Invoice for Solar panels before 12th December

langstroth2 · Dec 16, 2011

An interesting thread, and I agree with the ROI and Annual Compound Interest approach (which for my install come out at about 9.75% ROI** and interest rate of 5%). However there are a few other things that I think can also be worth considering

1) The 'return' is tax free - so that 5% is equivalent to 6.25% on a standard (non ISA) saving account, or even 8.34% if you're lucky enough to be a higher rate tax payer.

2) If the FiT savings are put straight into a savings account then this helps support payback. Assuming a saving account which pays AER of 3% for the 25 yrs - then ROI rises to 17% and Interest of 6.9%

3) The FiT is linked to RPI, unlike many "investment" products - my above figures do not take this into account.

**(this includes an assumed £1000 bill for inverter replacement)

gricks · Dec 17, 2011

Use Energy Savings Trust solar calculator find in its PDF report 'Payback time'. The plot above can be used to find the Equivalent Annual Compound Interest in a form that can be readily compared to bank & building society terms e.g. adverts for cash ISAs AER.

Equations below if others could check please:
a) Equivalent Annual Compound Interest [ECI]= (((Total Gain/Total Cost)^N) - 1) * 100 where N=1/Period i.e. for Period=25yrs N = 0.04
b) Simple Payback Time in years [PB] = Total Cost / (Total Gain/25)
Substituting (b) into (a) gives ECI = (((25/PB)^0.04)-1)*100

Naturally figures such as these are only a general guide; the performance of solar PV systems is impossible to predict with certainty. If you are good and stick mid-term payments into a savings account then you fare even better as langstroth2 rightly pointed out.