DECC FiT News

DECC ANNOUNCE NEW FiT.

INVESTING IN PV OFFERS A BETTER RETURN WITH A LOT LESS RISK THAN BUYING SPANISH OR GREEK DEBT

Well that is one way to look at it.  Spain and Greece are having to pay huge (by today’s standards) interest rates to raise money because investors are not absolutely convinced they will get their money back

PV can be risky, but, as I bask in the sun this Sunday morning, I remember that most years our weather is about the same just eclectic on timing (I remember driving, roof down, in a T-shirt in September and having a party washed out by torrential rain on Mid-Summer’s day, ahhhh)

On the whole, even in the UK, PV is safer and there will be no “having to take a haircut” (what a fabulous euphemism for “default”) on your income as the banks had to do with Greek debt a while back.

On Thursday the DECC announced the new FiT which comes in to force from the 1st August.

The new rates are

System Size

Generation Tariff

Export Tariff

<4kWp

16p

4.5p

4-10kWp

14.5p

4.5p

10-50kWp

13.5p

4.5p

50-150kWp

11.5p

4.5p

Standalone

11.5p

4.5p

 So is it worth putting up PV?

Let’s look at the potential return from 10 x 250 watt panels facing South at 30 degrees (using the Governments preferred SAP Calculator)

Current

From 1st August

Generation Income

£450.66

£343.36

Export Income

£32.19

£48.29

Total Income

£482.85

£391.65

Saved (percentage)

50%

Cost per kw

£0.150

£160.95

£160.95

Total Value

£643.80

£552.60

NOW FOR SOME MATHS

If you invest £7,000 at 5% compound in 20 years you will have £17,688.

However the interest will be taxable, let’s say your marginal rate of tax over 20 years is 40% (huge assumptions but gives the idea).  Take off the tax each year and the return falls to £12,274

If you spend that money putting PV on your roof then, in the first year this will return (approx.) £552.60.  Each year that will grow by inflation (assume 3%) and will be reduced by the degradation of the panels (guaranteed to retain 80% production over 25 years).  Let’s assume that degradation is straight line, so in year 2 the income will be £564.  By year 20 it will have reached £831.  By year 20 your return (income plus saving) will have totalled £13,650

If each year you bank the money (like for like) and earn interest (which is taxable unlike the income) then by year 20 you would have £17.955

FINANCIAL CONCLUSION

In theory then you are significantly better off if you put the PV panels on your roof than if you invest the money at 5% in the bank.

THINGS TO CONSIDER

1.    At the moment you would be hard pushed to get 5% unless you lent the money to Greece or Spain, it would seem PV is a lot less risky

2.    If one person puts up PV panels it makes no difference at all but if a million people put them up then the benefit in terms of greenhouse gasses is huge

3.    Inflation is likely to stick around for a while PLUS the amount you save on using the electricity you generate yourself could be worth significantly more.

THINGS TO LOOK AT IN THE NEW RULES

The new FiT Contract is:-

1.    20 Years – was 25

2.     Still index linked (why????)

3.    Potentially going to fall every quarter for new entrants

So, get in early!

This is my opinion only.  If you want more information please go to http://www.decc.gov.uk/en/content/cms/news/pn12_066/pn12_066.aspx

Contact me, Charles@usethesun.co.uk or 01279 320020 for more information

This is the opinion of Charles MD at Use the Sun, an MCS accredited company that specialises in the installation of Solar PV (Solar Photovoltaic), Solar PVT (Solar Photovoltaic Thermal and Electric Car Chargers).  Official statements can be found on the websites linked to in the text.

Use the Sun to turn light in to electricity and cash

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