Solar Electricity - is it worth the investment?

[traveler]

The price of photovoltaic panels has come down considerably in the past few years. It appears to me that the business case for installing a system and selling the power to EDP is getting to be more reasonable. A 3.6kw system is now around 14k Euro installed with a 6 year payback. I would like to hear from members who have recently considered such a system or have actually installed a system to find out if they are breaking even or making any money on the scheme. Thanks in advance for your comments.

[EMM]

Putting to one side what EDP or any agent tells you about the payback time.
Are you a full timne resident with current average family usage if not then I cannot see how the payback could be achieved within a reasonable period.
What assurance do you have that the feedback tarrifs will remain at levels that cover your investment costs.

In theory the Alagrve with its high solar levels is a much better proposition but the take up appears to be just a fraction of the UK ??

[Bruce Wallis]

When I enquired of a local installer , he told me that even in the Algarve, you are looking for a payback time of something over 5 years.

That's still better than the UK though......they reckon that now the discounts have been removed, it's 20 years + in the south and west, and 25 years+ in the midlands and north.

[maccasa]

Totally agree with you Bruce (did I just say that? ) I''ve done the sums and it's certainly over 5 years in PT. even if you are not there for 6 mths of the year and all the power goes to the grid. The problem is there is always the standing charge of - I think- €0.92/kwh installed/mth, so you are paying over 20 per mth for basically nothing. The story of a payback in the uk of 6-7yrs was a joke - friend's son worked for an installation company and he was so embarassed by the lies they had to tell, he went back into satellite communications.

[widge]

My electricity bill has averaged € 225 per month for the past 5 years. With the increase in VAT & inflation let's assume it's going to be €250 per month for the next 5. If the solar installation cost €15000 I would need to achieve zero electricity costs every year to recover my investment in 5 years.

[traveler]

Thanks to all of you for your recent posts. The last comment on the amount you receive as a credit from selling into the grid is exactly what I need. I would like to know if anyone has installed a system and the amount of income they are earning. Logically speaking a 5 to 6 year pay off is not that bad. With the life of the panels at around 20 years, it would seem to me that after 5 to 6 years you would have free electricity. With the price of electricity almost guaranteed to increase in the future, it seems like a logical way to lock in the cost of your utilities. I do not think the rate subsidy will be removed in the future, especially given that EDP is now foreign owned and the government can now truly act as a regulator.

[EMM]

I would not assume that the subsidies will remain at current levels.
They have been substantially reduced in the UK, also in Germany and Belgium countries that had a take up much higher than the UK.
Governments finance the subsidies NOT the electricity providers and as we all know too well Goverments are broke.
The financial papers have been carrying articles about the number of suppliers to this markets who have been going broke and factories closing in the states and across Europe.
in theory it is a great idea but something is not right .
A privatised EDP has shareholders to satisfy which means that it has to increase its profits, subsidising solar generation is not in its long term interest for profits.

[EMM]

I should have added. install solar because you believe in it, commercial considerations should be secondplace.

[Michael Crane]

I should have added. install solar because you believe in it, commercial considerations should be secondplace.

I agree. Certainly in the UK you'd need to be Scottish Stacey's age to make it worthwhile. Pato would not benefit at all . . . unless he was very, very lucky.

[traveler]

I think you will find that a number of solar panel manufacturers are going out of business due to 1) cheap panel imports from China, and 2) a change the rate subsidy for new installations. The rate subsidies in Germany have changed for new installations which reduces the ROI from 12% to 4%. The goal of the EU countries is to generate a certain percentage of energy from renewable resources and this is being driven through EU based regulation. This is actually to the benefit of the country in the long run, hence the short term up-front incentives to stimulate investment in this sector. The government is now shifting the burden of the incentive scheme away from tax based subsidies to rate based subsidies. At present, the contracted rate for residential roof top installations is 39c per kwh, dropping to 22c kwh after 8 years. The only fly in the ointment in Portugal is wording in the regulations that seems to indicate you can only sell to the grid 50% of the power you consume. Given the current rate subsidy you this would allow you to effectively reduce you monthly charges to +/-0 for the first 8 years and then by 50% after 8 years. My initial calculations indicate a breakeven at around 6 years and a positive ROI. However, I would like to hear from someone with real experience before making any final conclusions. What I do know is that my energy costs have gone up substantially without any real change in consumption. Given EDP has shareholders, I expect this to continue over the next 20 years.

[EMM]

Given the lack of response there would appear to be little informed knowledge of solar installations in the Algarve.
If you ask the same questions on expats portugal you may get a better response as there are many in the north who have gone down the route of self contained domestic installations.
This method has a much lower initial cost.

Traveller Do you believe in Solar as a " greener method " of power production ( excluding the rescources used and pollution caused by the panel production, one reason why china is so dominant and western companies have struggled to compete as they have much tighter environmental regimes ).
We have not excluded solar as a way of reducing our environmental footprint and power reduction but having seen the way companies have cashed in on the ignorance of consumers in the UK using high pressure commission driven sales it is a bandwagon we will not jump on at the moment.

As an aside I work with a belgian aluminium company who has seen a fall in demand from the Northern European solar market of at least 50% due to the change in subsidies, nothing to do with the chinese as their product is not imported. In fact their Belgian customers are one of the larger suppliers to the UK solar marke which as we know has also declined.

[traveler]

EMM, I will try to find some better information around expected "real" cash flow and repost. Regarding your question about a greener method of power production, my view is that at some point the economics of system will allow for a rational environmental decision. I believe we are very close to this crossing point. The two main drivers of cost are the cost of the equipment and the cost of installation. In the US the cost of installation was in some cases double the equipment. These kinds of scams destroy the ROI and help to destroy the economics behind a decent concept. There will always scams around these kind of schemes, which is a shame. This is one of the reasons I am conducting research and to determine if I can drive down the two cost variables above to maximize ROI, or do I need to wait another year or two. Once I conclude my research, I would be more than willing to share with others. Given the amount of sunshine we have in the Algarve it seems like a logical, and possibly practical way to go. Ultimately, the main goal is to reduce the cost of the energy we consume.

My understanding regarding the change of subsidies, at least in Germany, is that the subsidies are changing for future installations. Already installed systems should have a contract guaranteeing them a rate structure to justify the investment. This change in subsidies has made these installation much less attractive from an investment perspective and ultimately impacted demand for all components in the process. China, who knows? I would suspect that there are two factors here: One is cheap labor, the other is hidden government subsidies both on the environmental front and through export support. I would think that raw material inputs would be the same for all producers. If we do go this route, I will look for ethical high quality suppliers. Although, I suspect that many of these use parts from China. Hard to avoid these days.

[widge]

Interesting story about the solar industry.......


http://www.telegraph.co.uk/finance/news ... ustry.html

[BobT]

Short answer is no. Much better to reduce your consumption. Solar water heating is probably a better investment.

All of the claims on ROI are made by people who have a financial interest, so don't believe them.

Most of all you would be foolish to think that the Portuguese goverment will not screw you down the road.

[EMM]

There was a report on Algarve Daily News ??? that the PT government will treat the income derived from solar PV as taxable ( back dated ).