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The deal is $2500 deposit, refunded when the gov grant is paid to the company.Hopefully with no more of that interest free nonsense.
I can understand individual households going for this given the extent of government subsides but what I'm curious about is whether this represents the best return for overall investment (including the subsidies) relative to other renewable energy alternatives.
If for example we run the figures again but this time on a total cost of $10000 then the gross yield is 2.8%.
For comparison purposes, what yield would an investment in wind power generate (after running costs but before depreciation) ?
Not included is the meter change to accommodate the solar, but the electricity distributor will in my case do this for free.
So all up, the cost is the lost return on $2500 while waiting for the grant. Other than that, it's free. The company is Nu Energy. www.nue.com.au operates in all states except WA and NT.
As for return on investment, that's not really how the commercial electricity industry looks at it since the scale of investment is ultimately limited by the size of a slow growing market. That's different for the smaller companies but for those who are dominant it's a reality.
It comes down more to outright $ profit after assuming some fixed rate of return on capital.
A key reason for that is there's a huge difference between fixed versus variable costs for different generation sources. For example, hydro, brown coal and solar are almost totally the original capital cost + return spread over the life of the project (which could be a century in the case of hydro), with ongoing costs less than 5% of the total. Also these costs are non-recoverable by means other than generation and sale of electricity - you can't just pick up and move a dam or brown coal mine and power station.
On the other hand, open cycle gas turbines are predominantly fuel costs, which are variable going forward and can be avoided by shutting the plant, with the capital cost far less significant. Also, you can always relocate the plant interstate or overseas without too much hassle and that's not unusual.
So it's not so much about x% return, although that is obviously relevant to an investor, but overall profitability. That is, what is the cheapest option for generation of x megawatts assuming I can get the capital and pay some given return on it.
In terms of renewables, solar is pretty much a dud financially especially when it's done on a small scale on houses. Wind stacks up better (large scale) BUT ongoing costs are significant (in some cases higher than black coal and far higher than brown coal or hydro) so it's not so good as an inflation hedge.
Those who build plants which generate the highest % return on investment tend to build low cost, inefficient plants which end up as worthless assets when circumstances change. It's only now that a lot of the oil-fired plants built in the 60's and 70's (internationally) are finally being written off. Many of them have sat idle for years with their owners trying desperately to find some way of converting to gas, coal or anything else that will make the plant run. There's one in NZ that's never actually generated any power at all, since the economics went belly up during construction in the 70's and it was never switched on. A recent attempt to convert it to coal met opposition on environmental grounds - lots of examples like that.
Generally, wind is the cheapest renewable in terms of cost per unit of production unless you've got a good hydro site or a huge pile of free wood waste (eg sawmill waste). Everything else is either site specific, scale limited (landfill gas etc) or costs more (especially solar).
