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Any good green financing options?

  • 15-10-2020 10:44am
    #1
    Caspero
    Registered Users Posts: 220 ✭✭


    Interest rates are at historic lows and Green finance is really trendy.

    Has anyone availed of low-interest green loans for a retrofit like a PV installation and/or heat pump installation?


    After a quick search I've seen a couple of options. Not green related but if you have equity in your house some banks will let you refinance your mortgage while borrowing a big extra (i.e. increasing the size of your mortgage) for renovations. We did a refi at 2.65% fixed for 7 years recently...a PV and/or heat pump system would probably have a highly positive NPV if they could be financed at rates as low as that. Obviously if you miss payments you risk losing your house and who knows what will happen to the economy once the COVID supports end, so only a good option for those very secure in their jobs who can meet the regulator's mortgage lending criteria.

    Other options I've seen include credit unions offering rates in the 5 to 7% range for green renovation loans, but with minimum €20k spend. You'd need to combine PV and a heat pump to spend that much I think.


Comments

  • #2
    [Deleted User]
    Posts: 5,238 ✭✭✭ [Deleted User]


    Solar power (no battery); buy now save later ~6 year ROI if done right (keep it small so you're not always exporting <2.5kWp) and cost is kept down.
    The panels will last your lifetime. The inverter 8-12 years depending on flavour.


  • #3
    unkel
    Registered Users Posts: 64,745 ✭✭✭✭unkel


    Sir Liamalot wrote: »
    Solar power (no battery); buy now save later ~6 year ROI if done right (keep it small so you're not always exporting <2.5kWp) and cost is kept down.

    That is an extremely optimistic ROI though. My first system was very small and used a GBP80 inverter and 3 panels I bought way below market value. My home consumption was very high, so I used 100% of the production of my solar system myself. All at the higher rate too. DIY install with very cheap materials too. Just some clamps and some cable really and some cheap bits of rails to bolt them to my shed. That system had a projected ROI of 5 years

    Sold the lot a year later for well over what I paid for it, so with hindsight the ROI was 0 years, but still...

    If you buy well, have a small system (up to maybe 1200W) and do a 100% DIY install (no subsidy), you could get a ROI of about 12 years or so realistically. A good bit less than that if we got a (even as low as 5c) FIT. The bigger the system, the longer the ROI. Battery and / or diverter adds to the ROI even if you get subsidies and so does a smart EVSE charger like a Zappi


  • #4
    unkel
    Registered Users Posts: 64,745 ✭✭✭✭unkel


    Buy now save later is the right approach in life though if you don't want to waste a lot of your money, I agree 100% on that :D

    Only exception being a mortgage imho...


  • #5
    Caspero
    Registered Users Posts: 220 ✭✭Caspero


    Sir Liamalot wrote: »
    buy now save later

    What do you mean by this Sir Liamalot?

    Buy from savings?


  • #6
    [Deleted User]
    Posts: 5,238 ✭✭✭ [Deleted User]


    Maybe Unkel. I'm less than €1k into 2.5kWp.

    I don't keep up with market prices because I can hands down beat their best offer.

    The best value is power offset. €0.16 per kWh you don't buy off the network. The trick is to not produce more than you can use at any time. It favours small base load offset systems.


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  • #7
    unkel
    Registered Users Posts: 64,745 ✭✭✭✭unkel


    Caspero wrote: »
    What do you mean by this Sir Liamalot?

    Buy from savings?

    Yep. And if that means a €500 system and not a €2500 system, so be it. The smaller the system, the quicker it pays back for itself. Low hanging fruit. As Liam says, a system so small that you use every single kWh of it yourself instead of buying from the grid. But the two other main factors making ROI as low as possible are buy the parts cheap (second hand) and DIY.


  • #8
    Caspero
    Registered Users Posts: 220 ✭✭Caspero


    Well...this gets down to one's personal philosophy on savings and risk, but from a strict academic finance perspective...that's not how return on investment (ROI) is assessed.

    ROI looks at the equity (savings) invested vs cash flows resulting from the investment.

    Leveraging an investment with finance reduces the up-front equity and increases ROI as long as the financing cost isn't prohibitive.

    Even if one has the savings to purchase the whole system, it can make sense to finance if that then allows one to deploy equity into other positive-return investments.

    For example - if someone can purchase PV or a heat pump but not both with savings, but they can purchase both by using savings plus a loan and the cost of financing on the loan is lower than the energy savings from adding the second system, then that person is better off from a strict financial perspective by borrowing to install both - assuming they can meet the payments. The latter caveat is important - this gets down to risk/reward.

    I do see a lot of people in this thread looking at the number of years it'll take to earn back the cash they invested. That's called the payback period and while it's OK for a quick and dirty calculation, it's not considered to be a good way of assessing projects in the world of finance because it disregards time value of money, opportunity cost and project risk.


    Anyway I think we're agreed that the ROI is there to justify the investment, but that isn't really the question. Assuming for the sake of argument that one is OK with using a loan to finance (or partially finance) a PV or heat pump, what are the lowest rate green finance options out there?


  • #9
    unkel
    Registered Users Posts: 64,745 ✭✭✭✭unkel


    Caspero wrote: »
    Leveraging an investment with finance reduces the up-front equity and increases ROI as long as the financing cost isn't prohibitive.

    That's the idea for a business where you can make equity perform say 20% per year and debt only costing say 10% per year ;)

    In practice most people's savings do not outperform loan costs. By far the opposite. Any financing is very expensive (even the so called 0% interest stuff like PCPs) and savings are typically generating negative real returns (like a few grand sitting in a savings account)


  • #10
    Alkers
    Registered Users Posts: 6,810 ✭✭✭Alkers


    But with many of these "green" projects, any cost of financing is also offset by the cost of energy saved, be it less gas/oil used to heat a house or less electricity used.
    So the savings contribute to the cost of interest until the loan is repaid, then profit (hopefully).


  • #11
    [Deleted User]
    Posts: 5,238 ✭✭✭ [Deleted User]


    Ha!

    Solar freakin' roads...


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