"Savings" calculation for solar PV with storage batteries?

[plugwash]

To work out interest rates 10 years in advance needs a crystal ball. But unlikely to be less than 10% per annum, so

Where the heck did you pull that number from. Nowadays you are doing well to get over 1% on your savings.

And then you have to consider inflation, often "real terms" interest (taking acount of inflation") is actually negative.

 

[JohnW2]

What ever you spend money on to save money, you have to include loss of interest on that money if simply invested, or cost of borrowing the money.

To work out interest rates 10 years in advance needs a crystal ball. But unlikely to be less than 10% per annum, so

That's certainly a factor but I didn't bother to mention it with interest rates as low as they have been in recent years - during which period only fairly (very?) speculative investments would have achieved anything like 10% p.a.

... and don't forget that many people would actually pay interest (probably far more than they would receive from simple investment) by financing their capital outlay on a PV installation with credit.

However, as I keep saying, even if 'lost investment income' is zero, one still has to be able to cope with a situation in which one would be out of pocket (probably by 'thousands') for a number of years - something which becomes less sensible the worse is one's current financial/cashflow situation, the older one is or the shorter the period one is likely to remain in the same property.

I would think that those most likely to ('sensibly') consider PV would be young people with appreciable capital/savings wo though it likely that they would remain in their present property for, say, a couple of decades - but I suspect that such people are probably fairly few and far between!

Kind Regards, John

 

[plugwash]

I would think that those most likely to ('sensibly') consider PV would be young people with appreciable capital/savings wo though it likely that they would remain in their present property for, say, a couple of decades - but I suspect that such people are probably fairly few and far between!

I suspect they are not as rare as you might think.

People die, when they die they often free up a bunch of capital for the younger generation(s) of their family to invest.

 

[JohnW2]

I suspect they are not as rare as you might think. People die, when they die they often free up a bunch of capital for the younger generation(s) of their family to invest.

Possibly, but I suppose it depends, amongst other things, on 'how young' one is talking about.

'Youngsters' tend to be 'quite old' (I suppose most commonly 40-60y) by the time that (the second of) their parents die, and the great majority of them struggle, often unsuccessfully, to find enough capital/savings for a deposit to get them onto the first step of house ownership ladder, let alone to also finance the purchase of a PV installation.

However, it was really the last of the things I mentioned that I was thinking mostly of as being 'few and far between'. Probably largely because of the nature of the 'housing ladder' (if one manages to get onto the first step), I would think it pretty unusual for 'youngsters' to remain in one property for anything like 'a couple of decades'.

In any event, what I've been writing obviously only relates to those who, by whatever process (even if borrowing), are able to find the money for the initial cost of a PV installation - and leads me to wonder exactly which individuals would (sensibly) want to 'invest' in a (UK) PV installation if they examined the arithmetic properly.

When talking to people about this, I usually try to dissociate the issues from anything to do with PV, and simply ask them about 'money'. I ask them how they would feel about putting a number of thousand pounds today into an investment that would leave them 'cash poorer' for much of, say, the next 10 years, but thereafter would provide some effective 'return', but a return which would probable cease if/when they moved to a different property. Few people I've presented with that suggestion have felt that it was something they would be inclined to do.

However, opinions and views obviously vary.

Kind Regards, John

 

[crappy]

@flameport has pretty much covered off the corrections to original view. My system, using the batteries he mentioned, has cost me around £12k to build. Around £3 of that was "unnecessary" items such has 140m of 16mm swa, timber to buildings carport to house panels etc.

I currently pay £393 a month on electricity (yes, it hurts) so my payback is siting at under 4.5 years at the current rate. I'm assuming the price per unit will increase which only benefits my calc.

I could have built a a much cheaper one, spec's for summer but I wanted enough capacity for those crappy February months.

Batteries and inverters have dropped massively since my first build 9 years ago. It would be great if there was an incentive by government too do this (other than increasing price)

 

[JohnW2]

@flameport has pretty much covered off the corrections to original view. My system, using the batteries he mentioned, has cost me around £12k to build. Around £3 of that was "unnecessary" items such has 140m of 16mm swa, timber to buildings carport to house panels etc.

Should that perhaps be £3k ?

I currently pay £393 a month on electricity (yes, it hurts) ...

At, say, 30p/kWh, that would equate to around 44 kWh/day, which is quite high (about double my consumption in a very large house). Do I take it that includes EV charging?

... so my payback is siting at under 4.5 years at the current rate.

You seem to be assuming a saving of about £222 (for £12k outlay) or £167 (for £9k outlay) per month, corresponding to maybe about 740 kWh or 557 kWh per month (about 25 kWh/day 18.5 kWh/day) respectively. Do you really expect to be able to generate that much (or have my calculations gone wrong somewhere?) ?

I'm assuming the price per unit will increase which only benefits my calc.

That's true. However, interest rates are likely to rise markedly in the foreseeable future, thereby increasing (probably to levels which 'ought to be considered') the notional 'lost interest' to which eric referred, thereby reducing or reversing the increased benefits if/when energy prices rise (if they do in the medium-/long-term, which I'm not convinced they necessarily will).

Kind Regards, John

 

[StephenStephen]

In the abstract, it makes no more sense to focus on the time before payback is achieved than it does on the time after payback is achieved, or indeed the other way round!
However, the focus on the short-term thinking: 'I won't be in profit until X number of years have passed' does concern me for a few reasons:
-Short-term payback thinking supports short-term solutions and undermines support for longer term sustainable practice
-Short-term payback thinking leaves us poorer after the payback period - apples now or apple trees later?
-Short-term thinking tends to narrow individualism, discounting the benefit to future home dwellers, and ignoring the fact that there are important ways in which we really are all in it together.

I also wonder whether, if we're honest, we do, or indeed if we should base these kinds of decisions on payback and profit.

I'm clear that these kind of systems are much more like choosing whether or not to go on holiday - I wouldn't avoid the pleasure of going on holiday because it won't make me a profit, and I wouldn't avoid the pleasure of an elegant and effective home energy system because the profit may take some time.
Of course, others may not take pleasure from generating or saving their own energy, and I guess some people aren't so keen on going on holiday...

 

[JohnW2]

In the abstract, it makes no more sense to focus on the time before payback is achieved than it does on the time after payback is achieved, or indeed the other way round!

As I've said, if looked at in purely individual financial terms (which is what this thread is about), it does 'make more sense' if there are uncertainties as to whether one will live (and live in the same property) for long enough to enjoy much (or any) of the potential 'post-payback' benefits.

However, I think that most of the rest of which you have written overlooks the fact that what I have been writing relates only to that issue raised in this particular thread (and many other similar ones) concerning only financial benefits associated with PV generation (and maybe storage) which can be achieved by individual house owners.

However, the focus on the short-term thinking: 'I won't be in profit until X number of years have passed' does concern me for a few reasons:
-Short-term payback thinking supports short-term solutions and undermines support for longer term sustainable practice

It does, but we're talking at the individual level, at which (depending on circumstances) only the relatively short-term may be relevant, other than in altruistic senses.

-Short-term payback thinking leaves us poorer after the payback period - apples now or apple trees later?

As above (yet again, at the individual level) only if the 'post-payback period' comes, and lasts for an appreciable time. I wouldn't think that many people of 95, or much younger people who knew they were likely to move in the coming 5 years would be very inclined to plant trees in their garden which were not going to fruit significantly for over 5 years would they? Some might do that, if they were thinking only of those who survived them or future occupants of the property but, human nature being what it is, not many would.

-Short-term thinking tends to narrow individualism, discounting the benefit to future home dwellers, and ignoring the fact that there are important ways in which we really are all in it together. .... I also wonder whether, if we're honest, we do, or indeed if we should base these kinds of decisions on payback and profit.

You're now shifting the discussion to one which is very different from that about 'individual cost saving' which is central to this thread and many others like it ....

... I'm clear that these kind of systems are much more like choosing whether or not to go on holiday - I wouldn't avoid the pleasure of going on holiday because it won't make me a profit, and I wouldn't avoid the pleasure of an elegant and effective home energy system because the profit may take some time.

I don't really understand that analogy. Paying for a holiday is surely all about deriving a fairly 'immediate' (certainly 'short-term') benefit? I wouldn't think many people would consider paying a large amount of money today for a holiday (or even series of holidays) which would (hopefully!) happen in several years time, particularly if there were situations/circumstances in which they might never enjoy the holiday.

Of course, others may not take pleasure from generating or saving their own energy, and I guess some people aren't so keen on going on holiday...

I'm not sure that 'taking pleasure' is necessarily quite the right phrase but, whilst the questions and discussions about PV are very largely about 'individual cost savings', I imagine that most people understand that there are much wider considerations relating to society as a whole and any number of 'environmental' issues.

However, even if one forgets the issue of 'individual cost saving' (or not), I do still have to wonder a bit about domestic PV installations (in the UK). I think there are about 28 million households in the UK, so if each one spent, say, £10k on a PV+storage installation, that would amount to a total spending of about £280 billion. That is an extraordinarily large amount of money, by any standards, and I cannot help but wonder whether (even taking distribution costs and losses into account) it might not be much more efficient to spend that money (or even a fraction of it) on centralised 'sustainable' generation.

However, I have to presume that there would be considerable 'resistance' to a suggestion that every household should today be asked to make a payment of £10k (or to accept a substantial further rise in energy prices for the next few years) in order for them (and the whole country) to be able to enjoy much 'greener' (and possibly cheaper) energy in 10-20 years' time.

Kind Regards, John

 

[StephenStephen]

Just a brief reply:
Yes it might make more sense to value short term benefit over later benefit, if uncertainty over longevity of residency is greater than uncertainty about long term finance, but not otherwise, so you overstate your case here.
You assume that a narrow focus on the specific question, without raising questions about underlying assumptions in the question, is the only possible reasonable response. It is not.
No, you're right - you don't understand the analogy. The pleasure is not some far off possibility, it is the daily pleasure taken in the use and appreciation of the system itself - for example; the pleasure of boiling a kettle knowing it is powered by that day's solar generation etc.
Your assumptions about human nature, on which your arguments rest, are simply that - assumptions. (Other equally valid assumptions are available).
I can't help smiling at the irony of your attempt to insist that we remain inside the narrow frame of the original question, which was about batteries, whilst straying into musings about the cost of solar PV.
At some stage it would be good to get to the bottom of your strongly held views about solar PV, but maybe not in a thread about batteries?

 

[JohnW2]

Just a brief reply: .... Yes it might make more sense to value short term benefit over later benefit, if uncertainty over longevity of residency is greater than uncertainty about long term finance, but not otherwise, so you overstate your case here.

That's obviously a matter of opinion, and I can but base my thoughts on what I observe. For a start, I think that if one makes realistic assumptions about PV generation (in UK) then the payback period for a PV installation (particularly PV+storage) is probably likely to usually be nearer 10 years than 5. If one wants, say, to enjoy a period of 'benefit' approaching the prior period of 'being out-of-pocket', then that suggests that one probably needs to be thinking over a total period approaching 20 years, maybe more.

Other than for the 'fairly old', probable longevity (of life!) is not going to be a major consideration. However, 'longevity of residency' is a different matter. Prior to 2008, the average period of residency (by owner-occupiers) in the UK was 10 years or so, but, even though that has subsequently roughly doubled, even that suggests that half or more residencies probably last for less than about 20 years (particularly given that consideration of installing PV will often not happen until a number years after the start of residency).

Given that, I suppose it's a matter of opinion as to whether I am 'overstating' the uncertainties about longevity of residence. It is, in any event, up to the individual householder to take their own estimates of likely duration of residency into account when looking at estimates of the financial impacts of PV over time (*hence making their decision).

You assume that a narrow focus on the specific question, without raising questions about underlying assumptions in the question, is the only possible reasonable response. It is not.

See below.

No, you're right - you don't understand the analogy. The pleasure is not some far off possibility, it is the daily pleasure taken in the use and appreciation of the system itself - for example; the pleasure of boiling a kettle knowing it is powered by that day's solar generation etc.

I'll have to leave that one to you, since my capabilities are limited to things which are at least roughly quantifiable. Given some realistic assumptions, one can make a reasonable estimate of the financial impact over time of a PV installation on a householder and, given a lot more assumptions, one can make a stab at a quantitative estimate of the environmental impact of a given degree of shift between energy sources, However, I cannot even attempt to quantify (or ascribe a financial value to) something as subjective as the pleasure derived by an individual in boiling a kettle in that way - you might be able to but, even then, it would be very personal to yourself.

Your assumptions about human nature, on which your arguments rest, are simply that - assumptions. (Other equally valid assumptions are available).
I can't help smiling at the irony of your attempt to insist that we remain inside the narrow frame of the original question, which was about batteries, whilst straying into musings about the cost of solar PV.

The original question was essentially about the potential additional 'cost saving' (to the OP) of adding storage to his PV installation, so is really only a variant of the much-more-common question about the 'cost saving' of the PV installation, per se.

At some stage it would be good to get to the bottom of your strongly held views about solar PV, but maybe not in a thread about batteries?

I have no axe to grind, and no strongly-held views other than the view that people should be informed as fully and objectively as possible about the facts and estimates on which they must make their decisions about PV (or storage of PV-generated electricity). Only too many people appear to be mislead by marketing material/claims, leading to problems such as unrealistic assumptions and a failure to really grasp what it means to their financial affairs over time.

I would certainly never usually advise any individual to have, or to not have, PV (or PV storage) installed (the one exception being if they said that they were expecting to move home, or die, within the following small number of years!). The nearest I would get to that would be to tell them what I decided for myself, along with presenting and explaining the facts and figures that brought me to my personal decision.

For others, I would start by trying to make sure they were starting with realistic assumptions about PV generation and energy usage, and would then present them with estimates of what that would mean to them financially over time in the future. It would then be for them to make their (hopefully 'well informed') decision and (as I said above you could do for yourself) this is where they could, if they so wished, being issues such as the (their personally perceived) value of the pleasure derived from boiling water with their home-generated PV electricity into their decision-making process - but I certainly could not help them (or you) with that last bit.

I acknowledge, accept and respect the fact that some people will place sufficient value on 'pleasures' such as you mention and/or benefits to society as a whole and/or environmental benefits (potentially to the world as a whole) to sway their decision towards PV even if it could be shown semi-objectively to probably be to their financial detriment, in one sense or another. That's fine, but only they can decide that - I can't help them specifically with that, since all that I can do is to provide them with estimates of the financial implications for them, with PV vs. without PV, over the next couple of decades/whatever.

Does that help you to 'get to the bottom' of my views?

Kind Regards, John

 

[StephenStephen]

Yes, I think I see where now you're coming from. You have a concern that people will be misled by marketing, and will make what is first and foremost a financial decision based on innacurate information.

I have a different concern, which is that people will make a decision about how they spend their money, based on the false assumption that they must firstly not spend it in a way which might leave them less than they started with in the short term.
It's not true with t-shirts, it's not true with holidays, it's not true with most home improvements, and for many, if we're honest, it's not true with home energy systems.
The assumption about the primacy of short term avoidance of financial shortfall is embedded in your responses, and subtly but powerfully reinforces the beliefs that we ought to put 'taking care of myself financially, in the short term' above other considerations, in a way in which we don't for other home improvements.
I do understand that this may be the assumption you used for your decision re solar PV.
So my concern is that there may be many people who want to install a shed or update their kitchen, and feel able to do so, knowing full well that it's going to cost them money, and want to install batteries or ASHP or PV and the like, but don't feel able to because they believe that they must not or should not do so if it's going to cost them money in the short term. I think it's a shame if they miss out on doing what they want, based on this false assumption, which gets slipped in so invisibly - so it seems wise to point out its existence.
...and of course, if people do want to make a purely financial decision, then I agree that it's worth getting the maths guesses as accurate as reasonably possible.

 

[ericmark]

From what I read the EV can be used for storage, so if the EV is reason for solar panels one has to look at life style.

As some one retired I could use the EV for storage, but if using the car for getting to work, then only if working nights. I have not looked into how it is controlled as I can't afford an EV, at least not a car, my E-bike and mobility scooter can't feed power back into the home.

I look at my daughter and how her working life has changed, mainly due to Colvid, but seems this may now become the norm. She goes into work once a week, rest of time working from home.

This has completely changed her needs for transport and heating, she needs to heat her home in the day, and goes to work on a push bike mine, which I would really like back. Her car is for luxury, even shopping done on a bike, but before Colvid she would have seen the car as an essential tool to earn money.

My wife today suggested going to Spain for the winter to save money, however our house has a converter garage below it, so we could save even more by living in the flat in winter. We could turn the heating right down in the main house.

OK very marked for us, but most homes we can turn off selected rooms, keep over freezing to prevent damage, but we can reduce number of rooms lived in, my mother for last 15 years of her life never went upstairs, she had a stair lift, but simply did not use it.

So when deciding if batteries are a good idea, the question must in include alternative methods of saving money, very few have enough money to do all they want to do, so it is normally fit a solar battery or go on holiday or other function requiring money.

At 71 I don't see solar panels, water energy storage or electrical energy storage as some thing I want to spend my family's inheritance on. At the monument we are short of ready cash, but we know within 6 months that will change, so we could fit solar panels and batteries, but it would not benefit us, it may or may not help our children, but they have enough income that we don't need to worry about them, and I think a world cruse would be better than solar panels and batteries.

 

[JohnW2]

Yes, I think I see where now you're coming from. You have a concern that people will be misled by marketing, and will make what is first and foremost a financial decision based on innacurate information.

Exactly - inaccurate information and/or misguided assumptions.

In fact, it's quite a similar situation to that in nearly all of my professional life (in fields very far divorced from anything electrical, or anything we discuss here). The end-result of matters I'm involved with is usually a decision, often relating to 'countless millions' and/or potentially the safety/wellbeing of countless people, but I never make the decision. I simply present the 'facts and figures' (and their implications etc.) relating to one aspect of the matter, and it is then for "them" to put my input, together with other considerations that have to be taken into account, into the melting pot which they use as a basis for their decision.

Just as I may explain to people what decision I made about PV in my own house, and why, I will often say to a client "if it were me who had to make the decision, then I would be inclined to ....." but that is just another thing which goes into their melting pot - and not something I can even do/say if there are major 'other considerations' which I am not able/competent to take into account.

I have a different concern, which is that people will make a decision about how they spend their money, based on the false assumption that they must firstly not spend it in a way which might leave them less than they started with in the short term.

For a large proportion of expenditure ('purchases') it's more than just the short-term. Ignoring complications like inflation, if one spends £XYZ on a purchase, then one will be worse off by £XYZ for the rest of one's life as compared with the situation if one had not made the purchase, and it's as simple as that.

With other things (like PV, 'maintenance', insurance etc.) it's more complicated, since the financial 'loss' will not, or may not, last for ever and, indeed (e.g. in the case of 'maintenance' and insurance), may have the (financially) 'positive' effect of eliminating major financial losses in the future.

It is in these situations that one needs a good understanding of 'the estimated arithmetic' in order to make decisions, albeit they are often not easy decisions because they are inevitably at least partially probabilistic in nature. In some situations, appreciable 'short-term' expenditure on maintenance/insurance may not be considered 'sensible' in relation to the possible cost of replacement of the item at some point in the future.

PV is a bit more straightforward, in that there are less uncertainties - the main ones being about future energy prices and the (post-warranty) longevity of the PV installation. If energy prices remain unchanged and the PV installations lasts way beyond its warrant period, then it's easy enough to estimate the (inevitable) 'cost savings' which will start to be enjoyed in X years time. However, it needs to be remembered that 'things change', and that the eventual 'cost savings' that we estimate today are probably nearly double what we would have estimated just a year or so ago - and we don't know what further changes there will be in the future.

The assumption about the primacy of short term avoidance of financial shortfall is embedded in your responses, and subtly but powerfully reinforces the beliefs that we ought to put 'taking care of myself financially, in the short term' above other considerations, in a way in which we don't for other home improvements.
I do understand that this may be the assumption you used for your decision re solar PV.

It's not really 'my assumption'. As I've said, it's a matter of individuals making a decision (as 'well-informed' as possible) on the basis of comparing the probable situation (over time) with and without the PV installation - and that decision will (based on the same 'facts') vary considerably between individuals, particular is relation to individual attitudes to 'risk taking' in relation to the areas where there I uncertainty. Some people are very risk-averse, and hence would not want to discount the (very low probability) possibility that a PV installation might have to be replaced "the day after it's warranty expired" - in which case their view of the arithmetic would probably be very different.

So my concern is that there may be many people who want to install a shed or update their kitchen, and feel able to do so, knowing full well that it's going to cost them money, and want to install batteries or ASHP or PV and the like, but don't feel able to because they believe that they must not or should not do so if it's going to cost them money in the short term. I think it's a shame if they miss out on doing what they want, based on this false assumption, which gets slipped in so invisibly - so it seems wise to point out its existence.

It would, indeed, be a shame if they were to make such a decision based on 'false' assumptions/beliefs/whatever - which is why I feel that they should be as fully informed as possible - and that includes them being helped, if necessary, to 'fully understand' the maths, as well as seeing it.

In fact, in the case of PV, the situation is often almost the opposite of what you are suggesting, since (usually as a result of marketing stuff) people have often come to ignore the short-term costs and think only about the potential 'cost savings' a number of years down the road.

When people start talking/asking about PV, it is very common (again, probably due to marketing) for them to start by talking about "pays for itself in X years". However, if I ask them whether they have considered that this means that they will be 'out of pocket' for the first X years, many of them say that "they had not thought of it like that".

Similarly, if I ask them if they have considered the fact that since the warranty is only for 7 (or 10, or whatever) years, that it is not impossible (albeit probably unlikely) that they would have to bear the cost of replacing the installation fairly soon after they had started enjoying 'cost savings', they very often say that they "had not thought of that possibility" My intention in asking them those questions is not to bias their decision but, rather, to make sure that they did take into consideration this things "which they had not previously thought about".

...and of course, if people do want to make a purely financial decision, then I agree that it's worth getting the maths guesses as accurate as reasonably possible.

Indeed. I would say that (in all the situations I've mentioned, including my 'day job' work'), no matter how many other considerations have to go into the decision-making melting pot, the starting point should be mathematical estimates which are as accurate (and based on realistic assumptions) as possible.

Kind Regards, John

 

[Agile]

Anyone reading this thread please be aware that some of the links quoted have prices excluding VAT and the batteries and inverter needs to be installed at a cost.

Many quotes I see have a reasonably economic price for the panels but an expensive cost for any storage batteries and inverters. It is important to only consider the full total costs including installation.

A warranty of 10 years on batteries seems of questionable benefit if the supplier can go out of business during that time. Or worse can go into liquidation to avoid having to pay out for failed units.

I am also aware that there are many people with a bit of spare cash who are prepared to spend it solely to help the planet even if there is little or no investment benefit.

Whilst capital spent on long term projects of 10 years and more does have an equivalent cost from loss of received interest, that is expected to be balanced by increases in the financial benefits as electricity prices continue to increase each year.

 

[flameport]

A warranty of 10 years on batteries seems of questionable benefit if the supplier can go out of business during that time. Or worse can go into liquidation to avoid having to pay out for failed units.

While any company can go out of business, the main manufacturers of batteries are not some newcomers to the market that only make half a dozen packs a year and are likely to disappear.
Pylon Technologies who make the batteries linked to earlier have been making such things for well over a decade.
One of the others is BYD, who have been around since the 1990s and make batteries, electric vehicles, PV panels and a lot more.
The manufacture of li-ion batteries and associated items is a multi-billion dollar industry.

No doubt there are companies quoting excessive prices for installation, but that's the same in any industry.
For typical installations, the cost of the components is far in excess of the installation costs. PV panels will have higher install costs as scaffolding is almost always required, but a residential install of those can be completed in a day.