Solar PV - Incomes and Paybacks

There can be some confusion as to what incomes and subsidies are used to calculate the payback when owning a renewable technology; in this case a Solar PV (PV) array. The following is a simplified list, but encapsulates the main points, whether you’re a home owner or a business.

Please note that we’ve made the assumption that the PV array will use compliant product and is installed by a registered installer if under 50kW’s in size. The kite mark is called MCS and stands for Microgeneration Certification Scheme*. You need to ensure that you can tick both boxes.

The Feed in Tariff       The unit cost quoted in the FiT table is applied to all of the energy generated by your PV providing you have an Ofgen meter (often supplied as standard).

Spill/export                 If energy generated by your PV is not consumed on site, this will be automatically exported to the grid, normally at a pre-agreed price. The Feed in tariff states a minimum export price but higher rates may be available. It is worth contacting your current energy provider and specialist green energy trading companies to see who is offering the best terms.

Grid supplied energy  The energy that your PV generates, which you consume onsite, is replacing energy that you would otherwise have to purchase from your energy provider. This green energy therefore has a value equal to your current tariff.

Most if not all users of grid supplied energy have a day and night tariff, which may require a few more sums to calculate the equivalent value of this green energy.

Offsetting carbon       This is less important to homeowners. The carbon saved by having a PV array on a commercial property can be offset against the company’s carbon footprint. If the installation is offsite, then the company can only claim the FiT or the carbon, not both. As most PV arrays will be sited on the property where the energy will be used, this is not normally an issue.

Maintenance Costs     PV is generally considered a fit and forget technology but a once year inspection can be beneficial. This is however a point of preference and we would recommend that homeowners simply contact the installer if the PV array is not generating the expected power before rushing in to any annual maintenance contract. Businesses on the other hand may see the benefit in having a maintenance contract as peak performance may be business critical. There may also be health and safety reasons which prevent a company instructing an employee accessing roof mounted PV to clear aware debris or obstructions interfering with performance.

To give the above some context, we have illustrated a couple of payback examples below.

Illustration A – all energy generated by the PV is consumed on site, offsetting grid supplied energy normally purchased at 9p per kWh. We’re assuming that the energy generated is within the same period covered by the “day tariff”, defined by the current energy provider.

PV array size:                             50kWp

Energy generated p.a.:           40,000 kWh

Value of offset energy:            40,000 x 9p                                            £  3,600 p.a.

Value of FiTs:                              40,000 x 31.4p                                      £12,560 p.a.

Value of exported energy:      n/a                                                           £nil

Sub total                                                                                                        £16,160 p.a.

 

Maintenance:                          two people + access platform            £  1,200 p.a.  

Total income                                                                                               £14,960 p.a.   

Assuming the PV array cost £150,000 to install, a simplified payback calculation would be 10 years.

Illustration B – house/small business/school - all energy generated by the PV is consumed on site, offsetting grid supplied energy normally purchased at 11p per kWh. We’re assuming that the energy generated is within the same period covered by the “day tariff”, defined by the current energy provider.

PV array size:                          4kWp

Energy generated p.a.:         3200 kWh

Value of offset energy:         3200 x 11p                                          £   352 p.a.

Value of FiTs:                         3200 x 41.3p                                       £1,321 p.a.

Value of exported energy:      n/a                                                    £nil

Sub total                                                                                              £1,673 p.a.

Maintenance:                                                                                      £        0 p.a.   

Total income                                                                                       £1,673 p.a.    

Assuming the PV cost £12,000 to install; a simplified payback calculation would be 7 years.

 

*Altergen only use accredited installers and accredited products.