PV Solar providers - help please
Moderator: Peak Moderation
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biffvernon
- Posts: 18538
- Joined: 24 Nov 2005, 11:09
- Location: Lincolnshire
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An Inspector Calls
DominicJ
I agree about using DCF/NPV - best way to do project assessment.
The rate should depend on the project risk, and I've known projects with DCFs as high as 25 % (and they still made it!). Here, I think something like 8%; utilities traditionally always plodded along at about 6 % return, even on a valuation that edged upwards with inflation. I'd see them as lower risk than a single system PV array mired in government subsidy for cash flow. But use a DCF of 8% and these PV schemes are terrible.
As for depreciating capital, well it is done on large projects with the intention of realising scrap value at the end of the plant life. But these PV systems have little possible resale value after purchase.
Still, biff's smug and happy. I suppose that's the main thing as far as he's concerned, even though he's not making any profit.
I agree about using DCF/NPV - best way to do project assessment.
The rate should depend on the project risk, and I've known projects with DCFs as high as 25 % (and they still made it!). Here, I think something like 8%; utilities traditionally always plodded along at about 6 % return, even on a valuation that edged upwards with inflation. I'd see them as lower risk than a single system PV array mired in government subsidy for cash flow. But use a DCF of 8% and these PV schemes are terrible.
As for depreciating capital, well it is done on large projects with the intention of realising scrap value at the end of the plant life. But these PV systems have little possible resale value after purchase.
Still, biff's smug and happy. I suppose that's the main thing as far as he's concerned, even though he's not making any profit.
What's the DCF/NPV or whatever on owning (or the mortgage company part owning for several decades) a largish house, a car, lots of fancy furniture, iphones, wiis and all the other stuff that appears to be essential now, as opposed to having a home that provides for basic human needs, plus the simple free pleasures of life? Or, as I've asked before, having a tiled roof on your house, as opposed to chucking a tarpaulin over it. Or owning a car, as opposed to hiring one when required (or sharing one).
Picking an aspect of someone's life and doing profit calculations on it is pointless, unless it's done on everything they own, so a balanced choice can be made about how to spend their money. Maybe value for money isn't the main aim anyway.
Picking an aspect of someone's life and doing profit calculations on it is pointless, unless it's done on everything they own, so a balanced choice can be made about how to spend their money. Maybe value for money isn't the main aim anyway.
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An Inspector Calls
JohnB
No, you haven't grasped that assessing a purchase or a project using DCF is a process usually reserved for making commercial decisions.
You would not apply it to essential needs, nor to things that you covert. So the roof example immediately falls out of consideration for DCF (albeit, if applied, DCF would tell you to fit a proper roof ASAP). You'd also not apply DCF to low value purchases either.
However, you could/perhaps should apply the process to non essential needs.
I regard fitting PV as a purely commercial decision. Electricity is an invariant commodity, and I buy it on that basis. I don't care who supplies it to me as long as it's as cheap as possible, preferably the cheapest I can get it. (I also consider that lowest possible price probably implies lowest primary energy input). If I'm going to become a commodity producer, I'll examine that process on the basis of a purely commercial decision.
Alternatively, I can regard PV as a financial investment. That's much the way many systems are sold: "guarantees 13% return", for example. Well again, I'll make an assessment of the true rates of return on that investment and compare it to what I can get for my money (remembering liquidity) by placing it elsewhere.
You imply that electrcity generation from PV is something you very much want to do. You covert PV. Well don't apply DCF then. I couldn't care less.
No, you haven't grasped that assessing a purchase or a project using DCF is a process usually reserved for making commercial decisions.
You would not apply it to essential needs, nor to things that you covert. So the roof example immediately falls out of consideration for DCF (albeit, if applied, DCF would tell you to fit a proper roof ASAP). You'd also not apply DCF to low value purchases either.
However, you could/perhaps should apply the process to non essential needs.
I regard fitting PV as a purely commercial decision. Electricity is an invariant commodity, and I buy it on that basis. I don't care who supplies it to me as long as it's as cheap as possible, preferably the cheapest I can get it. (I also consider that lowest possible price probably implies lowest primary energy input). If I'm going to become a commodity producer, I'll examine that process on the basis of a purely commercial decision.
Alternatively, I can regard PV as a financial investment. That's much the way many systems are sold: "guarantees 13% return", for example. Well again, I'll make an assessment of the true rates of return on that investment and compare it to what I can get for my money (remembering liquidity) by placing it elsewhere.
You imply that electrcity generation from PV is something you very much want to do. You covert PV. Well don't apply DCF then. I couldn't care less.
JohnB
I do do management accounting for lots of my life.
But them I'm a giant nerd.
I own a car, because its cheaper than hiring one, I own a rubbish car, because its more cost effective than a nice one.
Biff
Well now you've switched your arguement.
Either its a good financial decision, which is a scientificaly testable fact, or its a good ethical decision, which is a personal judgement, or it could be both.
As it is, even with FiTs, the vast majority of users will struggle to break even financialy. The only people likely to benefit are those without any debts, with the cash to hand, and paying higher rate taxation.
I do do management accounting for lots of my life.
But them I'm a giant nerd.
I own a car, because its cheaper than hiring one, I own a rubbish car, because its more cost effective than a nice one.
Biff
Well now you've switched your arguement.
Either its a good financial decision, which is a scientificaly testable fact, or its a good ethical decision, which is a personal judgement, or it could be both.
As it is, even with FiTs, the vast majority of users will struggle to break even financialy. The only people likely to benefit are those without any debts, with the cash to hand, and paying higher rate taxation.
I'm a realist, not a hippie
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An Inspector Calls
The real winners here are the people selling and installing the panels. They make their profit and probably run.DominicJ wrote: The only people likely to benefit are those without any debts, with the cash to hand, and paying higher rate taxation.
Nest year, when FITs goes off the boil they'll all be doing heat pumps and solar hot water systems.
You can still make money out of solar hot water? I got out of the industry just as the excellent and simple Clear Skies grants ended, leaving my ex business partner tearing out what little of his hair was left over what was to replace it! Even in those days it wasn't the easiest route to your first million, unless you were one of the big companies with dodgy salesmen, who could get away with rip-off prices the genuine small installers couldn't charge.An Inspector Calls wrote:Nest year, when FITs goes off the boil they'll all be doing heat pumps and solar hot water systems.
Hi Simon/Caspian,
I am happy Watt & Sun after the meeting this evening. Do you have your gold tickets yet?
Glyn
I am happy Watt & Sun after the meeting this evening. Do you have your gold tickets yet?
Glyn
caspian wrote:Hi Glyn
I see you're in South Wales, so you want to consider Watt & Sun. I'm getting them to install a 4 kW array installed sometime in July/August.
Simon