Monday, 5 November 2012

Where's the catch?

In the TV debate with the Opposition Leader, the Prime Minister insulted many middle class families struggling to pay their utility bills by waving a zero bill purportedly received by a family who had installed a photovoltaic panel on its roof.

Let's make things clear.   If one installs one photovoltaic panel one can expect to generate about 350 KwH units of electricity per annum for which it would get a credit of EUR 85 from Enemalta.   So to get a zero bill a middle class family that pays say EUR 1000 in utility bills per annum, it would have to install 12 photovoltaic panels.

However apart from the problem of where to place 12 panels government subsidy normally cover approximately 50% of the cost of 7 such panels.   Without such subsidy the investment in photovoltaic panels would be a non-starter.

So installing 7 panels would generate about 2500 KwH units and procure a credit of some EUR 625 per annum.    This would involve a capital outlay of some EUR 6000 and with some delay one would get a subsidy of some EUR 2900 rendering an net investment of just over  EUR 3000.

It would take 5 years to get the money back on such investment which is an unappetising prospect for many stretched middle class families.

By way of return on investment, if one can spare the funds to make such investment, there is a return of 8.5% p.a. calculated as follows:

Credit on electricity supplied to the grid at 25c.per unit =                            EUR 625
less amortisation of investment over 12 years: 3000/12 =                                    (250)
Interest on the capital invested at 4% p.a: 3000 x 4% =                                        (120)
                                                                      Net Return                                          255 = 8.5% p.a.

Not bad for those that can afford it!!

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