Hello,
Has anyone conducted (or had conducted) cost-effectiveness calculations for a 10 kWp system compared to a smaller one (e.g., a 5 kWp system) and compared the results? What were the findings?
Here is my calculation:
A 10 kWp system does not cost twice as much as a 5 kWp system, for example €13,300 instead of €7,600 (1340 €/kWp instead of 1530 €/kWp)*. This could be an argument that a larger system is more cost-effective.
On the other hand, with a 10 kWp system, I can only use about 20% of the generated electricity myself, while with a 5 kWp system it is about 30%.* (Self-consumption saves 23.99 cents/kWh, feeding into the grid only brings in 12.2 cents/kWh). This would be an argument that a smaller system is more cost-effective.
The question is which effect predominates.
I am comparing two 5 kWp systems with one 10 kWp system. In both cases, I assume 7000 kWh per year.
Two 5 kWp systems cost €1900 more.
Annually, they generate:
70% * 7000 kWh * 12.12 cents/kWh + 30% * 7000 kWh * 23.99 cents/kWh
=
€597.80 + €503.79
=
€1101.59
The 10 kWp system generates annually:
80% * 7000 kWh * 12.12 cents/kWh + 20% * 7000 kWh * 23.99 cents/kWh
=
€689.74 + €335.86
= €1025.60
So the difference in return is €76. This means the additional cost of the two 5 kWp systems is recovered in 25 years.
This leads me to the conclusion that the cost-effectiveness of both options is quite similar, and it is more a matter of personal preference how much money one wants to invest. Generally, a larger system probably pays off somewhat earlier. If a battery storage system is to be added in x years, the larger 10 kWp option also seems more reasonable to me.
Have you done similar calculations and come to similar results?
Has anyone conducted (or had conducted) cost-effectiveness calculations for a 10 kWp system compared to a smaller one (e.g., a 5 kWp system) and compared the results? What were the findings?
Here is my calculation:
A 10 kWp system does not cost twice as much as a 5 kWp system, for example €13,300 instead of €7,600 (1340 €/kWp instead of 1530 €/kWp)*. This could be an argument that a larger system is more cost-effective.
On the other hand, with a 10 kWp system, I can only use about 20% of the generated electricity myself, while with a 5 kWp system it is about 30%.* (Self-consumption saves 23.99 cents/kWh, feeding into the grid only brings in 12.2 cents/kWh). This would be an argument that a smaller system is more cost-effective.
The question is which effect predominates.
I am comparing two 5 kWp systems with one 10 kWp system. In both cases, I assume 7000 kWh per year.
Two 5 kWp systems cost €1900 more.
Annually, they generate:
70% * 7000 kWh * 12.12 cents/kWh + 30% * 7000 kWh * 23.99 cents/kWh
=
€597.80 + €503.79
=
€1101.59
The 10 kWp system generates annually:
80% * 7000 kWh * 12.12 cents/kWh + 20% * 7000 kWh * 23.99 cents/kWh
=
€689.74 + €335.86
= €1025.60
So the difference in return is €76. This means the additional cost of the two 5 kWp systems is recovered in 25 years.
This leads me to the conclusion that the cost-effectiveness of both options is quite similar, and it is more a matter of personal preference how much money one wants to invest. Generally, a larger system probably pays off somewhat earlier. If a battery storage system is to be added in x years, the larger 10 kWp option also seems more reasonable to me.
Have you done similar calculations and come to similar results?
T
toxicmolotof20 Feb 2018 11:26Because in summer, you simply can’t consume as much electricity as the system produces. That 20% figure is actually somewhat reasonable.
You would need to install air conditioning, a pool, and a pool heater to make a real difference there.
You would need to install air conditioning, a pool, and a pool heater to make a real difference there.
T
toxicmolotof20 Feb 2018 14:15The lower section below the dashed line represents our self-consumption. Over the course of the year, we achieve 46% self-consumption. However, we do laundry and drying primarily during the day and operate a pool.
Here is an updated calculation:
- Investment costs (net) taken from a table on a solar panel portal on the internet, based on a statistical survey.
- For the first 5 years, the business is not considered a small business, so the investment costs are calculated without VAT.
- VAT: 5 cents/kWh for self-consumption
- Calculation of electricity costs for self-consumption as follows:
currently 24 cents, due to a 3% annual increase in electricity prices, an average value of 36 cents is assumed for the next 20 years.
- Income tax according to the cash basis accounting method. A 5% depreciation of the investment costs over 20 years is assumed, which is offset against the income. For simplicity, it is assumed that the income tax on self-consumption is the same as on the feed-in tariff. A marginal tax rate of 42% is assumed.
5-kWp system
============
Investment costs: 7,600 € net
Annual yield:
70% * 3,500 kWh * 12.2 cents/kWh + 30% * 3,500 kWh * 36 cents/kWh
=
298.90 € + 378 €
= 676.90 €
VAT on self-consumption in the first 5 years, as long as one is not yet classified as a small business, prorated over 20 years:
5/20 * (30% * 3,500 kWh * 5 cents/kWh)
= 13.13 €
Income tax according to cash basis accounting:
0.42 * (3,500 kWh * 12.2 cents/kWh - 0.05 * 7,600 €)
=
0.42 * (427 € - 380 €)
= 19.74 €
Return = (676.90 € - 13.13 € - 19.74 €) / 7,600 € = 8.5 %
10-kWp system
=============
Investment costs: 13,300 € net
Annual yield:
80% * 7,000 kWh * 12.2 cents/kWh + 20% * 7,000 kWh * 36 cents/kWh
=
683.20 € + 504 €
= 1,187.20 €
VAT on self-consumption in the first 5 years, as long as one is not yet classified as a small business, prorated over 20 years:
5/20 * (20% * 7,000 kWh * 5 cents/kWh)
= 17.50 €
Income tax according to cash basis accounting:
0.42 * (7,000 kWh * 12.2 cents/kWh - 0.05 * 13,300 €)
=
0.42 * (854 € - 665 €)
= 79.38 €
Return = (1,187.20 € - 17.50 € - 79.38 €) / 13,300 € = 8.2 %
Is this more suitable now?
- Investment costs (net) taken from a table on a solar panel portal on the internet, based on a statistical survey.
- For the first 5 years, the business is not considered a small business, so the investment costs are calculated without VAT.
- VAT: 5 cents/kWh for self-consumption
- Calculation of electricity costs for self-consumption as follows:
currently 24 cents, due to a 3% annual increase in electricity prices, an average value of 36 cents is assumed for the next 20 years.
- Income tax according to the cash basis accounting method. A 5% depreciation of the investment costs over 20 years is assumed, which is offset against the income. For simplicity, it is assumed that the income tax on self-consumption is the same as on the feed-in tariff. A marginal tax rate of 42% is assumed.
5-kWp system
============
Investment costs: 7,600 € net
Annual yield:
70% * 3,500 kWh * 12.2 cents/kWh + 30% * 3,500 kWh * 36 cents/kWh
=
298.90 € + 378 €
= 676.90 €
VAT on self-consumption in the first 5 years, as long as one is not yet classified as a small business, prorated over 20 years:
5/20 * (30% * 3,500 kWh * 5 cents/kWh)
= 13.13 €
Income tax according to cash basis accounting:
0.42 * (3,500 kWh * 12.2 cents/kWh - 0.05 * 7,600 €)
=
0.42 * (427 € - 380 €)
= 19.74 €
Return = (676.90 € - 13.13 € - 19.74 €) / 7,600 € = 8.5 %
10-kWp system
=============
Investment costs: 13,300 € net
Annual yield:
80% * 7,000 kWh * 12.2 cents/kWh + 20% * 7,000 kWh * 36 cents/kWh
=
683.20 € + 504 €
= 1,187.20 €
VAT on self-consumption in the first 5 years, as long as one is not yet classified as a small business, prorated over 20 years:
5/20 * (20% * 7,000 kWh * 5 cents/kWh)
= 17.50 €
Income tax according to cash basis accounting:
0.42 * (7,000 kWh * 12.2 cents/kWh - 0.05 * 13,300 €)
=
0.42 * (854 € - 665 €)
= 79.38 €
Return = (1,187.20 € - 17.50 € - 79.38 €) / 13,300 € = 8.2 %
Is this more suitable now?
Please ignore the previous post.
>>>
Here is an updated calculation:
- Investment costs (net) taken from a table in a solar system portal on the internet, based on a statistical survey.
- For the first 5 years, the small business regulation is not applied, so investment costs are calculated without VAT.
- VAT: 5 cents/kWh for self-consumption
- Calculation of electricity costs for self-consumption as follows:
Currently 24 cents, due to a 3% annual increase in electricity prices, an average value of 36 cents is assumed for the next 20 years.
- Income tax according to the surplus income calculation (EÜR). A 5% depreciation of investment costs over 20 years is assumed, offset against income. For private use, the difference between saved utility electricity price and lost feed-in tariff must be taxed, i.e., 36 cents/kWh – 12.2 cents/kWh = 23.8 cents/kWh. A marginal tax rate of 42% is assumed.
5-kWp system
============
Investment costs: 7,600 € net
Annual yield:
70% * 3,500 kWh * 12.2 cents/kWh + 30% * 3,500 kWh * 36 cents/kWh
=
298.90 € + 378 €
=
676.90 €
VAT on self-consumption in the first 5 years, before small business regulation applies, averaged over 20 years
5/20 * (30% * 3,500 kWh * 5 cents/kWh)
=
13.13 €
Income tax according to surplus income calculation:
0.42 * (0.70 * 3,500 kWh * 12.2 cents/kWh + 0.30 * 3,500 kWh * 23.8 cents/kWh – 0.05 * 7,600 €)
=
0.42 * (296.94 € + 249.90 € – 380 €)
=
70.07 €
Return = (676.90 € – 13.13 € – 70.07 €) / 7,600 € = 7.8 %
10-kWp system
=============
Investment costs: 13,300 € net
Annual yield:
80% * 7,000 kWh * 12.2 cents/kWh + 20% * 7,000 kWh * 36 cents/kWh
=
683.20 € + 504 €
= 1,187.20 €
VAT on self-consumption in the first 5 years, before small business regulation applies, averaged over 20 years
5/20 * (20% * 7,000 kWh * 5 cents/kWh)
= 17.50 €
Income tax according to surplus income calculation:
0.42 * (0.80 * 7,000 kWh * 12.2 cents/kWh + 0.20 * 7,000 kWh * 23.8 cents/kWh – 0.05 * 13,300 €)
=
0.42 * (683.20 € + 333.20 € – 665 €)
=
147.59 €
Return = (1,187.20 € – 17.50 € – 147.59 €) / 13,300 € = 7.7 %
Is this clearer now?
>>>
Here is an updated calculation:
- Investment costs (net) taken from a table in a solar system portal on the internet, based on a statistical survey.
- For the first 5 years, the small business regulation is not applied, so investment costs are calculated without VAT.
- VAT: 5 cents/kWh for self-consumption
- Calculation of electricity costs for self-consumption as follows:
Currently 24 cents, due to a 3% annual increase in electricity prices, an average value of 36 cents is assumed for the next 20 years.
- Income tax according to the surplus income calculation (EÜR). A 5% depreciation of investment costs over 20 years is assumed, offset against income. For private use, the difference between saved utility electricity price and lost feed-in tariff must be taxed, i.e., 36 cents/kWh – 12.2 cents/kWh = 23.8 cents/kWh. A marginal tax rate of 42% is assumed.
5-kWp system
============
Investment costs: 7,600 € net
Annual yield:
70% * 3,500 kWh * 12.2 cents/kWh + 30% * 3,500 kWh * 36 cents/kWh
=
298.90 € + 378 €
=
676.90 €
VAT on self-consumption in the first 5 years, before small business regulation applies, averaged over 20 years
5/20 * (30% * 3,500 kWh * 5 cents/kWh)
=
13.13 €
Income tax according to surplus income calculation:
0.42 * (0.70 * 3,500 kWh * 12.2 cents/kWh + 0.30 * 3,500 kWh * 23.8 cents/kWh – 0.05 * 7,600 €)
=
0.42 * (296.94 € + 249.90 € – 380 €)
=
70.07 €
Return = (676.90 € – 13.13 € – 70.07 €) / 7,600 € = 7.8 %
10-kWp system
=============
Investment costs: 13,300 € net
Annual yield:
80% * 7,000 kWh * 12.2 cents/kWh + 20% * 7,000 kWh * 36 cents/kWh
=
683.20 € + 504 €
= 1,187.20 €
VAT on self-consumption in the first 5 years, before small business regulation applies, averaged over 20 years
5/20 * (20% * 7,000 kWh * 5 cents/kWh)
= 17.50 €
Income tax according to surplus income calculation:
0.42 * (0.80 * 7,000 kWh * 12.2 cents/kWh + 0.20 * 7,000 kWh * 23.8 cents/kWh – 0.05 * 13,300 €)
=
0.42 * (683.20 € + 333.20 € – 665 €)
=
147.59 €
Return = (1,187.20 € – 17.50 € – 147.59 €) / 13,300 € = 7.7 %
Is this clearer now?
Stop it already 🙂
It won’t get any more accurate just by including more factors in your calculation.
Assumptions about electricity price developments, especially over 20 years, are simply not reliable. No one can predict that.
Similarly, self-consumption can only be estimated and may vary significantly up or down.
But you are trying to create a calculation that is exact down to decimal places. That doesn’t fit with these variable factors. So just discard them.
What remains is this fact:
Larger systems are cheaper per kWp in terms of investment. End of story. 🙂
It won’t get any more accurate just by including more factors in your calculation.
Assumptions about electricity price developments, especially over 20 years, are simply not reliable. No one can predict that.
Similarly, self-consumption can only be estimated and may vary significantly up or down.
But you are trying to create a calculation that is exact down to decimal places. That doesn’t fit with these variable factors. So just discard them.
What remains is this fact:
Larger systems are cheaper per kWp in terms of investment. End of story. 🙂
Without doing the exact calculations, I find this approach too theoretical. The result seems to be calculated down to the cent, yet there are so many unknown variables that it only creates a false sense of accuracy in the end.
My basic point is: a system is economically viable if the returns during the depreciation period exceed the costs. Self-consumption then improves the balance sheet as an added bonus.
There is not much more to be read from your result. A large system leads to a (more or less) lower self-consumption, which only marginally affects the overall balance. The main factor, however, comes from comparing costs to returns.
That’s why I am also bothered by a stated result presented as a yield. In my view, this is not a financial investment, but rather an investment for the future and the prospect of "free" electricity or loan repayment contributions after refinancing. After all, we are not investors, but equipping our own homes.
My basic point is: a system is economically viable if the returns during the depreciation period exceed the costs. Self-consumption then improves the balance sheet as an added bonus.
There is not much more to be read from your result. A large system leads to a (more or less) lower self-consumption, which only marginally affects the overall balance. The main factor, however, comes from comparing costs to returns.
That’s why I am also bothered by a stated result presented as a yield. In my view, this is not a financial investment, but rather an investment for the future and the prospect of "free" electricity or loan repayment contributions after refinancing. After all, we are not investors, but equipping our own homes.
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