Its that time of year again when the credit card reaches breaking point and the diary looks more like a war zone than it does an order of events. Which family will we see this year? Who will we invite to our party? When will we schedule our party against everyone elses? And the big one – how will we pay for it?
With that in mind I thought we should provide some talking points for this year’s BBQ, Christmas lunch or booze fueled dinner. After all – statistics always sound better once exaggerated with a bottle of Moet right!?
The biggest issue for the average Australian moving forward is the cost of living. Whether it be your utility bills, registration, fuel or just about any other essential expense it seems that the only way they move is up. Meanwhile our discretionary spending continues to move down, further impacting business and therefore placing an even larger drag on the economy as a whole.
We cant fix the economy – even Smokin Joe is looking like his Christmas cigar will be late, but we can most certainly reduce the cost of living through solar PV. Is this a sales pitch? Of course. But at the same time its an honest overview of the situation at hand and what we can do to solve it.
If one looks at the annual family budget and applies a razor’s edge, its very hard to find savings in anything but discretionary spending. One cant simply shave a few months off the registration bill without risking an appearance in court. With the way water is priced it seems almost pointless to put the family pets on rations, or empty the pool, but as anyone with solar will attest, one can quite easily reduce the average electricity bill.
There are a few reasons why some people havnt done this. Some simply dont have the suitable roof space and face issues such as shading, whilst others dont own their own home. Others are suspicious of returns and quite rightly wonder if they can trust the solar sales companies. Some have already maxed their credit on soon to be forgotten Christmas presents and therefore would struggle to afford the initial cost.
There have been some big changes in this regard. One is that unlike a car loan or a tv leasing scheme, a solar finance agreement will most certainly return more than double the cost of interest repayments. Anyone in business will tell you that the only reason to take on more debt is if it is to finance a profitable operation, which returns a margin more than the finance costs. With the average solar return clocking in at 30%, its not hard to see how a solar PV system can return a lot more than the average interest rate.
ELECTRICITY FOR FREE
But how does solar return? A lot of people get stuck on this and fail to understand how something which costs so much money can ‘return’ them money in the long run. The facts are this; A solar PV system is effectively a bulk purchase of electricity. When you buy a solar system you are purchasing 10 years worth of electricity in advance for the price of 3 to 4. It is likely that you will have to replace your inverter at the 10 year mark, however your panels will probably last 20. This brings the long term aspect to ‘purchasing 20 years worth of electricity for the price of 5’ with all reasonable maintenance factored in.
So solar begins to return through reduced electricity prices from day one. Before one reaches even halfway through the initial investment period of 10 years, the system is paid for and outputting electricity for free. It does this by reducing your electricity bills and therefore putting a few dollars back into the new year’s wallet.
THE kWHR APPROACH
The other way of looking at this is by pricing the cost of power which comes out of a solar system. This is easy to calculate, as any reputable company will provide some sort of production estimate. If one takes this estimate and multiplies it out to 10 years it will give a total number of kWhr’s produced. For example a 5kW system will produce approximately 4.15kWhr per kW installed in the Brisbane area. So 5 x 4.15 = 20.75kWhr x 365 x 10 = 75,737kWhrs over its initial lifetime of 10 years. Now lets say that solar system cost $6,500 we could then divide $6,500 by 75,737kWhrs to give a cost of 8c per kWhr.
Whats the cost per kWhr on your average bill? With it likely been close to 30c INC GST it is then obvious that solar would save some 22c on every single kWhr that is used.
If that isnt enough to convince you the latest Energex costings estimate that your electricity price will increase in line with CPI every year for the next ten years. Many people would say this is conservative ourselves included. So that figure on your bill can only go up – the figure that comes with solar is locked in upon date of purchase from then until term completion.
Can you or your mates name any other investments which will return 30% p.a? If anyone hears of any such investments at this year’s BBQ then please give us a call, but otherwise the big question is, ‘have you maximized your solar PV investment?’ What could you do with the savings produced by reducing your power bill by up to 50%? Will your solar company guarantee its production estimates and put them in writing?
With our economy struggling to maintain its blip its even more important that consumers maximize their savings wherever possible. For homeowners this means targeting their day time power usage and reducing their night time power usage by changing lamps to LED. We have some great calculators which can help you estimate your returns on both solar and LED here;
For business owners can you really expect to compete against competitors who have already taken advantage of government subsidies and therefore reduced their operating costs vs your own? Can you afford not to have solar PV? Government subsidies are available as a point of purchase discount for systems up to 100kW in size, therefore making them an incredible business investment even when based on finance. Ask us about our leasing model which enables a business to claim all repayments as a direct tax deduction. The business takes ownership at the end with no more to pay and can expect returns on par of 25-30% in line with the domestic model.
So this Christmas munch on a shrimp and enjoy the cricket, but when the topic of bills comes up dont forget your reliable friend solar PV!