The solar numbers

February 18th, 2014 at 1:00 pm by David Farrar

Stuff reports:

The head of New Zealand’s largest renewable energy company is dismissing the economics of home-based solar, saying he “can’t follow” the numbers put forward by proponents.

Last week, ahead of the Green Party announcing a major loan scheme to subsidise solar installation through low-cost loans, Meridian chief executive Mark Binns said he could not understand why people installed them.

“I can’t follow the economics that are put forward by proponents of household solar in terms of returns as an investment,” Binns told Parliament’s commerce select committee.

“On our numbers, in our analysis, it is still probably not viable if you went to an accountant.”

energy spokesman Gareth Hughes, who is part of the committee, defended the economics, asking Meridian management “it’s still cheaper than buying from a retail provider, isn’t it, over the lifetime of the solar panel?”

Binns and Meridian chairman Chris Moller replied simultaneously “no”.

While Green Party co-leader Russel Norman said the major obstacle for people investing in solar was the up-front cost, Binns said the major challenge posed by solar was that after 25 years the panels were worthless.

“The thing people don’t realise is that [if] you invest in solar facilities, you get nothing back at the end of 20 or 25 years,” Binns said.

So you need to be pretty certain the savings from electricity will be greater than the cost of both the capital and the interest.

An academic is also cautious:

University of Canterbury engineering lecturer Dr Alan Wood said there were 1250 New Zealand households with solar panels installed, with predictions this would increase to 30,000 by late 2018.

Whether there was a benefit in cost-savings to the consumer depended on how they used the solar-generated power, Wood said.

“Early adopters should be people that consume electricity during the day.

“For them it does stack up but only just.”

Wood thought the Green Party’s predicted savings to households of $100 a year were over-estimated.

“They have assumed you use all the power yourself, which is not the case.”

I’m willing to bet a very large amount of money that even if the Green Party policy is implemented, there will not be 30,000 new solar installations in three years. A 1.9% reduction in the interest rate on a loan saving $2 a week is not going to increase take up by 2000% as they claim. Their numbers are more dodgy than a used car salesman.

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43 Responses to “The solar numbers”

  1. Peter (1,468 comments) says:

    Hughes “missing calculator problem” strikes again.

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  2. CJPhoto (182 comments) says:

    “it’s still cheaper than buying from a retail provider, isn’t it, over the lifetime of the solar panel?”

    Are we sure he isn’t asking Clint?

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  3. Ed Snack (1,535 comments) says:

    What the Greens will probably do is to guarantee the price paid to such minor “generators” at 3 x the usual price for power, just the like the Spanish (and others in a similar vein) did. And that worked out just brilliantly didn’t it…?

    Add to that, there would be a pretty significant cost to upgrade our current electrical grid to be able to cope with more a small amount of delocalized small scale power generation.

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  4. Steve Wrathall (207 comments) says:

    “…the savings from electricity will be greater than the cost of both the capital and the interest.” And let’s not forget the disposal cost. Or do magic Green fairies rapture them up to the sky at the end of their lifetime?

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  5. RRM (8,988 comments) says:

    “I can’t follow the economics that are put forward by proponents of household solar in terms of returns as an investment,” Binns told Parliament’s commerce select committee.

    “On our numbers, in our analysis, it is still probably not viable if you went to an accountant.”

    But then, the CEO of Meridian would say that wouldn’t he?

    We just received a monthly power bill of over $200 from Mr Binns’ company.

    It is the height of summer so that contains no heating costs, less than normal hot water use, and we don’t have a heat pump so we are not electrically cooling, and we have eco bulbs everywhere. Typical winter months are well over $300 and that is with a log burner providing all the heating.

    When we bought our house in 2012, Mrs RRM who is an industrial electrician priced up a solar system that would generate approximately 100% of our daily power needs. $15,000 + installation + smart meter.

    We would have installed it ourselves so that price is the same price as about 4-5 years of meridian’s electricity.

    We were tempted, and would have been even more tempted if getting the mortgage down a bit first wasn’t the priority!

    I hope the Mr Binnses get put to the sword as home generation becomes more and more developed.

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  6. CJPhoto (182 comments) says:

    Or as ACT point out, even Conusmer doesn’t like solar:

    He points out that in November 2013 Consumer Magazine reported: “The economics of grid-tied PV don’t stack up – particularly when you include the lack of significant environmental benefits. Our calculations show that most grid-tied PV systems have negative net present value (NPV), which means you’re better off putting your money in the bank.”
    http://www.nbr.co.nz/article/act-sharpens-attack-greens-solar-panel-scheme-152049#comment-646283

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  7. alloytoo (337 comments) says:

    Worth pointing out that the greens illusive “Savings” don’t decline due to panel deterioration.

    After 15 years you may well short on the promised savings with only 5-10 years remaining on the life of the unit.

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  8. rangitoto (144 comments) says:

    It also doesn’t account for costs such as inverter or panels failing before the loan is paid off. Do they offer 15 year guarantee on the gear. If not they need to factor in maintenance costs. Probably needs to be covered by insurance as well in case of storm damage etc. So higher premiums. Do they cater for disposal/recycling of toxic materials at end of life.

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  9. PaulL (5,775 comments) says:

    The only way it works is guaranteed feed in tariff – i.e. allow people to sell back to the grid at a rate higher than wholesalers of power get.

    This only works so long as a minority of NZers have solar panels. So effectively we have a small number of people getting subsidised by everyone else, and an arrangement in which it is impossible for all NZers to share in the benefit.

    I think solar makes a lot of sense in some situations – it’s cheaper than connecting to grid on many farms, and if you’re at home during the day to consume the power (and the unit only rarely generates more power than you’re consuming) then it makes sense.

    But for most people, most of the time, insulation or double glazing or other energy efficiency measures would have a much better payback.

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  10. Dave_1924 (55 comments) says:

    Question for RRM: Does you or anyone else on the site have the numbers for Solar Water heating as opposed to PV Solar generation of electricity for all purposes? Does it stack up? Slightly off topic just interested….

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  11. NK (916 comments) says:

    If one wanted to borrow from the bank to cover the cost of the installation and add it to the mortgage, it would halve the repayment amounts because they would be over the 30 year period of the mortgage loan. This makes it more affordable for punters to NOT go with the Greens policy. Sure, you would end up paying more over the term of the loan because of accumulated interest, but loan repayments would be reduced.

    On the other hand, and this is the really funny part, if a punter repaid it through their rates, there is no ability for the council to sell the property if payments go into default, because they are not classified as “rates”. Would there be default interest? Who gets this – the lender (the Crown) or the council?

    It’s all piss in the wind stuff. Just lower taxes and let people do what they want with their money.

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  12. PaulL (5,775 comments) says:

    @Dave_1924: there is some evidence that PV + heat pump water heating is equivalently efficient as solar hot water. And that the efficiency of PV and heat pumps continues to improve, and of course PV has other uses beyond purely hot water. But there is capital cost to consider as well, it’s less economic as a retrofit v’s as an install in a new house.

    Bottom line to me is that this is largely a wealthy person’s game at the moment – you do it because you think it’s cool, it makes you feel good, you like tinkering with it or you just like the feel of using power without green guilt. All of those are legitimate reasons to get solar. What I struggle with is asking (poorer) taxpayers to subsidise any of those things. It isn’t currently a public good worthy of subsidy.

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  13. rouppe (852 comments) says:

    But then we get this which just turns into a “he said, she said”.

    Who can take any confidence from that?

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  14. srylands (301 comments) says:

    “I hope the Mr Binnses get put to the sword as home generation becomes more and more developed.”:

    RRM – I have absolutely no problem with that outcome. Provided it is delivered by markets.

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  15. rouppe (852 comments) says:

    The reference I tried to put in was this:

    http://www.stuff.co.nz/waikato-times/news/9732683/Solar-panels-get-thumbs-up-from-consumers

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  16. CJPhoto (182 comments) says:

    http://www.stuff.co.nz/waikato-times/news/9732683/Solar-panels-get-thumbs-up-from-consumers

    So he thinks we should move away from distributed model, yet he will be relying on that distributed model during the peak evening period. He defiantly isn’t going off grid for $4k (which is weird since the Greens thinks it costs $10k minimum???).

    Plus I am sure he will be paying tax on income he will be deriving from selling power back into the grid.

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  17. RRM (8,988 comments) says:

    Dave_1924: as I understand it, no this was purely a photovoltaic system.

    Srylands – absolutely! A system with local support that you can just buy for $15k off a website is starting to get down to levels quite a few people could afford. It will be interesting to see what is available in ten years’ time. I don’t think a gubermint subsidy is necessary…

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  18. artemisia (194 comments) says:

    Mr Hughes should by now have learned not to ask a question he doesn’t already know the answer to,

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  19. mavxp (490 comments) says:

    It would make sense for more offices and commercial premises, universities, schools etc. to have PV, and perhaps in places like Wellington some wind generation to help reduce power demand during peak times.

    Are there mental or systemic roadblocks for developers and commercial property owners to include some generation/ green energy in their proposed developments? If they try to charge more for rent because the power bill will be cheaper on sunny/ windy days it may be a hard sell to prospective tenants currently. How can we structure things so that there is a win-win (developer, tenant, reduced environmental footprint)? I think if the Greens focussed on removing barriers that are not strictly economic but perception or systemic in the owner/leaser model of the commercial property market they would get more positive results than the feel-good factor of a PV cell on every home roof in the nation.

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  20. Rowan (1,729 comments) says:

    At the end of the day the “true” cost of the greens proposal would be borne by the consumers that can’t afford to take it up, i.e. benificaries, renters, solo parents, students etc. To me a good idea for a new house but think anyone wanting to fund solar would be better of borrowing at low interest from the solar companies or adding it to their mortgage that way it wouldn’t be funded by the consumer.

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  21. Rowan (1,729 comments) says:

    Another factor to consider, installing solar panels is literally installing a mini power station on your roof and this does create EMF which can be a health risk
    http://www.eiwellspring.org/SolarEMFHazard.pdf

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  22. RRM (8,988 comments) says:

    and this does create EMF which can be a health risk

    http://2.bp.blogspot.com/-tptLLXmB4_o/T6MIYzmfHmI/AAAAAAAAOJY/94fFTfhEa2I/s1600/Jerry-Mouse-Facepalm%5B1%5D.jpg

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  23. Steve (North Shore) (4,321 comments) says:

    Quite simple to work it all out when you use variable arithmetic

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  24. burt (7,085 comments) says:

    Calm down people … The tax payers will be paying more tax and that extra tax will be loaned back to them with interest. From the perspective of government there is a very real pay back – immediately…. What else matters in left leaning politics – the best interests of the masses always trump the best interests of individuals – right ????

    So like when Labour were creaming state owned power generation for revenue and claiming it was OK because it gave the government more money to spend – this solar plan will achieve the same.

    Stop being so self centered – there is nothing wrong with fleecing individuals to better the interests of left leaning political parties because these policies make them popular – end of story.

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  25. adze (1,695 comments) says:

    “We just received a monthly power bill of over $200 from Mr Binns’ company.”

    Jeez, I hope you have more than yourself and the missus in your household, RRM. Either that or you might be on an inappropriate plan. I’m on a low rate plan with Meridian.

    I live on my own but I have a fan running most of the night to keep cool in summer. My last bill was $90 with prompt payment discount.

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  26. Ed Snack (1,535 comments) says:

    Yes RRM, I have 4 in the household which includes 2 teenagers, plus an array of heat pumps, and our two latest power bills are well below $200. Are you able to swap suppliers ?

    And I’d be surprised that you could get a 5 year payback on a PV system, seriously, even after installing yourself. Did you include running costs for the inverter and batteries amongst other things ?

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  27. Rowan (1,729 comments) says:

    “When we bought our house in 2012, Mrs RRM who is an industrial electrician priced up a solar system that would generate approximately 100% of our daily power needs. $15,000 + installation + smart meter. ”

    Sounds very minimal and your bill must be pretty low to be able to supply 100% of your power needs, The aussie system under the original scheme back in 2010 still took about 3-5 years to pay of (depending on the capacity of the system) at a FIT of 60c/kwh and a government subsidy paying for half the cost of the install. Even then you would need a pretty big system to be able to cover “100% of your power needs” as the majority would have been subsidising the cost of the electricity as would not be producing as much as the house was consuming.

    Some of you guys have some pretty low bills, ours is over $300 in winter (without much electric heating) and that (Contact 22%) is one of the better plans out there.

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  28. Ed Snack (1,535 comments) says:

    Rowan, the winter bill is a lot higher; mainly I think because of the hot water system, it takes quite a bit more to heat and keep it hot in winter, the incoming water temperature is significantly lower I would think. I’m actually quite impressed with the performance of the heat pumps, doesn’t take a lot it seems to cool the place down enough to make it a lot more comfortable especially at night.

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  29. Rowan (1,729 comments) says:

    Ed Snack
    Yup it is a nasty old low pressure HWC far to large and I wish it had gone in the quakes, have looked at replacing it in the past but this house is not going to be kept beyond this year so won’t be replaced beforehand.

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  30. Anthony (736 comments) says:

    RRM hasn’t explained how his solar cells would meet his electricity needs at night?

    No one has mentioned that it would cost a fair amount to run the Greens scheme too regardless of whether the money was being on lent at the same rate.

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  31. Ben Dover (526 comments) says:

    When you get passed all the BS artists pushing their wheelbarrows full of brainless political horse poop
    and you have the brains to weed out what is c r ap and what is not

    The only thing hard about solar is choosing between all the really really good proven technology
    absolutely fantastic technology
    that is not too expensive because there is really only a little smidgeon between the really good stuff

    Finding good panels is not too hard so here is some inverter links

    SMA German Inverters for ongrid and hybrid
    http://www.sma.de/en/

    check out the island systems

    big in AUs
    http://www.sma-australia.com.au/en_AU.html

    Very Clever Proven Hybrid System used in Europe
    http://powerrouter.com/

    Very Good Australian Inverters they have a relationship with KACO Europe
    Truly Awesome
    http://www.selectronic.com.au/

    All of the above are fantastic in their own ways

    http://kaco-newenergy.com/us/
    more good german

    http://www.xantrex.com/

    http://www.trannergy.com/about/

    Not saying what I have that’s a secret GET OFF YOUR OWN A
    AND DO YOUR OWN RESEARCH

    IF your are considering it the above links will have saved you time

    While you have been arguing the treaty and selling your country to communist china
    and debating how often you should bash the kids of NZ

    the world has moved on

    And Solar will work with or preferably with out your input

    You really need to look at the other subsidies for other industries to be fair and honest

    The sun will come up and shine

    Your Power costs will always increase

    Does NZ even have regional testing facilities for Solar?

    How can any one talk figures with out one?

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  32. cauld (46 comments) says:

    The reason that everyone is scratching their head going ‘WTF this doesn’t add up’ is because it doesn’t add up. The reason it doesn’t add up is because the only way to make it add up is with a feed in tariff that amounts to a cross subsidy for those with solar by those without. You’ll have to ask the Greens why their policy is, so far, silent on the feed in tariff…

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  33. CJPhoto (182 comments) says:

    It isn’t silent on FIT – the policy states that the new NZPower will guarantee a rate between the wholesale and retail rate. While not a huge subsidy like Germany or Australia had, anything above wholesale is a subsidy. Whats more, it should be based on spot rates so if they are supplying power when demand is low, the rate should be low, but if they are using power when supply is high, their purchase rate should also be high.

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  34. Pita (356 comments) says:

    The conclusion of one of the largest manufacturers of photovoltaic panels in China for the U.S. market was… the best cost savings came from direct solar water heating rather than photovoltaic electricity generation for water heating.

    The siting of panels is critical to their performance; the angle to the sun (Morning and evening/summer and winter)Optimum performance is gained when the panels are at right angle to the sun.

    Output also declines over the lifetime of the panels and on cloudy days.

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  35. Red (5 comments) says:

    But wait – the numbers keep getting realer and realer…
    Twitter Feb 17
    Gareth Hughes…

    “The Greens want to make your power bills lower by $300 a year and make it easier for you to put insulation under your roof & solar on top”

    The question was asked…. “Was $100 p/a at 7am…. Now $300?

    The answer from Hughes…. “That’s the saving from NZ Power and our progressive pricing policy”

    If that’s the maths nous being used for this cunning plan? – I’m astounded – do we have a 4th form maths book we can get mailed to Wellington?

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  36. beadgame (3 comments) says:

    I’m an accountant and have been considering installing a grid-tied system at my house for a couple years now. Some observations:

    1. Panel prices in NZ have dropped significantly in the past year. It now appears based on my calculations that it would make financial sense to install solar for our house, though the return on investment is not all that much higher than putting the money in a bank, and it depends on how much one thinks electric rates will increase and on doing the install myself.

    2. “Binns said the major challenge posed by solar was that after 25 years the panels were worthless” – shows Binns is not an accountant. The overall rate of return on a solar system is only minimally affected by the assumed value of zero at the end of 25 years due to something called present value. I’ve done the spreadsheet calculations on this.

    3. From an environmental perspective, my own thought is that in NZ, solar is the un-environmental choice, since so much of NZ electric comes from renewable sources, and it is better to support these sources. I realize this is debatable though. Many views I see on going solar appear to be emotionally based as opposed to being based on real economics or other objective analysis.

    4. In order to achieve significant solar uptake in NZ, I think there would need to be significant government support for some time, more than just the loan program that has been proposed. I don’t see this happening (for what seem to be valid reasons).

    For now, I’m still on the fence on this.

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  37. Ben Dover (526 comments) says:

    The thing is Solar research and test bed facilities should have been set up in NZ 20 years ago
    like many other things but

    Generally speaking all you people do or have done
    is Talk the Treaty
    Talk Beating kids
    Talk Gay Marriage and Now

    Changing your flag?

    The lights are on the Sun is shining but no body is home

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  38. Ben Dover (526 comments) says:

    I can get a 4.5kw system with SMA inverter Kyocera panels for $9200 incl GST approx installed? Seriously?
    and that is with angle frames on most

    What the 3.0kw for 10k is I only shudder to think
    probably Lucky Dragon ?

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  39. Ben Dover (526 comments) says:

    Check that though

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  40. RightNow (6,338 comments) says:

    Shit Ben, stop your bitching and go and put solar on your own fucking house with your own fucking money if it’s such a great idea.

    And I hope you do a better job of it than you do with your html tags

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  41. Ben Dover (526 comments) says:

    Yeah get your slimey MITS off our Flag Priscilla

    and EAT coal

    and you can’t even do that can you?

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  42. Ben Dover (526 comments) says:

    TRUST ME Buddy I DON”T NEED YOU
    OR YOUR MONEY
    FOR ANYTHING AT ALL

    God help me if I did or if I used this discussion to evaluate SOLAR

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  43. Ben Dover (526 comments) says:

    COAL it is awesome – My Gr8 grand dad used to sell it in the 1890′s?

    Some people are just stuck on its benefits

    it burns real good

    Vic coal-mine fire could burn for weeks
    http://www.skynews.com.au/topstories/article.aspx?id=950847

    http://www.miningaustralia.com.au/features/hazelwood-coal-mine-fire-images

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