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Online ramblings, current & historic, by just another human bean

Solar Finances

Middle class investment vehicle


3-Minute Read

Gazprom sign Belgrade

“Solar finances” are not always intuitive - and the simplest question which trips over most advocates is ‘but I won’t have the money it costs to install solarPV in my pocket after day 1’.

And that is true. But it’s a cash view (a short term view of money as most of us plebs are prone to do) of the world.

From an investment view - i.e. to invest 10K, say, you have to leave it invested to get the earnings (and therefore likewise don’t have it in your pocket). So in the graph below that’s the orange line earning at bank rate of .1% (the 10K is ‘tied up’ for as long as it’s invested). Likewise if you want dividends from stock or share investment the 10K is ‘tied up in stock holdings’ to yield 2-5% per year in dividends. It is absolutely true that solarPV is not a ‘liquid’ investment - you can’t just sell it (off your roof) to recoup your capital (like shares can be sold, say). And for SolarPV their are two phases - ‘earning back’ phase, and ‘real earnings’ phase.

The ‘earning back phase’ is the ‘return on investment’ which is recouping the initial capital costs - in the graph, this is the time (0-9 years) and the slopes below the zero line. This is achieved by the savings you’re making on your electricity bills. Another way to look at this period is you’ve paid your electricity bills 10 years in advance..

After that (above the zero line) you’re in the ‘real earnings’ (i.e. back in your metaphorical pocket is the initial money plus extra earnings coming in, in ‘real cash terms’).

And this is why many have ‘missed the solarPV boat’ because they can’t do a 10 year investment horizon, because they’ve been ‘schooled’ in money short-termism. But as you reach your later years (40+) you can attest to just how fast 10 years goes by..

The graph here is ultra conservative - 10K system (can get 5KW system for 5K these days), 10% return (15% is more likely), bank rate at .1%, and rising electricity charges of 2% (3-5% is more likely, with inflation, over the longer haul I reckon). In reality, spend 5K on a system and it will pay itself off (earning back phase) in 5-6 years, and earn probably triple that (say 15K) over years 6-20. It really is a no-brainer. It’s the best ‘middle class investment vehicle’ designed for a very long time 🙂 Even these days when subsidies and feed in tarrifs are very low.

Notice one doesn’t have to resort to ‘greenie arguments’ to justify the cost - it’s pure mercenary investment calculations that make it so obvious.

Buggered if I know 😛

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Online ramblings, both current and historic, by just another human bean