Friday, 19 July 2013

Did You Invest In Solar Too Early?


The 1st of July 2013 saw another reduction in the feed-in tariff rate (FiT) to 14.9p. 


So, is the fall in revenue from the solar panels on the roof putting householders off?

Comparing the 0-4 kW installations during the period April to mid July 2012 (37,453) to the same period in 2013 (30,683), a reduction of 18%, would suggest that this may be the case.
The underlying reason for change in FiT rate relates to the cost of installations. In June 2011, the £10,000 cost of my system seemed a reasonable price for the return on investment (ROI).




My installed system details:

Size of system. 2.66kWp

Number of panels. 14
Physical system size. 20sq mtrs
PV system output. 2185 kWh/year
Annual solar radiation. 1027 kWh/year
The reality today is that panel efficiency has increased substantially, whilst reducing in price. Installers are now having to reduce their costs to remain competitive in a shrinking market.

So. Did I invest in solar too early?   I don't think so.


I've estimated that 14 of the latest panels would increase my output by 30%. I've also estimated that my installation costs would reduce to £5,000. That's a 50% saving for a 30% increase in production.

So what would I have done with my £10,000 for the past 2 years? I could have invested it in the stock market or bonds, but that's a fairly risky short term investment. I could have put it under the mattress which seems pretty safe, unless you have a fire or a burglary. Or I could have put it into a bank/building society account. 
I don't know about you, but I've struggled to find any interest rates which match the current level of inflation, never mind beating it. I'm going to suggest that I'd probably get around a 3% interest rate, which most people will pay income tax on.

The figures below give a comparison of the costs and income generated by the different installation dates. I'm sure the more financially astute of you will say.

"Yes, I can see that you're projecting £2,414.93 extra income by installing early, but you've still got £5,000 in the bank by waiting."


I agree it's nice to have the money in the bank, but I'd rather have a 25 year indexed linked FiT rate which will probably rise by 3% again next April. Over the life time of the installation I'm going to be significantly better off by making the move early.

Do you wish you'd waited, or invested earlier? I'd be interested in your comments.


Icarus 
Twitter: (@solaricarus)

3 comments:

  1. I agree, better to have committed early, but still a good return now compared to leaving the money in a Bank.
    By the way, I think your being over ambitious expecting to get 3% return in a Bank account!

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    Replies
    1. It takes a bit of fiddling about with standing orders and moving money about each month, but 3% is achievable with Lloyds TSB Vantage accounts. http://www.lloydstsb.com/current-accounts/vantage.asp
      Also with Santander 123 accounts. http://www.santander.co.uk/csgs/Satellite?appID=abbey.internet.Abbeycom&canal=CABBEYCOM&cid=1237892266671&empr=Abbeycom&leng=en_GB&pagename=Abbeycom%2FPage%2FWC_ACOM_ViewSelector

      Delete
  2. Icarus,

    Through a calculated risk I had my panels installed weeks just weeks before the first FIT reduction (whilst the government was still trying to get an appeal at the supreme court granted).

    End result: me hitting the "sweet spot" of having the (then) best technology installed at the (then) lowest price with the highest FITs payments guaranteed for the next 25 years and index linked.

    So, its fair to say I have no regrets acting when I did.

    ReplyDelete