Solar Panels and Tax

[pixel]

Many thanks for your advice above, pixel.

When you say here that you will have the entire system paid off in under 8 years (which actually seems like a pretty long time to me) how does this work?
Is it dependent on the existing rules continuing to apply?
Is it conceivable that a change of government, or just a change of government policy, could scrap your capacity to get paid for the excess you generate?

sorry if these are dumb questions. I really have no idea how it all works.
Any enlightenment would be appreciated.

LOL, Julia;
I'm sure you know the definition of a "dumb question": Dumb can only ever be applied to the question that didn't get asked.

Here in WA, the Government passed a law that guarantees a feed-in tariff of 40c for ten years starting in September 2010. That is on top of the power utility being obliged to pay the standard (7c) generation cost per unit.
I understand that South Australia has a similar legislated subsidy that's even higher.
That being the case, I cannot see any possible constellation, under which a new State Government could change the rules for existing installations. It may be conceivable that the FIT will be reduced at some time in the future, but only for installations begun after the new framework became Law. But the contract I have with Synergy and the State Government is quite clear-cut: 47c per unit that I deliver into the grid.

My "bankable feasibility study", made before I ordered the extension, made certain assumptions about our future power consumption vs power production. In it, I assumed a retail price of 21c as the bottom line: If we consume every unit we produce - averaging 10 units a day, we save about $750 per annum. In reality, however, there are times when our consumption is much less than 1 KW, so we'll "feed in" any excess that our 2KW installation produces. Those "fed-in" units carry a price tag of 47c rather than 21c.

During the first year of production, our 1KW system "made" 1,666 units; double that for the upgraded 2KW system. Then rough an average price of 30c per produced unit, and you end up with $1,000 ROI p.a.
Our total costs were a shade below 8 Grand, so you can see where my 8 years payback comes from. With every price increase, the price mix moves up in our favour, increasing the rate of annual savings.

PS: OK, so I ignored the cost of capital; had I invested $8K in the market at x% (taxable!) interest, I might have, after 8 years, slightly more than $8K capital. But neither did I account for the fact that for every year AFTER the system has paid for itself, it'll give me at least $750 worth of free power - year after year. That is $750 worth in today's money, without any further feed-in tariff...

 

[nioka]

That's very impressive. Is the subsidised deal through which you did this still available? Can you tell us some of the detail of it?
After the subsidy, approx what was the cost: therefore how long until the system has paid for itself?

Original Quote was for a 3.06 kw system with 2 inverters $17,194.50 less 7,199.50 subsidy. and less $500 "order now" discount? So $9,995.

Because I had room for more panels I paid an extra $2000. The inverters had the capacity but there was no extra rebate bacause the rebate is only for the first 1500kw.

My cost therefore was $12,300.extra was for an electrician to make the final connection to the grid. The unit has capacity in theory for 4000kw. The best instant read of generation has been a rate of 3.69kw per hour. Average is way down on that of course. We have a contract for 6 years to sell into the grid all we produce at 60c kw. In six months I have used $763.08 worth @22.12c and have a credit of $947.53. ( They pay annually so they get an advantage there).

So for an investment of $12,300 I have received back $1,710.61 in six months. Last meter reading and account last week.

Note we get 60c a unit for all we produce and buy back at the lower rate. This deal may not still be available in NSW.

 

[Julia]

Thanks, pixel and nioka, much appreciated.

 

[drsmith]

Note we get 60c a unit for all we produce and buy back at the lower rate. This deal may not still be available in NSW.

If 60c per unit gross was on offer in the west, I'd seriously consider plastering the entire north facing roof with solar panels.

The Swan Valley 1.54kW setup (someone else's) that I linked earlier has produced about 1800kW of electricity from mid-September to the end of March or a dollar value of $1080 at $0.60 per unit. I would estimate another 500kW is likely over the cooler months taking the dollar value to $1380pa. At that rate, a 1.5kW setup could be paid off in under 2 years. With 4kW, that would rise to $3680pa or a payback time of 3.3 years for $12300.

If only the WA government was that foolish, er, um, generous. A net feed in tarriff of $0.47 combined with a 50/50 split between feed in and usage (~$0.21 per unit) results in a net of $0.34 per unit produced or $782 for 2300kW of generation over a year. My net cost is about $2.7k for 1.5kW including 3-phase meter changeover for a payback time of ~3.5 years (29%pa). I suspect that in reality, it could be a little less, more like 4 years (25%pa) as I'm a little further south (more cloud/weather than the Swan Valley setup).

With the government subsidy reduction above 1.5kW, each additional kW of generating capacity costs about $4000. That, on the WA estimated figures above would generate $521 of revenue per kW of generation capacity for a payback period of 7.7 years (13%pa). While this sounds attractive in the context of bank interest, it does not take into account depreciation as the hardware only has a finite useful life while money in the bank does not lose it's nominal value. For this reason, I have not considered investment beyond 1.5kW to be worthwhile.

As this is an evolving technology, I also wonder to what extent improvements will result in price reductions per unit output (much like the evolution of computer components).

In 5 years time, is it possible that a 1.5kW inverter could be replaced with a 5kW one for, say, 1/2 the price ?

 

[pixel]

If 60c per unit gross was on offer in the west, I'd seriously consider plastering the entire north facing roof with solar panels.
With the government subsidy reduction above 1.5kW, each additional kW of generating capacity costs about $4000. That, on the WA estimated figures above would generate $521 of revenue per kW of generation capacity for a payback period of 7.7 years (13%pa).
In 5 years time, is it possible that a 1.5kW inverter could be replaced with a 5kW one for, say, 1/2 the price ?

Hi Doc,

We started with a 1KW setup and 2KW inverter.
The harvest for the first year was 1,666 KWh (or "units"). Of course, when the increased FIT legislation came in, we researched a larger than 2-fold expansion. We were however told that would require a complete rewiring in addition to replacing the inverter, because the installed system had been dimensioned for no more than 2KW.
Sure, that's still possible, but in our case, the extra costs didn't stack up.

Your 7.7 years payback period sounds about right; it matches my own calculation/ estimate based on our routine power consumption. If we follow a neighbour of ours and go caravaning for extended periods, that will of course change. He was quite chuffed recently, returning from 3 months outback to find a power "bill" for over $400 credit

 

[nioka]

If 60c per unit gross was on offer in the west, I'd seriously consider plastering the entire north facing roof with solar panels.

In 5 years time, is it possible that a 1.5kW inverter could be replaced with a 5kW one for, say, 1/2 the price ?

That is why I increased my installation to utilise the full north facing roof area.

In 5 years time I could afford to replace the inverters from profits accumulated.

The offer of 60c is no longer available as the energy companies filled their quota and our dear premier , make that ex premier, had hers instelled the week before the subsidy was reduced. Maybe that is one more reason why she is the ex.

 

[pixel]

The offer of 60c is no longer available as the energy companies filled their quota and our dear premier , make that ex premier, had hers instelled the week before the subsidy was reduced. Maybe that is one more reason why she is the ex.

Now Now, nioka; that is a nasty insinuation

You should applaud her for putting her money where her mouth is and going green like the rest of us.

And like the rest of us, she would have ordered her panels months before installation. Solar installers' order books are overflowing, but the subsidy conditions are locked in on the date the order is placed. (At least that's how it worked when we placed our initial order.) That renders irrelevant the fact that her system happened to be delivered a week before the cut-off date.

 

[Calliope]

So for an investment of $12,300 I have received back $1,710.61 in six months. Last meter reading and account last week.

Note we get 60c a unit for all we produce and buy back at the lower rate. This deal may not still be available in NSW.

And the beauty of it is that the consumers who don't have it are the suckers who are paying for it. It is to our advantage not to encourage others to take it up, or the golden goose will be cooked.

 

[nioka]

Now Now, nioka; that is a nasty insinuation

You should applaud her for putting her money where her mouth is and going green like the rest of us.

And like the rest of us, she would have ordered her panels months before installation. Solar installers' order books are overflowing, but the subsidy conditions are locked in on the date the order is placed. (At least that's how it worked when we placed our initial order.) That renders irrelevant the fact that her system happened to be delivered a week before the cut-off date.

Actually I think the press report was that she ORDERED it the week before. I've been trying to find the news report but cant find it. There is a report though that she said in parliament that she will now not claim any subsidy etc.

 

[nioka]

And the beauty of it is that the consumers who don't have it are the suckers who are paying for it. It is to our advantage not to encourage others to take it up, or the golden goose will be cooked.

The suckers as you call them had the same opportunity to help save the enviroment so why should they not pay the cost of pollution if they are not prepared to help.After all that is what this is all about.

 

[Calliope]

The suckers as you call them had the same opportunity to help save the enviroment so why should they not pay the cost of pollution if they are not prepared to help.After all that is what this is all about.

Exaclly, that is what it is all about. Why should we feel any qualms about profiting at the expense of the less well off, when we are doing it to "help save the environment?"
After all, it is the government's job to subsidise our capital costs and also to compensate the less well off for their rising electricity costs.

 

[Julia]

Further to my earlier questions, I had the representative from "SolarLife" out yesterday.
Upshot is that (due to all the north facing roof being covered with solar tubing for pool heating) I don't have enough suitably directed roof to install a system which would provide value for money.

That's fine, and pretty much what I expected.

What I did find a bit remarkable, though, is the professionalism of the sales person, who essentially told me not to waste my money, even though to do so meant his loss of commission.
That's integrity and something I'll remember when talking with anyone who is thinking of installing a system.

 

[Smurf1976]

You seem to have found the most honest solar salesman around.

Sadly, the industry has a bit of a reputation for ripping off consumers...

 

[ggumpshots]

LOL, Julia;
I'm sure you know the definition of a "dumb question": Dumb can only ever be applied to the question that didn't get asked.
........

PS: OK, so I ignored the cost of capital; had I invested $8K in the market at x% (taxable!) interest, I might have, after 8 years, slightly more than $8K capital. But neither did I account for the fact that for every year AFTER the system has paid for itself, it'll give me at least $750 worth of free power - year after year. That is $750 worth in today's money, without any further feed-in tariff...

Re Above
Of course you can still continue to invest the $8000 after 8 years if you are going to continue usuing the system. The question is , Is the oppurtunity cost worth it?

 

[pixel]

Re Above
Of course you can still continue to invest the $8000 after 8 years if you are going to continue usuing the system. The question is , Is the oppurtunity cost worth it?

Not sure I understand your point:
The system stays on my roof; of course I'll continue to use it and the power it generates. And I'll "export" any excess into the grid. The only difference after September 2020 is the price the Power Utility pays me for what I feed in. Until 2020, that'll be at least 47c; after that, it'll be less. But every unit that drives my home appliances will be free, as opposed to what Synergy would've charged me.

 

[ggumpshots]

Not sure I understand your point:
The system stays on my roof; of course I'll continue to use it and the power it generates. And I'll "export" any excess into the grid. The only difference after September 2020 is the price the Power Utility pays me for what I feed in. Until 2020, that'll be at least 47c; after that, it'll be less. But every unit that drives my home appliances will be free, as opposed to what Synergy would've charged me.

My point was that there is an oppurtunity cost which is compounded at x% ( eg 7% in an offset account, which could reduce a mortgage) after 8 years at 7% your $8000 has become $13745.
So, have you saved $5745 in generated electricty or electcity fees?

After 20 years @ 7% your 8k has turned into $30957.
So thats an average $1547 a year you need to recoup in electricty charges to break even.
its not so straight forward anyway just food for thought.

 

[Smurf1976]

My point was that there is an oppurtunity cost which is compounded at x% ( eg 7% in an offset account, which could reduce a mortgage) after 8 years at 7% your $8000 has become $13745.
So, have you saved $5745 in generated electricty or electcity fees?

After 20 years @ 7% your 8k has turned into $30957.
So thats an average $1547 a year you need to recoup in electricty charges to break even.
its not so straight forward anyway just food for thought.

A more accurate "real world" basis would be to assume that annual savings from solar are compounded. Not necessarily into more solar panels, but into something (Eg cash deposit or more likely, repaying a mortgage).

 

[GumbyLearner]

A more accurate "real world" basis would be to assume that annual savings from solar are compounded. Not necessarily into more solar panels, but into something (Eg cash deposit or more likely, repaying a mortgage).

What's the cost of installing solar panels on say a 30sqm dwelling in Tassie Smurf?

And how much can the average joe blow get back in dollars if they feed it back into the grid?

If he uses more than he captures, can he still make a quid out of it?

 

[Happy]

... If he uses more than he captures, ...

Money saved by not having to pay for all the power used are real money too.

What worries me is that every year solar panels derate by more than 0.5%
Meaning that in 10 years time system will not produce as much as during first year after installation.

Hope that new energy saving devices will be able to compensate for that.

 

[Happy]

... eg 7% in an offset account, ...

Problem with this assumption is that TAX-man takes part of it back, unless all the income is below magic level when no tax has to be paid.