“Investing“ in lowering living costs

[Spet0789]

Seeking views here.

I have just purchased some solar panels and a battery. I estimate that this will reduce my annual electricity bill by 7-10% of the amount spent. I expect the panels (though not the inverters or the batteries) to last for as long as I live in my house.

To me, aside from the ecological benefits, spending to (semi-)permanently reduce my living costs is just as good as investing… better in some ways as it will never be taxed and is not as risky. Also, in this case, the benefit will rise and fall as electricity prices rise and fall.

I assume a 3.3% SWR in my FIRE planning. The effective pseudo ‘SWR’ on this spend was 7-10%. Was this a slam dunk or a mistake?

Thoughts welcome.

[JohnB]

The key question with emerging technologies is how quickly their price drops. You might have done financially better to invest the money for 2 years, and then purchase at an (inflation adjusted) lower price, or get better performance at the same price.

Talking to friends who delighted in debugging (literally) their new home system made me realise I didn't want to be an early adopter, but as they just bought the house, it was the obvious time for them to do it with minimal disruption.

[BullDog]

I assume a 3.3% SWR in my FIRE planning. The effective pseudo ‘SWR’ on this spend was 7-10%. Was this a slam dunk or a mistake?

Thoughts welcome.

Well it's not just about the finances. IMO there's more than one way of looking at this. Everytime I look at doing something similar and do the numbers I find they don't add up when comparing to a simple alternative. I think you need to include maintenance and depreciation in the calculations. Essentially, after maybe 20 years you will have a scrap system that you have to dispose of. Plus regular cleaning and at least one new inverter. Possibly some new batteries too.

Hopefully by then they'll be recycled rather than go to landfill.

After allowing for depreciation, I then think about investing the same amount of money into renewable energy stocks. Presently, the share prices of many renewable energy stocks are seriously depressed due to the rising interest rate environment. Which means that outsize dividends are available from the likes of NESF (a solar farm operator) and HEIT (battery storage operator) as just two examples.

So, after the twenty years lifetime of a solar array and battery, I hope the investment has paid me dividends to offset against my energy bill, has had a positive environmental aspect and has grown the capital too.

Effectively, I think of it as outsourcing my solar and battery storage to a 3rd party in preference to doing it myself.

I hold NESF and HEIT so I'm eating my cooking in that respect.

[Dicky99]

Seeking views here.

I have just purchased some solar panels and a battery. I estimate that this will reduce my annual electricity bill by 7-10% of the amount spent. I expect the panels (though not the inverters or the batteries) to last for as long as I live in my house.

To me, aside from the ecological benefits, spending to (semi-)permanently reduce my living costs is just as good as investing… better in some ways as it will never be taxed and is not as risky. Also, in this case, the benefit will rise and fall as electricity prices rise and fall.

I assume a 3.3% SWR in my FIRE planning. The effective pseudo ‘SWR’ on this spend was 7-10%. Was this a slam dunk or a mistake?

Thoughts welcome.

How confident you are in your calcs? Have you factored in how inefficient solar panels are in winter in the UK when you're relying on them most? I think i read somewhere about 20% of their max capacity on a cloudy winter day. When you say you bought some panels "and a battery", won't you need another battery to be charging while your draining one for heat?
When energy prices first started rising and making the news in 2021 I looked on ebay at solar panel stuff and batteries and I couldn't make the numbers work and came to the conclusion it may be be better to invest some money in energy stocks instead but never got round to that.

[Gerry557]

There are lots of things that can be done depending on cost and or effort.

I've updated my dryer to the heatpumps type thus should save a bit of energy
I have installed tado smart meters which should also save a bit.

Then again the home cinema is not green but a luxury I accept and I like watching movies.

I can still switch off unused lights etc which doesn't cost anything but effort. There is a capital costs to the upgrades but mine was base more on convince rather than being green but a saving helps but I don't know the return.

I have invested in wind farms TRIG, UKW so I also have 3rd party holdings which offsets some cost.

Do you buy chickens, cows etc. Buy a greener house. I think led lights offer one of the bigger cost/reward aspects but assuming you have them covered.

[Spet0789]

I also hold enough UKW to pay my gas bill with the dividends, so I agree with that as an alternative route.

My question was more around the comparison between spending today to reduce costs in the future or investing today to generate income in the future. To me they should be equivalent from a FIRE perspective.

I am pretty confident in my calculations - within the (wide) range I stated. My panels will not cover my electricity usage all year round but so far (admittedly in the summer) they have meant that I have barely had to buy any daytime electricity. I certainly expect the solar yield to drop a lot in the winter and have taken that into account.

[leedm]

I also hold enough UKW to pay my gas bill with the dividends, so I agree with that as an alternative route.

My question was more around the comparison between spending today to reduce costs in the future or investing today to generate income in the future. To me they should be equivalent from a FIRE perspective.

I am pretty confident in my calculations - within the (wide) range I stated. My panels will not cover my electricity usage all year round but so far (admittedly in the summer) they have meant that I have barely had to buy any daytime electricity. I certainly expect the solar yield to drop a lot in the winter and have taken that into account.

FWIW, I invested in a 3.6kw system just over 6 years ago. I’ve calculated that it will finally have paid for itself by the end of this summer. I have never had to clean it and the production has not noticeably dropped at all. I was quite a heavy user of electricity for 4 of the 7 years with a large aquarium that used a lot of power. That’s now gone so I use much less, but now I use my panels to charge my electric car, which I haven’t had to charge from the grid in nearly 2 months.

On the downside, I’m now on my 3rd inverter, all replaced under warranty at no cost to me other than lost generation during the time between repair. But it is a concern and I’ll probably need to find some way of extending the warranty once it expires in 3 years time.

Overall though, I’m glad I did it, sure there might have been other ways to invest in the technology to make more money but it does have a certain feel good factor to it, especially when the suns shining!

[rhys]

My 3.92kW PV system cost £12 852 early in 2012.
By 31st March this year it had generated 36 929kWh of electricity and given a tax free income of £16 634. I'm in north Wales, so not so sunny.

I track the generation on a daily basis and upload the figures to PVOUTPUT.ORG ; this Australian website allows comparison of weeks/months/years . There's been no degradation year on year. I do notice that very hot days can produce a little less, ~5%, than cooler days. The panels are on top of disused cold frames. Never cleaned, although I do need to weed nettles that grow between some panels.

Currently the AGA and central heating are off. We still imported 9kWh yesterday. On those clear days last month we always imported at least 2KWh - fridge freezer etc. Last year I installed a "Solar iBoost". This toaster sized box monitors whether any power is being exported, and if so, it diverts it to the immersion heater. Unfortunately I've realised that because our immersion heater is at the top of the hot water cylinder, it fails to ever heat the entire cylinder, and consequently I'm getting only small benefit from the iBoost - especially since my wife insist that the immersion is timed to be on for 8 hrs/day regardless, but we'll not discuss that.

[DrFfybes]

We have Solar and Battery coming in a couple of week - circa 5kW system and 5kWh battery for about £11k, about £5k of which is the battery kit.

Expected generation of 4.6Mwh pa which is more than we use, so assuming we cover our current (ho ho) use of 3600 at 30p and export 1000 at 15p to Octopus then thats about 10%. Of course it isn't that simple, winter generation will not cover our use, and more export in summer, which reduces the return, and energy prices are changing quicker than a politicians opinions, so who knows what the future holds. I could have had panels only for just over £6k, which makes the return a lot higher.

As JohnB says, prices will change as will technologies. Panels have come down massively in price and are probably a mature market. Batteries might come down but demand is very high at the moment and will continue.

Payback on the batteries is hard to work out, sometime between "ages" and "never" as every unit I put in and take out is the difference between import and export (so for me about 15p) so at 75p per fill and empty then even once a day is only £270pa or 5%. However getting it installed as part of a solar system means zero VAT, and is isn't quite as simple to calculate as it decouples me from the grid.... the solar system can only supply a certain amount of current depending on the light and equipment, so on an overcast day I could put the kettle/oven/ immersion heater on and need to import to top up the generation, despite being a net exporter for the day. A battery decouples me from the grid in this instance and tops up the missing requirement.

But as for most of the affluent middle class homeowners installing these things, it is because we can and feel like we are "doing our bit" for the enironment, whilst still driving to the corner shop for a pint of milk and using 24,000 kWh of gas over winter.

The last point brings me to our other investment - spending circa £100k having the 230 year old roof removed, raised 18 inches and joists replaced with thicker ones, which allows insulation between the new rafters and underneath, but also increases the head height to one suitable for normal people to navigate without stooping. Obviously the return on this is "never", even the interest would pay for a lot of gas, but hopefully it will mean than when we've had the heating on all day like we did in December's cold snap the house will actually get above 12C in the rooms without extra fires in and we won't simply be pouring £20+ of gas out of the roof each day.

Paul

[servodude]

We have Solar and Battery coming in a couple of week - circa 5kW system and 5kWh battery for about £11k, about £5k of which is the battery kit.
...

Interesting to read about your system; thanks for sharing.

Would you have considered dynamic feed-in/consumption rates pegged to the wholesale price? (Asking as this seems to be an emerging and interesting idea round these parts e.g.https://www.amber.com.au/)

[Spet0789]

We have Solar and Battery coming in a couple of week - circa 5kW system and 5kWh battery for about £11k, about £5k of which is the battery kit.
...

Interesting to read about your system; thanks for sharing.

Would you have considered dynamic feed-in/consumption rates pegged to the wholesale price? (Asking as this seems to be an emerging and interesting idea round these parts e.g.https://www.amber.com.au/)

Octopus offer an agile tariff which does exactly this - rates are set for each 30 minute period on the prior day.

I now have a 12kWh system with a 20kWh battery, which cost roughly £30k installed. The cost was roughly 40% batteries, 40% panels, 20% inverters and wiring. I am expecting to have to add another battery in 10 years as the capacity on the current one will have degraded materially by then. The panels and inverters have a 25 year warranty for what it’s worth.

Not yet set up for export but the main purpose of the battery is to increase the amount of energy from the panels I can use. So far, we have been able to use over 85% of it and I expect over the year that will be over 90%.

[scrumpyjack]

I put in my 4kw solar system in Nov 2021 at a cost of about £10,600. The inverter has failed once (after 3.5 years) and was replaced under warranty.
No problems since

It paid for itself in about 6 years and since then it has all been a tax free return. The return last year was £3,212. It is indexed linked (RPI) for 25 years from installation.

So it was a ludicrously generous scheme to subsidise the build up of the Chinese panel manufacturing industry and of course they soon realised that and cut the subsidy levels.

It probably is still worth doing (but I doubt the battery is), but the return will be much less.

We have economy 7 and have switched as much electricity usage to the nighttime cheap rate (dishwasher, washing machine, BEV charging) when our rate is now 14.237p per kw.

It is curious that these home batteries are many times more expensive per kwh than the batteries in BEVs. Maybe home battery prices will come down a lot as volumes rise?

[servodude]

Interesting to read about your system; thanks for sharing.

Would you have considered dynamic feed-in/consumption rates pegged to the wholesale price? (Asking as this seems to be an emerging and interesting idea round these parts e.g.https://www.amber.com.au/)

Octopus offer an agile tariff which does exactly this - rates are set for each 30 minute period on the prior day.

I now have a 12kWh system with a 20kWh battery, which cost roughly £30k installed. The cost was roughly 40% batteries, 40% panels, 20% inverters and wiring. I am expecting to have to add another battery in 10 years as the capacity on the current one will have degraded materially by then. The panels and inverters have a 25 year warranty for what it’s worth.

Not yet set up for export but the main purpose of the battery is to increase the amount of energy from the panels I can use. So far, we have been able to use over 85% of it and I expect over the year that will be over 90%.

That seems like quite a large amount of storage for a normal grid connected domestic property. Do you mind explaining how you decided on that capacity? (Are you planning on long blackouts?)

[Spet0789]

Octopus offer an agile tariff which does exactly this - rates are set for each 30 minute period on the prior day.

I now have a 12kWh system with a 20kWh battery, which cost roughly £30k installed. The cost was roughly 40% batteries, 40% panels, 20% inverters and wiring. I am expecting to have to add another battery in 10 years as the capacity on the current one will have degraded materially by then. The panels and inverters have a 25 year warranty for what it’s worth.

Not yet set up for export but the main purpose of the battery is to increase the amount of energy from the panels I can use. So far, we have been able to use over 85% of it and I expect over the year that will be over 90%.

That seems like quite a large amount of storage for a normal grid connected domestic property. Do you mind explaining how you decided on that capacity? (Are you planning on long blackouts?)

The marginal cost of the extra storage is pretty low. Much of the cost is in the control electronics.

It’s a large property… I use over 40kWh on a typical day, (more if heating the pool with heat pump) and generate 20-50kWh from my panels. Only a couple of times have I maxed out the battery. In winter I will fully charge it overnight using cheaper electricity to be consumed during the day.

[ayshfm1]

Wow I had the same idea!

I have also invested in Solar, the panels and the inverter are installed and am waiting for the battery. I don't think mine is going to pay for itself anytime soon. I have yet to be issued with the MCS certificate because I won't pay the balance until I get my battery. So no export tariff

As things stand I have 8.3kw of solar panels into a 5Kw invertor. I use circa 20Kwh of electricity a day and in the six weeks it been running it's averaging 30+kwh per day, max 50kwh, min 14kwh. We are often home during the day and it prevents about 3/4 of electricity use, but also normally gives the grid a load of free energy.

So here's the problem you can go for a solar system that will pay for itself, but it will have some shortcomings, or you can go for one with all the bells and whistles but the payback becomes problematic. I went with b.

Mine is solaredge with optimisers and it will have a tesla battery and a home gateway. It's overkill. But you can't put a benefit on power continuity (IMHO), if I add the cost of providing that capability then the payback is poor, however having solar and a battery dead in the event of a power cut or any sort of load shedding like is happening ins South Africa was a deal breaker. In the end - sod the payback.

If however you take the view that it's going to reduce my monthly bills then assuming it lasts a long time then it will insulate me from inflation.

On the subject of maintenance.

Solaredge optimisers are really about shade protection, I don't have any shade issues and modern panels contain bypass circuits, so they provide questionable performance benefits. That said they will ensure all panels operate as well as possible even as they degrade, get hot or I neglect to clean them. I bought them because if a panel or optimiser fails I'll know which one and invoke the warranty, each optimiser provides a monitoring point.

Solar edge will let you over commit up to 200%, so you could hang 10Kw of panels off a 5Kw invertor. With solar I'm finding that when the Sun is out the panels run at full tilt this leads to clipping but when it is cloudy they are a lot less effective. The full tilt opportunities are reserved for a few hours in the summer. The rest of the time a lot of panels producing some electricity really adds up, I was really after low light performance, I'll be very interested to see the winter performance. Also should panel fail the generation impact will be minimal.

When the battery degrades, I would not replace it, I'd simply buy another to sit along side.

Solaredge invertors can be warranted for 25 years, I'm kind of thinking I won't do so, if it fails a good few years down the road then a modern replacement will likely be a lot better anyway.

In summary I think you have to approach solar with one of two goals, maximise the payback, which really boils to minimising the install cost or buying what amounts a cool toy and not be too bothered that payback extrapolates to a decade or so.

[scotview]

I assume a 3.3% SWR in my FIRE planning. The effective pseudo ‘SWR’ on this spend was 7-10%. Was this a slam dunk or a mistake?

Thoughts welcome.

If you damage the roof tiles during installation, your roof repair costs and subsequent water damage could cause your "SWR" for the solar install to go negative.

[vand]

You have done very well, and this is indeed "smart" use of money. Let's say you spend £10k on solar PV and it returns you just 7% like you say - that's effectively a £700 implied income stream that is a guaranteed and real return - you know that you'll be using the electricity, and the electricity is going to be generated for you no matter what happens to future energy prices.

While your investment returns might generate more than 7% real, it is by no means gauranteed, and the unpredictability of it means that you are only relying on drawing 3.25% - much worse use of your money.

[scrumpyjack]

...
So here's the problem you can go for a solar system that will pay for itself, but it will have some shortcomings, or you can go for one with all the bells and whistles but the payback becomes problematic. I went with b.
...

I too have gone for b. I had a 4kw system installed in 2011 so get the maximum FIT etc until 2036. But we sometimes get power cuts here so in upgrading our system, having automatic backup, so the batteries carry on supplying the house in the event of a power cut, was a high priority.

I've ordered another 5kw of panels, plus 2 x 10kw batteries, plus an immersion heater to absorb surplus energy, plus a backup unit. It's all solar edge and is being installed the first week in December.

I was surprised that we got DNO approval for all this within 2 weeks of applying, having been told it takes 8 weeks. The only stipulation was to ensure the new kit limits exports to 5kw, which the Solar Edge kit can be set to do.

Really it isn't financially justified but it's fairly harmless as boys toys go

The smart meter is being installed first and I plan to go with EON Next Drive tariff.

[vand]

As this has sort of evolved into a thread on solar, I did the numbers a while back and didn't make sense for me personally.

We don't use much energy - will be about 2400kWh this year - and given the cost of the solar and that you can't reap the full benefits when you most need them (ie over winter) means the payoff will not be great, so I just invested the money instead.

If you are a high energy user over the summer - electric vehicle, swimming pool/jacuzzi, air conditioning etc... then it the payoff time will be much more friendly. I am just happy to be a relatively low energy user - that's a perfectly valid way of keeping your costs down too.

[Sam0912]

Hi, my first post on this forum as I only just found it - I actually got a free copy of the motley fool guide to investing many moons ago when I joined First Direct bank’s share service (I think that’s what it was), always kept up with them since then.

Thanks to all who posted their experience of solar installations, my friend and I (both electricians) tried to convince another friend to have them fitted when he was moving into a house which was nearing completion (new build). Price was 6,000 as the scaffold was up and roof nearing completion. He said he’d rather invest, regrets that now (at that price).

As we said to him, it’s not just about money, it’s also taking some control of your supply, the national grid is in a mess, the government has pretty much forced “smart meters” onto people, meters which whilst convenient, don’t actually save you a penny. Those meters allow remote control by your supplier (they can swap you to a pre-payment remotely if you go in arrears for instance), so I think with the crazy world we live in, that control plus a bit of payback are well worth it, shame the prices are pretty high now, but still considering installing either in my current house whilst i refurb it, or the next one which will be bought with my partner.