My 4.5kWh setup

Sir Liamalot wrote: »

For simplicity I count 2 inverters over 20 years

Sure. But then also count only a bit over half of your roof installed panels cost over 20 years. See where I'm coming from? I reckon for a simplified maths exercise like we are doing here it is not unreasonable to give the whole system a weighted average life of around 20 years. Or 17 or 23. My point about bigger returns on a PV system compared to a savings account still stands.

BTW you don't know where I can score a free / cheap waterproof enclosure big enough for 16 lead acid batteries, do you? My source is not coming through for me and I have used up all the patience I have in me in waiting for several months. I want to get it up at the latest by next February

air wrote: »

Are you assuming a FIT income of 400 a year (in addition to bill reductions)?
That's the only angle I can see your logic working perhaps.

Having said that, even for myself I'm on the FIT, but it gets credited to my supply account and my annual bill isn't totally covered by it. No free cash is generated for reinvestment.

I don't understand where you are getting €400 "cash back". There's no cash back, the return is in the form of a reduction in your previous liability.

air this is getting a bit silly now. If you install a PV system you get a reduction in your electricity bill. That’s extra money in your pocket so same as earning 400€ a year. If you didn’t have a PV system you would have 6k extra in the bank earning interest but you would be paying 400€ a year more on electricity bills so that will eat away into your 6000€. We are trying to figure out where the breakeven point is ignoring inverter life, possible maintenance etc. If you wanted to do it properly you would assume a discount rate equal to the risk free rate etc. For instance that’s how bond prices are calculated. So you have to think of the PV system as a bond that pays an annual coupon of €400 but doesn’t pay back any principal. But that’s all pretty complicated and before that you have to agree that even according to your calculations after 20 years we are breakeven?

Think about this another way. In your example let us assume you have €6000 to cover your electricity costs for 20 years. If you install a PV system you are home free - assuming no maintenance and inverter replacement. Agree? Now assume you put that €6000 in a bank earning 1.45% after tax. At the end of the first year when the first electricity bill of 400 comes due where do you get that cash from? From your €6087 in the bank (87 is 1 yr interest). So at the start of year 2 you have €5687 left and you earn interest on that and not on 6087. So you run out of money before your 20 years are up.

That’s how mortgages are calculated. Anywhere where there is a regular payment and an interest in the picture you have to take both into account fairly.

unkel wrote: »

or lose your €6k into a PV install you get a yearly saving of 7% or €420 per year. Put this saving on deposit and with compound net interest of 1.4% after 20 years this is worth €9.3k

This is the crux of what I'm arguing against.
You make the saving yes, but that saving is the return, there is no further cash generated which can be put on deposit!!!!

air wrote: »

This is the crux of what I'm arguing against.
You make the saving yes, but that saving is the return, there is no further cash generated which can be put on deposit!!!!

Disagree here. The saved money can be put into an interest bearing account. The whole basis kf compound interest is that you earn a return on the return.

air wrote: »

I don't understand where you are getting €400 "cash back". There's no cash back, the return is in the form of a reduction in your previous liability.

air wrote: »

I agree with your post 100% Garo but unkel is arguing that 400 a year is generated in actual cash which can be reinvested in an interest bearing account further improving the case for PV. This is absolutely not the case.

As it happens the sample figures are pretty close to my own PV investment and return. I "save" about €400 a year between FIT and self consumption but ZERO cash is generated that can be reinvested.

But the saving is in your current account. Its money you have, which you now dont have to spend as a result of investing in PV so its like a pay rise if you will.

air wrote: »

This is the crux of what I'm arguing against.
You make the saving yes, but that saving is the return, there is no further cash generated which can be put on deposit!!!!

air wrote: »

From a cash flow perspective I'm up €400/ year, but like I keep saying, this is on the basis of having eliminated this amount of annual liability.

I do not have €400 free cash generated that can be invested or spent on anything else

Your issue seems to be around the use of the word "cash back" and "cash generated".

If I have a €400/yr liability that has to be paid out of my current account and now I dont have to pay that anymore, surely that means I have €400 more in my current account each year... yes? Thats the "cash back" its just not in the form of a cheque in the post.

Just transfer that €400 at the end of each year out of your current account into a deposit account. Whats the issue with that logic?

Are you really only arguing about the use of the word "cash back"?

air wrote: »

My issue with tha logic is that it forces me to pay €400 a year, which is what the PV was put in to eliminate.
Plus it's 400/year that I have to contribute in addition to the capital cost of the PV.

It's like a bank telling me that they'll give me 400/year interest on my €6000 but that if I also deposit an additional €400/year to the account I'll have even more at the end of the term!

ok, I agree its a little unorthodox and as you said its not allowing for the fact that there is alot more risk (failing inverters etc) but if you are looking at the end result after 20yrs the logic is sound.

I'm not agreeing that I'd use the same logic myself when investing in PV but in the simplistic scenario ye are debating it is valid if you look at what money is in your deposit account at the end of 20 years.

So you take the present value of €6,000 on one hand and the present value of a stream of €400 annual payments you would have to make otherwise for 20 years. Easy enough to do in Excel. Use a discount rate of whatever you wish and you will see that PV comes out on top for all discount rates under 2.9%. So unless you are getting 2.9% tax free on your €6,000 you are better off going PV in this limited scenario.
This is a pretty routine calculation. Every bond trader makes it as does every mortgage calculator.

That sounds realistic and a decent enough rate of return.
The thing to remember though is that the 400 return is locked in and offset against the annual energy supply liability.
It's not like a regular return on an investment.

Any future increases in energy prices should help the ROI, as will eeking out additional life from the installation.

Expected lifetimes of panels are continually being revised upwards from what I've seen.

Ireland has better prospects for PV lifetime than many parts of the world due to reduced thermal cycle ageing.

I also enjoy the feeling of being hedged to some extent against any future energy price hikes and indeed supply interruptions since I can run off grid when required.

KCross wrote: »

Why cant you invest the savings? Its a choice surely... you either spend it on living expenses or invest it. Its a choice.

I can't invest the savings because there is nothing to invest.
Imagine a situation where I have no costs (other than electricity) or income. I've 6000 at the start.

At the start of the 20 years I have the option to either pay 400/ year for electricity as I go or invest in PV that will deliver all my electricity.

I put 6000 into the PV and now have no income or capital but no costs.

The PV is not delivering further income that can be reinvested elsewhere.

KCross wrote: »

Splitting hairs.

No, it's finance 101 but I don't think I'm getting anywhere with this audience.

I can see where you all are coming from in terms of managing personal cashflow but it's nonsense from a ROI standpoint.

air wrote: »

I can't invest the savings because there is nothing to invest.
Imagine a situation where I have no costs (other than electricity) or income. I've 6000 at the start.

At the start of the 20 years I have the option to either pay 400/ year for electricity as I go or invest in PV that will deliver all my electricity.

I put 6000 into the PV and now have no income or capital but no costs.

The PV is not delivering further income that can be reinvested elsewhere.

Fine you can do the calculations this way but in this scenario you cannot claim to earn interest on the entire 6000 for 20 years. Your 400€ annual payment comes out of your bank account. And unless you earn 2.9% or more after tax on your money you run out of money before the 20 years are up.

reklamos wrote: »

Finally found some time to start integrating my PV system into home automation. There is still plenty work to do but looking good so far.

Cool, any chance you could expand on how you are doing it, would love to do the same myself, have openhab and loads of smart lighting and stuff, so would love to bring in the solar in to the mix.