Costs of installation and borrowing outweigh benefits for most

Here’s a more detailed breakdown of the progress we’ve made exploring the feasibility of solar panel installation on the blocks of flats on our Estate.

TL:DR version:

A conservative estimate of saving on energy bills for each flat is £200 a year. To cover costs of installation (plus inflation) we'd have to charge each flat £400 for 10 years. These costs are for the cheaper option not using smart technology, which also means the project would probably not be technically possible at the moment.

Technical options

Using smart technology

We have reviewed the cost of using Solshare technology to ‘smartly’ share the energy produced. The chart below shows the comparative costs of installing solar PV across all of Hanger Hills Garden Estate Flats, either with or without the Solshare facility, expressed in pence per kWh.  The following assumptions have been made:

·       1079 solar panels are installed, with 475kWp capacity generating 405,292kWh each year for twenty years.

·       Install costs are £1757 per kWp without Solshare and £3781 with it

·       Self-consumption of solar by residents averages at 52% without Solshare, increasing to 87% with the system

The chart shows that without Solshare the cost of each unit of electricity used by residents is nearly double the cost of each unit generated.  Solshare significantly reduces this difference in costs, but the high price of the system ends up increasing the cost of each unit of electricity used by residents.

Across the estate, using Solshare would cost £48k a year more than each flat having its own solar supply. Using 25p/kWh as the reference price, this increases annual savings to residents from £52.7k to £88k, an increase of £35.3k. The increased savings do not justify the increased cost, although it would mean that more electricity generated by solar PV is used locally.

Without smart technology

The cost for each unit of electricity consumed is below the reference market price, suggesting that an install will generate savings for those residents who can afford it.  Initial modelling suggests that the overall project is affordable, allowing for the cost of financing, but the return is marginal. 

Each flat would need its own invertor, connected to the grid and feeding in extra energy generation. Unfortunately, at present this can create local grid instability, and would risk power fluctuations. Invertors that ‘talk’ to each other are available but not yet at a cost that would make the project financially viable.

Financing capital costs

We received an offer from Triodos Bank Corporate Finance for an indicative £750k - £1million for capital costs of installation. This was as a community bond offer with the solar array as security- a model Triodos have used elsewhere. This would not have been sufficient for the install with Solshare, although costs are difficult to model as solar panel costs are changing as are labour costs.

If we did not use smart technology, the community bond finance should be sufficient to fund installation costs, even allowing for the significant legal costs of arranging the bond offer.

To see if it would make financial sense to proceed, we modelled how this option could work.

We modelled service charges £300+inflation to repay the loan cost over 10 years. An option of 12 years was also possible, potentially at a higher interest rate.

Because of the costs of inflation on this borrowing, we would still be left with a deficit if we charged this amount. This would amount to over £500,000 we would need to find in 10 years time.

We could cover this inflation based cost by charging each flat £400 for 10 years.

Amount saved on energy costs for each flat

A conservative estimate is an average saving of £200 a year based on government figures. As energy prices are changing, the figure could be larger, perhaps closer to £250-300 a year.

To see whether this estimate is likely to be correct, please see the next post......