Introduction
Solar panels have become increasingly popular as an environmentally friendly and cost-effective solution for producing clean energy. One of the key factors that make them attractive to homeowners is the return on investment (ROI) of solar panels. In this article, we’ll delve into the ROI of a solar panel system by examining a case study. We’ll analyse a solar system with a total cost of £15,281, with additional features like battery storage.
Case Study Details
- System Cost: £15,281
- Lifetime Output: £50,937
- Battery Storage: SolarEdge Home Battery 10kWh
- Smart Battery Management
- Self-consumption: 47%
- Self-consumption from Batteries: 14%
- Total Storage Capacity: 10kWh
- Total Battery Power: 5 kW
- Levelized Cost of Energy (LCOE): £0.162/kWh
- Internal Return Rate (IRR): 17.08%
- Payback Time: 6.6 years
Profit and Return on Investment
To calculate the profit from this solar panel system, we subtract the initial investment cost from the lifetime output:
Profit = Lifetime Output – System Cost
Profit = £50,937 – £15,281
Profit = £35,656
Now, let’s determine the ROI in percentage terms. It is calculated by dividing the profit by the initial investment cost and then multiplying by 100:
ROI (%) = (Profit / System Cost) x 100
ROI (%) = (£35,656 / £15,281) x 100
ROI (%) ≈ 233.09%
The solar panel system in this case study provides an impressive ROI of approximately 233.09%. This means that the initial investment will be recouped and profits will be generated over the system’s lifetime.
Levelized Cost of Energy (LCOE)
The LCOE is a crucial metric for evaluating the cost-effectiveness of a solar panel system over its lifetime. It represents the per-unit cost of electricity produced by the system. In this case, the LCOE is £0.162/kWh, which indicates that each kilowatt-hour of electricity generated by the solar panels costs approximately £0.162 over the system’s lifetime. This cost is lower than the average electricity prices in most regions, making the solar panel system a cost-effective choice.
Battery Storage and Energy Independence
The SolarEdge Home Battery with 10kWh capacity plays a significant role in enhancing the ROI of the solar panel system. With 47% self-consumption, a substantial portion of the solar-generated energy is used directly by the household, reducing their reliance on grid electricity. Additionally, 14% of the self-consumption comes from battery storage, ensuring a stable power supply even when solar generation is insufficient.
Payback Time and Internal Return Rate (IRR)
The payback time for this solar panel system is estimated at 6.6 years. This is the duration it takes for the system’s total savings to equal the initial investment cost. After this period, the system starts generating pure savings.
The IRR, standing at 17.08%, indicates the rate of return on the initial investment. It is a valuable metric for assessing the long-term financial benefits of the system. An IRR of 17.08% demonstrates that the investment in solar panels is not only financially sound but also offers a return higher than many traditional investment options.
Conclusion
This case study solar panel system, with its initial cost of £15,281, highlights an impressive ROI, low levelised cost of energy, and the substantial benefits of battery storage. The numbers above from a real-life example demonstrate the economic viability of solar panels and how they contribute to energy independence while reducing electricity bills and carbon footprints.
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