Love it when this happens

dansk · Aug 6, 2011

As an MCS installer with big solar panels right on the roof above the front door were my letterbox is i get the attach flyer - now dont want to sound bitter about the competition, but i felt it was tad mis-leading - it says earn £65k over 25 years!! what you cant see easiley is its based on £1600 per year with 4% inflation every year - when i do my 25 year payback i dont include inflation, does anyone else?

[ElectriciansForums.net] Love it when this happens

SRE · Aug 6, 2011

We do - we use 3% annual inflation, 5% fuel inflation and when comparing against savings we use 4.5% interest. We produce a 25 year, year by year, payback scenario and if they want the figures changed we do that too so they can understand the full implications. If we didn't we'd frequently be asked by our customers why our system generated less than others.

Although our customers are pretty "switched on", excuse the pun, they can sometimes be baffled with so many different options, so as long as we explain what we're doing I don't think there's an issue with it. From my personal experience, looking at the calculators (the decent ones not the blatantly exaggerated ones) gave me the reassurance to spend my cash and it works for our customers too.

I have to point out though that we're not as blatant as the leaflet above, we don't sell it as an income of x over 25 years we just promote the annual projected income using SAP.

dansk · Aug 6, 2011

yeah as i would expect you too - but any unsuspecting person getting the above going to think "blimy charley i can make £65 THOUSAND POUNDS.

I dont take inflation into account - but maybe i should - i put it as it is at the present day and explain if the cost of living keeps rising them this becomes an even better investment.

SRE · Aug 6, 2011

You're in a tough market, with a lot of competition, you're not twisting the truth but you do need to fight on the same playing field. Long after you've gone they will have x company that says 65k and yours that says 10k, for all your charm, the money will often win out ..

dansk · Aug 6, 2011

point taken, then if you cant beat them join em! i too honest for my own good sometimes.

dansk · Aug 6, 2011

SRE - do you do the 25 year by year payback on an excel sheet? and if so would you be so kind to give me a copy?

BruceB · Aug 6, 2011

In my opinion inflating the figures is completely wrong when doing payback calculations. Any accountant doing the calculation would do it on a discounted cash flow basis, that is with all figures reduced to their value today. £25K in 25 years time is worth a small fraction of what £25K is worth to an individual today (about £9K assuming 4% inflation), so you should not be comparing the 2 values. As the FIT figures are going to be inflated by rpi, they already have a discount rate built in and so are effectively at current value and should not be inflated.
Regards
Bruce

northernsun · Aug 6, 2011

I use the inflation figures (3% which i believe is the avergage for the last 20 years) but like SRE i only use the sap figures on any marketing stuff and when I do use the extended figures, inflation, energy rises and system losses, I am in communication with the customer, or actually with them, to explain what they are and how I have arrived at them.

dansk · Aug 6, 2011

Mixed bag, i personally felt the flyer was overstretching somewhat - put it this way - if i did a leaflet drop my promo wouldnt have such high figures with ROI of 16%!

northernsun · Aug 6, 2011

BruceB said:
In my opinion inflating the figures is completely wrong when doing payback calculations. Any accountant doing the calculation would do it on a discounted cash flow basis, that is with all figures reduced to their value today. £25K in 25 years time is worth a small fraction of what £25K is worth to an individual today (about £9K assuming 4% inflation), so you should not be comparing the 2 values. As the FIT figures are going to be inflated by rpi, they already have a discount rate built in and so are effectively at current value and should not be inflated.
Regards
Bruce

Interesting and very true, but as I say, I only use these figures when talking to the customer about what they are and explain to them how I did them- so they know about inflation.
It is an important aspect of the FIT that it is linked to inflation and therefore it is something I discuss.

SRE · Aug 6, 2011

BruceB said:
In my opinion inflating the figures is completely wrong when doing payback calculations. Any accountant doing the calculation would do it on a discounted cash flow basis, that is with all figures reduced to their value today. £25K in 25 years time is worth a small fraction of what £25K is worth to an individual today (about £9K assuming 4% inflation), so you should not be comparing the 2 values. As the FIT figures are going to be inflated by rpi, they already have a discount rate built in and so are effectively at current value and should not be inflated.
Regards
Bruce

I know where you're coming from but most of our customers aren't accountants and wouldn't understand it. They want to understand in fairly simple terms what it would generate over 25 years and we provide the figure for them. We don't use it in our marketing (not that we do a huge amount) and I've never been tempted to say to a customer look you'll make xx out of the system.

Just to open the debate a bit further - I also advise our customers that they should consider the financial side of pv using the FIT alone, the electric savings are a great bonus and it's sensible to try and get as much use as possible but that the FiT should stack up on it's own.

dansk · Aug 6, 2011

Thats how i sell it - ive never added inflation and hence the OP - i was surprised to see such high figures, IMHO i felt the flyer is a bit misleading TBH.

Ramjam · Aug 8, 2011

Have a go with this one, you can put inflation, energy price inflation and individual consumption and export figures in....

www.silverstonesolar.co.uk/SS9999-ProjectDetailsV2-CustomerName.xls

hallmarksolar · Aug 8, 2011

BruceB (& all),

I include an inflation rate of 3% on our income information to potential customer's. What we should remember is that we are providing them with an indication of likely INCOME from their installation over a certain number of years - not a valuation of their income.

When you start talking about discounted cash flow etc etc you are then talking about putting a valuation on what a certain sum of money in 10 years is worth now.. You're therefore providing them with a valuation of their whole system for the next 25 year's in today's money...That's not the way to look at it.

I think by NOT including an inflation rate you're underselling the potential of your system.

SolarCity · Aug 8, 2011

Personally, and I know this is at odds with what others are saying, I don't think inflation should be factored in at all. You are informing a customer what they can expect to earn on the system - and they understand that in todays financial terms with the pound valued as it is now.

Love it when this happens

dansk

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SRE

dansk

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SRE

dansk

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dansk

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BruceB

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northernsun

dansk

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northernsun

SRE

dansk

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Ramjam

hallmarksolar

SolarCity

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