The White Lily (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
thewhitelily) wrote2010-06-17 05:45 pm
thewhitelily) wrote2010-06-17 05:45 pm
Solar Powered
It all started because our hot water system is leaking.
Well, I say our hot water system, but in fact it's only one of the three that the previous occupants/renovators of the house felt was appropriate. It's good in some ways, because it means that with the tank right outside whatever tap's being turned on, hot water appears practically instantaneously. It's bad in others because... well, there's three aging hot water services, each of which chew electricity and break down and require repairs.
So, one of our hot water systems is leaking. And rather than spend a couple of hundred dollars getting a plumber out (twice, because he'll never have the right parts the first time) to tut-tut on the shoddy workmanship of the previous guy and stop the steady leak of water, greenhouse gasses, and money down the drain, we thought we might look into getting a solar hot water system installed. Queensland's great for solar hot water. Plenty of sun, plenty of hot weather. Not too much difference between the length of the days, so it's not like you only get hot water in summer, either. I grew up with solar hot water, which always kept us plentifully supplied, despite being installed at least twenty-five years ago. While we're at it, we thought we might look into getting PV cells (solar electricity) installed as well.
We'd done some figures before the sales guy came and worked out that while solar hot water was probably not worth it as far as cold hard cash was concerned (although it later turned out that it was, for reasons I won't go into) and taking some of the government rebates into account, PV cells were just starting to look as they just might be.
We liked the sales guy. He struck us as genuine and knowledgeable. While this makes us strongly consider the possibility we've been manipulated - I mean, he's sales guy! - it's actually not a hugely common thing for us. In general, sales guys tend to rub us the wrong way - something about trying to forge a personal connection (Hah! Good luck!) rather than relying on hard facts and a compelling product - and as soon as they leave we look at each other and go... maybe we should still have our termites taken care of but NOT by this company, okay? But this guy had all his figures, every question we asked he not only answered easily but went into technical details about why and how.
The most interesting thing, of course, were the figures he showed us. PV cells are... well, even completely setting aside the social responsibility element and going solely on finances, they're totally worth it. At the moment, government rebates in Queensland mean that electricity you generate is sold back to the grid at up to 52c per KWh, depending on your provider. Electricity you use, you buy at 17c per KWh, or whatever the current going rate is. A little quick calculation(1) means that in our case, spending $22,700 on solar panels and solar hot water (and we've all got that lying around, right?) is equivalent to putting that money in the bank and getting (on the most ridiculously conservative estimates(2) we can manage) 6.37% interest per annum. On less ridiculous but still conservative estimates(3), the return is more like 10.7%pa. If we start counting on government rebates, it only goes up from there. Of course, you're using the profits from this mythical bank account to pay your power bill, and if you're lucky you've got a bit left over (with the size of the system we're looking at, we're hoping to be lucky quite frequently), so it's a little bit hard to wrap one's head around the fact that you are actually making money - but money saved is money earned. They're literally the same thing.
(1) I went through a number of increasingly complex methods of calculation as more factors occurred to me, including depreciation, compounding, and the fact that return is spread across time rather than a lump sum at the end as most opportunity cost calculations assume, and finally settled on calculating the monthly annuity payment for a principal of $22,700 based on 6.52%pa (which is the break even point) and subtracted this value from the savings due to solar over the same period. I multiplied this figure out by the time period in question for the total profit (or loss) and then calculated as a percentage return on $22,700 with monthly compounding. I then added 6.52% to the result to give a total return on investment for the money in question. I would have calculated the whole thing as an annuity, but solving the annuity formula for interest rate is beyond my mathematical abilities. All the reasonable systems I worked out, however, gave figures in a very similar ball park.
(2) Assuming that the entire system is essentially worthless in 25 years (at which point Australian standards require the equipment to still be capable of operating at 80% efficiency), assuming an average 6 hour sunlight day (8.2 hours is the actual average according to the bureau of meteorology), that it operates at 80% of its conservatively projected efficiency over its entire life (ie. a further 20% off the 82% of theoretical efficiency reduced for expected loss due to heat/wiring/transforming), that electricity prices rise by no more than 3% inflation each year (average price rise over the last five years is 9.6%), and that the inflated buyback rate is immediately abolished without being replaced by any other ongoing government rebate.
(3) Assuming all conditions in (2) except for the system lasting for 35 years, and electricity prices rising by 5% pa.
I haven't allowed for repairs to the system, as it's very difficult to estimate how much that would cost, however we're paying more for high quality products: ie, solar panels with tempered glass, which won't fracture under a hailstone, etc. The warranty for the panels is 15 years, for the inverter is 10. Government standards require the panels operation efficiency be operating at at least 80% in 25 years time, which is also backed up in warranty. Budgeting for the complete depreciation of a $20,000 system - for it to be better to throw it away in 25-35 years rather than perform any repairs - is essentially my way of budgeting for repairs, as we wouldn't drive the system into the ground like that, we would replace what needed replacing when it needed it and end up with a system which continued being useful further into the future. Also, the solar system is classified as part of the building and would be covered under our home and contents insurance, thus many repairs are likely to be covered under that.
10.7% conservative. And that ridiculous minimum of 6.37%pa? That's good. That's really good. That's better than the bank, better (and certainly safer!) than the stock market, better than property. And it's better than the figures I was getting at first with some less complex calculations based on simple interest and coming out with things like 20%, no matter what I did to bring them down, because all that made me think was that if it was true then why the hell wasn't everybody doing it? Why weren't there companies out there making a small fortune by borrowing money to put solar panels on people's rooves in exchange for the savings from their power bill? Why weren't the power companies saying 'If we can put solar panels on your roof and feed the resulting power back into the grid, we'll give you a 2cent pKWh discount off your bill! And just think of the advantages in a zombie outbreak?' and making a motza? I must have something wrong.
10.7% is an awesome figure. Not enough to be absurd to still be talking about an energy crisis with the figures in front of you, but enough to make break even extremely likely with significant potential for being ahead of that. It certainly answers, as far as we're concerned, the question about whether our money is better sitting against our mortgage saving us 6.52%pa, or sitting on our roof saving the planet. (Or at least reducing our footprint on it.) There's also the fact that the system we're looking at comes very close to completely meeting our currently un-optimised power needs which means - in the event of nuclear holocaust or attack by zombies shutting down the power station - we could conceivably obtain an extremely large battery and be completely self-sufficient.
Hubby's freaking out, as he always does when we're looking at changing our finances, because he hates spending money, and he hates reducing the buffer we've built up in our mortgage offset account for emergencies or opportunities or just plain wanting to buy nice things. (Although the last one's always a struggle for obvious reasons.) Money is for building up, not for spending. On this, we're mostly on the same page - I find shopping as much of a pain as he does, and it hurts me almost as much as it hurts him to spend money at all. But at the moment, he keeps bursting out with things like "If we do this, you can't buy a recliner to breastfeed Gilgamesh in!" or "If we do this, we can't spend any more money for the rest of the year!"
I'm ignoring him. There'll still be buffer left for the other things we'll need (and want) to spend money on in the next six months. We can, in fact, still afford to feed and clothe Gilgamesh, and there'll be plenty of buffer left even after having plundered it to finance solar panels. He can't argue with the figures: this is cash-flow positive from the start. We have the liquid assets available to finance the start-up costs. The zombie revolution grows closer every day. It'd be stupid not to proceed, and Hubby may resist change, but he's anything but stupid. (Although, given his resistance to including the likelihood of zombie attack in our calculation, I suspect him to be a closet sympathiser.)
So... We've made the decision. We've ordered the system. We've signed all the papers. We've paid the deposit. Solar hot water will arrive on our roof in around a week. 5.4KW (the biggest system these guys have ever installed) of PV panels will take more like ten weeks.
I'll let you know how it goes.
Well, I say our hot water system, but in fact it's only one of the three that the previous occupants/renovators of the house felt was appropriate. It's good in some ways, because it means that with the tank right outside whatever tap's being turned on, hot water appears practically instantaneously. It's bad in others because... well, there's three aging hot water services, each of which chew electricity and break down and require repairs.
So, one of our hot water systems is leaking. And rather than spend a couple of hundred dollars getting a plumber out (twice, because he'll never have the right parts the first time) to tut-tut on the shoddy workmanship of the previous guy and stop the steady leak of water, greenhouse gasses, and money down the drain, we thought we might look into getting a solar hot water system installed. Queensland's great for solar hot water. Plenty of sun, plenty of hot weather. Not too much difference between the length of the days, so it's not like you only get hot water in summer, either. I grew up with solar hot water, which always kept us plentifully supplied, despite being installed at least twenty-five years ago. While we're at it, we thought we might look into getting PV cells (solar electricity) installed as well.
We'd done some figures before the sales guy came and worked out that while solar hot water was probably not worth it as far as cold hard cash was concerned (although it later turned out that it was, for reasons I won't go into) and taking some of the government rebates into account, PV cells were just starting to look as they just might be.
We liked the sales guy. He struck us as genuine and knowledgeable. While this makes us strongly consider the possibility we've been manipulated - I mean, he's sales guy! - it's actually not a hugely common thing for us. In general, sales guys tend to rub us the wrong way - something about trying to forge a personal connection (Hah! Good luck!) rather than relying on hard facts and a compelling product - and as soon as they leave we look at each other and go... maybe we should still have our termites taken care of but NOT by this company, okay? But this guy had all his figures, every question we asked he not only answered easily but went into technical details about why and how.
The most interesting thing, of course, were the figures he showed us. PV cells are... well, even completely setting aside the social responsibility element and going solely on finances, they're totally worth it. At the moment, government rebates in Queensland mean that electricity you generate is sold back to the grid at up to 52c per KWh, depending on your provider. Electricity you use, you buy at 17c per KWh, or whatever the current going rate is. A little quick calculation(1) means that in our case, spending $22,700 on solar panels and solar hot water (and we've all got that lying around, right?) is equivalent to putting that money in the bank and getting (on the most ridiculously conservative estimates(2) we can manage) 6.37% interest per annum. On less ridiculous but still conservative estimates(3), the return is more like 10.7%pa. If we start counting on government rebates, it only goes up from there. Of course, you're using the profits from this mythical bank account to pay your power bill, and if you're lucky you've got a bit left over (with the size of the system we're looking at, we're hoping to be lucky quite frequently), so it's a little bit hard to wrap one's head around the fact that you are actually making money - but money saved is money earned. They're literally the same thing.
(1) I went through a number of increasingly complex methods of calculation as more factors occurred to me, including depreciation, compounding, and the fact that return is spread across time rather than a lump sum at the end as most opportunity cost calculations assume, and finally settled on calculating the monthly annuity payment for a principal of $22,700 based on 6.52%pa (which is the break even point) and subtracted this value from the savings due to solar over the same period. I multiplied this figure out by the time period in question for the total profit (or loss) and then calculated as a percentage return on $22,700 with monthly compounding. I then added 6.52% to the result to give a total return on investment for the money in question. I would have calculated the whole thing as an annuity, but solving the annuity formula for interest rate is beyond my mathematical abilities. All the reasonable systems I worked out, however, gave figures in a very similar ball park.
(2) Assuming that the entire system is essentially worthless in 25 years (at which point Australian standards require the equipment to still be capable of operating at 80% efficiency), assuming an average 6 hour sunlight day (8.2 hours is the actual average according to the bureau of meteorology), that it operates at 80% of its conservatively projected efficiency over its entire life (ie. a further 20% off the 82% of theoretical efficiency reduced for expected loss due to heat/wiring/transforming), that electricity prices rise by no more than 3% inflation each year (average price rise over the last five years is 9.6%), and that the inflated buyback rate is immediately abolished without being replaced by any other ongoing government rebate.
(3) Assuming all conditions in (2) except for the system lasting for 35 years, and electricity prices rising by 5% pa.
I haven't allowed for repairs to the system, as it's very difficult to estimate how much that would cost, however we're paying more for high quality products: ie, solar panels with tempered glass, which won't fracture under a hailstone, etc. The warranty for the panels is 15 years, for the inverter is 10. Government standards require the panels operation efficiency be operating at at least 80% in 25 years time, which is also backed up in warranty. Budgeting for the complete depreciation of a $20,000 system - for it to be better to throw it away in 25-35 years rather than perform any repairs - is essentially my way of budgeting for repairs, as we wouldn't drive the system into the ground like that, we would replace what needed replacing when it needed it and end up with a system which continued being useful further into the future. Also, the solar system is classified as part of the building and would be covered under our home and contents insurance, thus many repairs are likely to be covered under that.
10.7% conservative. And that ridiculous minimum of 6.37%pa? That's good. That's really good. That's better than the bank, better (and certainly safer!) than the stock market, better than property. And it's better than the figures I was getting at first with some less complex calculations based on simple interest and coming out with things like 20%, no matter what I did to bring them down, because all that made me think was that if it was true then why the hell wasn't everybody doing it? Why weren't there companies out there making a small fortune by borrowing money to put solar panels on people's rooves in exchange for the savings from their power bill? Why weren't the power companies saying 'If we can put solar panels on your roof and feed the resulting power back into the grid, we'll give you a 2cent pKWh discount off your bill! And just think of the advantages in a zombie outbreak?' and making a motza? I must have something wrong.
10.7% is an awesome figure. Not enough to be absurd to still be talking about an energy crisis with the figures in front of you, but enough to make break even extremely likely with significant potential for being ahead of that. It certainly answers, as far as we're concerned, the question about whether our money is better sitting against our mortgage saving us 6.52%pa, or sitting on our roof saving the planet. (Or at least reducing our footprint on it.) There's also the fact that the system we're looking at comes very close to completely meeting our currently un-optimised power needs which means - in the event of nuclear holocaust or attack by zombies shutting down the power station - we could conceivably obtain an extremely large battery and be completely self-sufficient.
Hubby's freaking out, as he always does when we're looking at changing our finances, because he hates spending money, and he hates reducing the buffer we've built up in our mortgage offset account for emergencies or opportunities or just plain wanting to buy nice things. (Although the last one's always a struggle for obvious reasons.) Money is for building up, not for spending. On this, we're mostly on the same page - I find shopping as much of a pain as he does, and it hurts me almost as much as it hurts him to spend money at all. But at the moment, he keeps bursting out with things like "If we do this, you can't buy a recliner to breastfeed Gilgamesh in!" or "If we do this, we can't spend any more money for the rest of the year!"
I'm ignoring him. There'll still be buffer left for the other things we'll need (and want) to spend money on in the next six months. We can, in fact, still afford to feed and clothe Gilgamesh, and there'll be plenty of buffer left even after having plundered it to finance solar panels. He can't argue with the figures: this is cash-flow positive from the start. We have the liquid assets available to finance the start-up costs. The zombie revolution grows closer every day. It'd be stupid not to proceed, and Hubby may resist change, but he's anything but stupid. (Although, given his resistance to including the likelihood of zombie attack in our calculation, I suspect him to be a closet sympathiser.)
So... We've made the decision. We've ordered the system. We've signed all the papers. We've paid the deposit. Solar hot water will arrive on our roof in around a week. 5.4KW (the biggest system these guys have ever installed) of PV panels will take more like ten weeks.
I'll let you know how it goes.
no subject
no subject
Gotta love maths!
(Anonymous) 2010-06-22 11:35 pm (UTC)(link):)
TPWFL
Re: Gotta love maths!