only £70 per year for maintenance, which I think is too low to cover inverter replacements and the risk of panel failure. They also include savings from years 26-35 from avoided energy purchase and exported units (ie after the FiT has ended).

These two points will make a minor difference to the return rate, but the crucial point they don't allow for is what happens when the owner sells her house. There is no guarantee that the sale price will accurately reflect the residual value in the solar PV system. And seeing how estate agents ignore and abuse EPC ratings, I suppose the general public view energy efficiency in roughly the same light, meaning we won't find many buyers willing to pay a higher price for a 'solar house'. Well not in the next 10 years. (and present company excepted)

If you move 5 years after installing solar PV, the rate of return has to allow for residual value in some way, since you don't get the FiT etc for the next 20 years. This is all hugely uncertain, but my argument to DECC when I responded to their consultation was that they should factor in some of the risks of moving early and so increase the rate. I said the rate should be equivalent to 6%.

When the consultation was out, you could get a cash ISA at 4.5%, and access to your money after 5 years. So PV at the same rate is not a clear winner.

 

 

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Fred1

Fred1Comment left on: 24 January 2012 at 9:12 am

Hi Fagsken,

The subject of " return" has been discussed frequently on this site.

Cathy the moderator is, I believe , going to provide a " yougen " calculator.

In the meantime there are several spreadsheets on the Eco Centre Wales website with a lot of interesting info on FIT's and solar power etc.

Try www.ecocentre.org.uk/en/renewableenergy

The three spreadsheets are in Excel format.You can input your own

capex figures and FIT rates 21 or 43 etc there is an option to input maintenence. It seems the rate calculated by the spreadsheets are heavily dependant on the initial cost, but since you have recently installed you will have an exact figure. It looks like by dropping the rate down to 21 pence for a 4Kwp system the comparison with a savings account is about 1.5%- this seems lower than the DECCconsultation assumption of around 4 to 5 % , but I do not know what capital cost DECC assumed. In any event the spreadsheets seem flexible enough for most eventualities.

My local authority says that my section 40 planning permission only lasts as long as the system works, so at some stage I will have to remove them, Since you have just installed you will know exact scaffold and labour costs.

 

The alternate method, which some people use, of stating a return is to divide the first years income by the initial cost.

Good Luck

Fred

 

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Fagashken

FagashkenComment left on: 23 January 2012 at 3:02 pm

Hi Fred, I have had installed a 4 Kw solar panel system to my south facing roof, I am enquiring as to the return a person with a similar system over a year long system has received if you can assist.

Thanks

Ken Harris 

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Fred1

Fred1Comment left on: 21 January 2012 at 6:57 am

I see you have calculated the your " return " is 9-10 %

Perhaps you could share you calculations, initial capex, initial yearly income, replacement cost for invertor, removal cost at end of period.

By return do you mean initial years income divided by initial cost, or do you mean the " rate of return"   What is the APR ?

What is the payback, ie how many years does it take to get your initial money back???

What political risks have you factored in, ie say the govt changes to the rules/ payments under the FIT scheme...

 

Thanks

 

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