Solar PV

Earlier this year I wrote:

I keep hearing people tell me that it's crazy not to install PV on our house, especially with feed in tariffs that pay back almost 40 pence for each kWh generated, so I thought I'd look into it at bit.

So, start with the assumption that we fit about 2.1 kWp to the house, that means that on a perfect day, the solar grid would produce 2.1 kW of power. It turns out that where we are, the expected output of that panel would be around 1750 kWh per year. That currently costs us about £150 for that amount. Now, the feed-in-tariff would also pay an additional £720 per year (tax free? maybe let's assume it is).

Now, the installed cost for this system is £8700, which the solar websites tell me would make me £29,000 better off after 25 years, and that I break even after 8 years and 6 months. Really? Where do I sign up, and do you have a bridge you want to sell me too?

Sure, the government currently promises that we'll get the subsidies over 25 years, but I'm not sure I trust promises from governments.

Now, what's the real payoff time?

Well, first of all, the opportunity cost on the money is missing. Let's say that you take your savings out of a nice safe bank account to pay for it, and that it's currently paying you 1% interest.

The lost interest costs you £87 per year, so that now takes you 13 1/2 years to break even.

But I know you manage your money better than that. You can get 3% really easily here in the UK, and interest rates are soon to rise. At that rate it's 13.5 years, but if you think you can pull off 4.5%, it goes all the way out to 18.5 years. Don't even think about taking out a loan at 7.5% to pay for this; if you do, payback goes out to 31.5 years!

If you instead ignore the government subsidy, even at a paltry interest rate of 2% on your money, you're losing £24 a year every year.

Never mind you've invested your capital so if it breaks, you lose your investment, unless you insure which costs you money, making payback worse.

So, for me, I've decided to put this on the back burner again, until something else changes.

What’s Changed?

My old college roommate installed the panels on his house, and they are producing electricity as expected.  Based on the quotes he received I did the above calculations.

However, when I actually came to have someone quote me, the installed system price was just over £6500, giving me a payback time of shortly over 7 years.

The parts are guaranteed for 10, so even if it all goes wrong, it looks like the system should pay for itself, so we’ve given the go ahead, and in just over 4 weeks time, we should be generating a quarter of our electricity.