Payback period

[oblitafried]

Hi all! New poster so be gentle.

I'm in the middle of a dissertation at the moment and one aspect of it is the payback period of a large(ish) PV array. The data I have is a 50kW PV array, based in the UK costing £120,000 installed and producing an initial annual yield of 43,935 kWh. What I'm after are some comprehensive and accurate payback period calculations for this particular set-up, assuming the current UK FiT rates (and inflation link), system degradation & (say) a 6% discount rate. I'm an engineer so the financial mathematics are making my head bleed.

Does anyone here deal with this stuff on a daily basis, or can offer a few helpful pointers? It'd be hugely appreciated.

Thanks.

 

[yellowvanman]

PM your email address and I'll send something that may help.

 

[Worcester]

If you're doing your dissertation are you going to use discounted cash flow or net present value?

These terms are fundamental to any ivestment, if you are not sure what they mean, then go tap up an economics student. All the banks that we've dealt with have wanted full financials not just the simple type figures most sales people use to present the benefits of PV.

For example you should build in maintenance, inspections, breakdowns, repairs, after all has anyone seen a 25 year old inverter yet?

Also at what time would you look at re-powering - would you do it earlier if breakthrough new technogology came about?

If this is your dissertation, then you need to get it right and as I say - go chat to an economics student.

 

[oblitafried]

As far as repowering is concerned, I think that's outside the scope. What I've done so far is model a PV array's output by interpolating irradiance & temperature data for a certain location. To then select the most attractive array from an investor's viewpoint, I want to calculate the payback period for each module type.

I think I'll use discounted cash flow. From my very basic knowledge, NPV is simply an indicator if the investment should be made? I'll input an inverter replacement in around the 15 year mark.

I think I'll take your advice on the economics student! Thanks for your reply!

 

[Worcester]

You do need to add in all the maintenance / warranty factors etc, for example some module manufacturers gaurantee a linear reduction in output, whereas for most it's stepped, i.e. 90% for the first 10 years and 20% for the next 15, seeing as they won't warrant any better, you shouldn;t assume they will perform better, hence the benefit of linear warranty.

Other wise the cheapest will always come out giving the best ROI.

£120k is also at the bottom end for a 50kWp system, the 'industry defacto' price is currently nearer £150k, when you add in all the costs e.g. planning application, DNO works, project management, legal fees if its split / shared revenue etc.

Also if you're going ground mount, our figures suggest (if they can get planning) that the extra cost of a single axis tracker pays for itself very quickly with increased output.

 

[oblitafried]

Ah, okay. I hadn't realised that about the various degradation rates of the modules. Cheers for that! To keep in line with the new UK FiT I'm gonna keep it roof mounted (big roof!). Could apply to a large farm building.....well, at least that's the kind of assumption I'm gonna put in there. Yeah, I appreciated £120k is pretty low for a whole system. To keep it relatively simple I've kept it to the module cost, inverter, racks/mounts & installation only.

 

[ScottishKev]

Have a look here - Solar Panel Calculators

Let me know if it doesn't exactly suit and I will see what I can do. The calculations have various elements of financial mathematics behind them.

 

[whlphil]

Degradations an interesting one the guys Ive spoken to at Fraunhofer say in general good quality silicone doesnt drop below 90% at 20 years. Thats why I'm not interested in Chinese (except the top couple) they just havent got enough history yet.

I know your trying to keep it simple but ignoring the whole of the costs for an install eg planning, structural surveys, insurance, tax, vat, rates, monitoring, maintenance all the health and safety costs for the install, scaffold, site management, adherence to CDM etc all contribute to the full costs which are unavoidable. Not quoting the whole costs is to fall into the trap that a lot of the cowboy element are currently doing when they quote 5 and 6 year paybacks and unrealistic returns.

That said its hardwork but you'll make someone an interesting proposition as an employee at that point because there arent that many that go to that length!

 

[Worcester]

@oblitafried, Sorry you can't ingnore those other costs, as pointed out by whlphil, otherwise it like looking at the whole cost of runnign a car, and saying that i'll ignore road tax, insurance, maintenance etc

In that case you would always buy the cheapest banger first!

At the same time you lay yourself open to massive criticisim when you present it, and if you ever think of using it as part of the interview process, sorry you wouldn't even get past the first 30 seconds with us, as having had the whole costs pointed out to you, you then deliberately ignored them.

Don't skimp, do it properly, go chat up one the econmics students (you never know what side benefits there may be ) !!

It'll be worth it in the end.

p.s. when it's done send us a pdf of it in exchange for all the free advice you get here!

 

[oblitafried]

Thanks for the advice guys. I'll try to find some approximate figures for additional installation figures. I have seen a few fully installed 50kW systems online for around £120,000, so I'm not far off in terms of ICC. In the mean time, I've created a spreadsheet to help calculate the real payback period, with the assumption of a 100% borrow of the capital. I've attempted to perform a discounted cash flow analysis to get a real approximation. It'd be great if you could take a look and give me some feedback...(i'll try and upload it somehow in a min).

Yeah, true with the economics students, a massive improvement on your average engineer.

 

[whlphil]

I would suggest that a £120k system will not include everything it should do or it's being done with 2nd tier Chinese which will be low output and thus effect your returns. That then takes you into what's the value of a high yielding panel and it's not just yield but that's a whole different subject!Then your other obvious one is location don't forget youve got fixed costs that don't really change no matter where you are, irradiance and thus yield is the big advantage you've got against your fixed costs.A 4kw system costs about the same in Newcastle as it does in Torquay but you'll get 50% more yield and hence a much quicker payback or profit if your fitting free systems!

 

[Drew11]

Thanks for sharing problem.
I suggest to contact with relevant expert because he easily solve your problem.
I can not understand your question. If you make a plan and use the facts and figure your solution is easily available.