The feed in tariff has arrived and my inbox is filling up fast with emails from companies selling PV systems making wild claims about payback periods and rates of return. Some of them are clearly from cowboys. Some of them are from reputable companies that (unless I’ve missed something or they’re temporarily insane) should know better. In this febrile flurry of market positioning, PV may rapidly become the new double glazing.
I have to admit that I love PV. As soon as I got to know PV properly through some projects we’re doing in Italy, I fell in love. PV is the business and I have absolutely no doubt that it’s a key solution to our long term energy needs.
But you’ve got to be realistic about costs and output. The UK isn’t Italy. As a result of years of domination by very few players, the UK PV market remains immature and install costs are high. In addition, (obviously) there’s less solar radiation so outputs are lower.
So what sort of IRR is realistic? I’ll go do some graphs now.
Using the Tesco example here for the 2.1kWp, I’m getting an IRR of about 6%, equivalent to an AER over 25 years of 3.15%
http://www.tescohomeefficiency.com/electricity-pricing/
Not sure where everyone is getting their ROI’s of 8% from…