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Poor ROI?

  • 13-11-2024 09:42PM
    #1
    Registered Users, Registered Users 2 Posts: 856 ✭✭✭


    I've been looking at solar recently. Roughly speaking a 7k outlay after the grant, will save 1.2k on electricity annually at current prices. There's no capital appreciation on my home, as the technology is improving so quickly, so I'm effectively pre-paying for 6 years' worth of electricity up front. After that point things should improve, but that's quite a long way into the future. I'd want to be pretty sure I'll be living in the house long enough to see a return. I really want to get solar, but I'm having a hard time justifying it. What am I missing?



«1

Comments

  • Registered Users, Registered Users 2 Posts: 791 ✭✭✭conor_mc


    The key point is whether you’ll be staying in the house or not. So long as you are, 25+ years of inflation-proof electricity for the price of 6 is a no-brainer.

    In my case, I’ve got about 80% of current annual utilisation locked in at ~10c/kWh for that 25+ years.



  • Registered Users, Registered Users 2, Paid Member Posts: 6,854 ✭✭✭Alkers


    7k after grant is a large array with battery I assume?

    If ROI is your main metric, you could get a much cheaper system to not save all your electricity outlay but drastically reduce it. The sweet spot will depend on your usage case.

    Solar PV actually makes quite a decent impact on BER also, which can unlock green mortgages so added value and potential associated savings there too.



  • Registered Users, Registered Users 2 Posts: 856 ✭✭✭spuddy


    The choice is overpay the mortgage or solar, so ROI is important for comparison. The general advice seems to put as many panels as you can. At the moment, we are looking at a 20 panel system split E/W, without a battery. Are there any good tools around to help someone determine their sweet spot?



  • Registered Users, Registered Users 2 Posts: 2,700 ✭✭✭bullit_dodger


    Use solar to overpay the mortgage once it's paid for itself :-)



  • Registered Users, Registered Users 2, Paid Member Posts: 1,283 ✭✭✭Dr Robert


    Saving 1.2k per year is a lot.

    What's your current usage per year?

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  • Registered Users, Registered Users 2 Posts: 791 ✭✭✭conor_mc


    I think you’d be missing a trick by not including at least a 5kWh battery. It will allow you to switch to a day/night rate, where you can load up the battery at the cheaper rate and keep it topped up by solar throughout the day before exporting excess. Given how tariffs have gone in the UK market and assuming we’ll follow eventually, this gives you flexibility to maximise your payback over coming years, whether consumption- or export-focused.

    Regarding RoI, mine calculated out as 5.5% for 25 years (panels 30-yr warranty to 80% performance, battery 10 years to 80% capacity, inverter 10 years so I allowed for replacement costs in that 25 year cycle) versus 4.4% for mortgage. Since the mortgage will be paid before the PV system croaks I hope, you can also compare to an indexed annuity of 1.2k per annum for joint lives (more or less for us!). You’d be doing very well to get one of those for under 6/7%!



  • Moderators, Sports Moderators Posts: 18,289 Mod ✭✭✭✭slave1


    I agree, I see savings from installers hyper inflated. The base cost of electricity needs to be the cheapest on the market and up to date in any calculations. €1.2k is massive

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  • Registered Users, Registered Users 2, Paid Member Posts: 15,826 ✭✭✭✭loyatemu


    I calculated payback on mine at around 7 years. That's at current best electricity prices. In terms of energy upgrades, I think only attic insulation has a better payback, and even there only if you currently have no attic insulation, which would be unusual.

    Obviously if you think you're likely to move in that time, it's not a great investment though having a better BER should get you a better price for your house.

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  • Registered Users, Registered Users 2 Posts: 12,821 ✭✭✭✭the_amazing_raisin


    Well the mortgage overpayment should be easy to figure out, go onto an overpayment calculator and see how much it'll save you per month

    Most of them have an option to either shorten the mortgage or reduce the payments. If you reduce the payments and it's less than €1200 per year saved then solar is the better option

    To be fair, both are good options and there's no rule saying you can't do both in the long run. Think of it more like which is the best option now

    What you'll hopefully find is the reduced bills give you a bit more space to build up savings which you can spend on reducing your bills further

    "The internet never fails to misremember" - Sebastian Ruiz, aka Frost



  • Registered Users, Registered Users 2 Posts: 21,080 ✭✭✭✭Cyrus


    depends on usage though, i was looking at it, for us, with a heat pump a 5.5kwh battery wouldnt touch the sides in the colder months (HP could use 20-30 kwh in a day).



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  • Registered Users, Registered Users 2 Posts: 791 ✭✭✭conor_mc


    Is it that massive at current prices? Bottom line is exporting 100% of generation, and at current Energia tariff that’s 24c (granted, maybe not for long). So €1200 would be equivalent to 5000 kWh - not too far off a 20-panel EW setup, I would have thought?



  • Registered Users, Registered Users 2 Posts: 2,717 ✭✭✭ECO_Mental


    What are the details on your system you were quoted, how many kW is in the quote did it include a battery? How much do you consume a year.

    I have 6kWp installed and no battery, between saving day kWh rates and FIT payments I am saving about €1500 a year. I consume 18,000kWh/year so big bills.

    If you are going to do it, this is a one chance opportunity to do it right because you will get the VAT off and get a grant. Make sure you put as much PV on as most of the cost will be installation, getting scaffolding up etc. A PV panel is only €100-200. If not getting a battery make sure you get a hybrid inverter

    If you get a battery there possibly some bigger savings, shift load from to super low rates of 6.33cent to peak times of 30-40 cents/kWh. Some posters on here are getting surplus electricity bills during the summer and going into the winter with big credits… 

    6.1kWp south facing, South of Cork City



  • Registered Users, Registered Users 2 Posts: 856 ✭✭✭spuddy


    There are a few questions, let me try to answer them…

    Our current usage is approx. 5,000 kWh / year, which includes about 1,000 kWh of EV charging (at night rates). On the topic of a battery, due to space limitations, the only option is to put it in the attic, and I'm just not a fan of the idea. The €1.2k is actually €1.3k when I double checked the figures, but obviously based a combination of usage and exporting the excess.

    The system we've specified at the moment is 8 E / 12 W, as the afternoon / evening time is when we use most electricity. I would guess the maximum number of panels we could fit on our roof is 24, 12 E / 12 W. The general advice seems to be to get as many panels as you can. On the one hand that increases the likelihood that we'll hit the generation estimates. However doing that comes with a bigger risk with a PV only setup, due to the uncertainty of the FIT. That's the problem!

    To think about a sweet spot, we could reduce the size of the array with panels either 0 E / 12 W, or maybe 4 E / 8 W to maximise solar utilisation. The ROI is the same regardless of the size of the array, but it de-risks the return if FIT rates drop significantly. On the other hand, there's an increased concentration risk where we don't meet the generation estimates, on days when it's sunny in the morning and cloudy in the evening.

    On the mortgage over-payment, it's worth roughly €1,500 in interest savings over the course of the 7 years, so net would be €8,500. With the solar, I'm calculating cumulative savings of €9,800 by year 7, albeit with the uncertainty/risk element at play.



  • Registered Users, Registered Users 2 Posts: 12,821 ✭✭✭✭the_amazing_raisin


    It isn't a totally hopeless case, I've a heat pump too and mostly it's running at night when the electricity is cheaper, plus I'm charging the battery

    I've the heat on during the day but the between the bit of sunshine, insulation and generally being more active the house is warmer anyway. So the heat pump generally doesn't kick in until the evening

    So the 10kWh battery gives some extra cheap energy to run the heat pump during the day

    "The internet never fails to misremember" - Sebastian Ruiz, aka Frost



  • Registered Users, Registered Users 2 Posts: 791 ✭✭✭conor_mc


    I wouldn’t be too concerned about FiT dropping long-term, as I think time-of-use tariffs a la UK will arrive eventually. At least one provider has posted on LinkedIn about being over to visit Octopus about their Kraken system in recent months so they see it coming down the tracks too. As I said above, a battery is really key to giving you flexibility to profit from either self-consumption (ToU regime) or export (FiT regime), depending on the situation.

    Also agree with other posters, max out your panels if you can afford it.



  • Registered Users, Registered Users 2 Posts: 1,592 ✭✭✭DC999


    There are other options to save €1000+ a year once you charge it on a cheap night rate on a smart meter. Buy an EV. 2nd hand ones are much cheaper now. We got a 2nd hand EV 2 years ago to replace our single car. Tax is tiny. And costs us €300 a year in 'fuel' (electricity) for ~15000kms.

    I've solar too and would deffo recommend that too. But you could get the EV first.



  • Registered Users, Registered Users 2 Posts: 856 ✭✭✭spuddy


    We could install 24 panels, but as even more of the output would be exported, it would increase our reliance on the FIT for the system's ROI even further.

    The more I think about it, a 16 or maybe even a 12 panel system makes better sense, with west facing panels to maximise solar generation usage & minimise reliance on the FIT. I know I'm going against the grain but can anyone else see the logic?



  • Registered Users, Registered Users 2 Posts: 455 ✭✭Rock Steady Edy


    I prefer the payback period method.

    The best quotes (net of grant) I got during the year were around €6k for a 10 panel 4400kW system (eddie but no battery). At best we'd save €750 a year assuming we covered all our electricity needs. That's an 8 year payback period, paying for 8 years electricity up front.

    If there were any roof repair issues that required removal of the panels, or any replacement or repairs to the solar system, that could add significantly to the cost / payback period.

    I'm sure the greens were taking about 5-6 year pay back periods; that would be much more attractive.

    The grant is reducing at the end of year, so that's not going to help either.



  • Registered Users, Registered Users 2 Posts: 791 ✭✭✭conor_mc


    If you’re aiming to maximise self-consumption then add a battery, 5kWh at the very least.



  • Registered Users, Registered Users 2 Posts: 12,821 ✭✭✭✭the_amazing_raisin


    In general the cost difference installing more panels isn't that much. 50% more panels doesn't add 50% to the cost if that makes sense

    So it's generally better to install as many panels as you can get away with

    You'll still be limited by the inverter anyways, but oversizing the array can give better output in winter

    As regards FIT, let's spin it another way, if the amount is likely to go down then would it be better to invest more and maximise your short term ROI so it pays for itself sooner?

    I'm also not 100% the FIT is going to drop dramatically in the next few years. It's trending downwards, however electricity consumption is still going up and market forces will likely keep prices around where they are now

    "The internet never fails to misremember" - Sebastian Ruiz, aka Frost



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  • Registered Users, Registered Users 2 Posts: 791 ✭✭✭conor_mc


    @the_amazing_raisin is spot on, you can shorten RoI by increasing the investment - a) additional panels have a lower marginal cost and basically improve the payback period on your “fixed” costs of inverter hardware plus installation effort, and b) a battery can be used to optimise either self-consumption or export (in combination with day/night tariff, e.g during summer I buy 5kWh every night at 14c so I can sell 5kWh generation at 24c).



  • Registered Users, Registered Users 2 Posts: 856 ✭✭✭spuddy


    A bigger array costs more in the first place, so the payback period is the same.

    If anyone's interested, these are the figures I've come up with for the 20 panel system. Import/Export rates are hard to predict but are correlated in the model, i.e. both increase in line with inflation.

    Variable

    Figure

    Variable

    Figure

    Annual Consumption

    5,000

    kWh

    Electricity Export Rate

    0.185

    Panels

    20

    Inflation

    2.5%

    Capacity

    440

    W

    Solar Consumption %

    30%

    Theoretical Production

    8,800

    kWh / Year

    Solar Export %

    70%

    Estimated Production

    6,613

    kWh / Year

    % Consumption from Battery

    0%

    Annual Performance Decline

    0.5%

    Cost of System

    € 7,100

    Electricity Import Rate

    0.235

    c / kWh

    Year

    Estimated Production Units (kWhs)

    Import Rate

    Solar Generation Savings

    Exported Electricity Cost

    Exported Electricity Earnings

    Current Electricity Cost

    Future Electricity Cost

    % Change

    Annual Benefit

    Cumulative Benefit

    ROI

    1

    6613

    € 0.24

    € 466.22

    € 0.19

    € 856.38

    € 1,175.00

    -€ 147.60

    112.56%

    € 1,322.60

    € 1,322.60

    -81%

    2

    6580

    € 0.24

    € 475.48

    € 0.19

    € 873.40

    € 1,204.38

    -€ 144.51

    112.00%

    € 1,348.89

    € 2,671.49

    -31%

    3

    6547

    € 0.25

    € 484.93

    € 0.19

    € 890.76

    € 1,234.48

    -€ 141.21

    111.44%

    € 1,375.70

    € 4,047.18

    -14%

    4

    6514

    € 0.25

    € 494.57

    € 0.20

    € 908.47

    € 1,265.35

    -€ 137.69

    110.88%

    € 1,403.04

    € 5,450.22

    -6%

    5

    6482

    € 0.26

    € 504.40

    € 0.20

    € 926.52

    € 1,296.98

    -€ 133.94

    110.33%

    € 1,430.92

    € 6,881.14

    -1%

    6

    6449

    € 0.27

    € 514.43

    € 0.21

    € 944.94

    € 1,329.40

    -€ 129.96

    109.78%

    € 1,459.36

    € 8,340.51

    3%

    7

    6417

    € 0.27

    € 524.65

    € 0.21

    € 963.72

    € 1,362.64

    -€ 125.73

    109.23%

    € 1,488.37

    € 9,828.87

    5%



  • Registered Users, Registered Users 2 Posts: 12,821 ✭✭✭✭the_amazing_raisin


    The table got messed up, maybe a screenshot is better

    Obviously more panels costs more, and if 7k is the budget then that's what you can spend

    The idea behind more panels is this, the cost per generated kilowatt hour goes down with more panels, thus reducing your payback period

    If 16 panels cost 8k then you'd expect 24 panels to cost 12k, but in reality it'll be closer to 10k

    This means you generate more at a lower cost per kilowatt of installed capacity, and so you pay off the system faster

    "The internet never fails to misremember" - Sebastian Ruiz, aka Frost



  • Registered Users, Registered Users 2, Paid Member Posts: 6,854 ✭✭✭Alkers


    The price per panel decreases with bigger installs sure, but bigger installs are also more likely to suffer from clipping, have more units go to FIT rather than self consumption, push you into the tax bracket for FIT payments so it's not simply the case of more is better for ROI / payback calcs.

    The fact you need an E W installation will make your install more expensive also.

    If it's just about ROI, as.you have an EV and night meter, do the bath on a battery only with a dedicated inverter, charge at night rate with your car and cover day usage or export to fit before recharging.



  • Registered Users, Registered Users 2, Paid Member Posts: 1,283 ✭✭✭Dr Robert


    Are you saying you'll export 4500 units from roughly 6500 produced?

    How are your future electricity units broken up? Nights v Days etc?

    If you get a 10-12 year payback at current prices you are doing well. If anything unit prices will fall, as will FIT. So you may be closer to a 15 year payback. Nothing wrong with that either btw.

    Be realistic with the figures. The cheapest rates on the market as well as if you're utilising then correctly should be your base comparison. Remember that. Loads of people make this mistake when calculating savings, myself included.

    It hard to calculate savings on the information you posted.

    What's your current rates again? And how many units per year at each rate?

    People can save a lot of money per year by simply altering electricity habits alone, without investing in any panels at all.

    Post edited by Dr Robert on

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  • Registered Users, Registered Users 2 Posts: 856 ✭✭✭spuddy


    The 70% export figure is what the company who modelled the system are saying. This gives me cause for concern regarding the ROI, as the FIT is a significant element of it.

    Our current split is 50/50 day/night, but I anticipate 60/40 with the solar system as we'll use the white goods during the day more once the solar is in (the rate I've used below is a blended one to reflect that split).

    I'm interested in your view it could be a 15 year payback, where am I going wrong with my own calculations?

    image.png


  • Registered Users, Registered Users 2 Posts: 2,717 ✭✭✭ECO_Mental


    I think those numbers look okay, but you might also do some sensitivity analysis on this. We are getting into detailed financial CBA analysis now, but maybe run some numbers of the FIT decreasing, not increasing (e.g., run a few scenarios of good and bad assumptions). There is a theory out there (and it is happening now in places like Australia and the USA, like California) where they do not want PV exporting to the grid during the day as they have too much of it...

    In the end, I think you are overthinking this. I love a good spreadsheet myself and try to do very complex analyses of very simple things. You have an estimate of how much your potential FIT is and a % of how much you will use. Keep it simple, and you are showing a simple payback of 6-7 years, which is about right, I would say. That is a very good payback! You probably won't get something back on that investment on much other stuff.

    I remember only a year or two ago before FIT, the standard practice was to use as much of your PV as possible, charge your car during the day, charge your home battery, use an EDDIE, etc. Now the best financial option is to export as much PV as possible and charge your car on the extremely low EV rates. That can and will change. I can see where the FIT rates will drop, and the Peak rates will increase. Having a PV system allows you to have options to adjust your consumption to roll with these changes, which will be invaluable.

    Final advice... put as much PV on your roof as possible (don't worry about clipping) and get a HYBRID inverter that will allow you to install a battery later if you wish. Also, get on a smart EV tariff and shift as much load into this as possible. You wont regret it

    6.1kWp south facing, South of Cork City



  • Moderators, Sports Moderators Posts: 18,289 Mod ✭✭✭✭slave1


    Your maximum production is based on your inverter size, not your panels, if you have a 5Kw Inverter then I would go with 5,000kWh MAX producion

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  • Registered Users, Registered Users 2 Posts: 856 ✭✭✭spuddy


    Don't knock spreadsheets, they keep me in gainful employment :)

    I've played around with the numbers & as you'd expect, the lower the FIT rate, the longer the ROI, especially with so much being exported. The bigger the size of the array, the bigger the risk.

    I hadn't considered the tax implications too for going over the tax free limit either, which is another another reason to scale back the size of the array. The battery would be a game changer, but it's just not something I'll ever be happy with putting in the attic.

    I started this with the full intention of following the usual advice and filling the roof with panels. For the reasons mentioned though, there's a much smaller downside with something like a 12 panel west facing setup.



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  • Registered Users, Registered Users 2 Posts: 1,411 ✭✭✭j62


    ”what am I missing”

    26, 16 and 13% increase on capital in last year which even after our punitive 33%CGT tax is a nice little earner (ignoring dividends too)

    https://stockanalysis.com/stocks/so/

    https://stockanalysis.com/stocks/xom/

    https://stockanalysis.com/stocks/cvx/


    Source: Me who “invested 7.5K” (after many many months of waiting SEI to payback some of the total cost) into home solar 4 years back and now having FOMO regrets



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