How Much is Payback Time Improved when Electricity Price Rises are Factored In?
Simple Payback is a rudimentary calculation of the financial benefits of a PV System. Put simply, simple payback is the first year cost divided by the first year revenue. It doesn’t account for ongoing costs, nor for increases in the electricity price or decreases in the Feed-in Tariff (as happens in 2017 in NSW). It doesn’t account for Panel Degradation or Inverter Replacement Cost.
The SunWiz PV Sales Tool factors all of this in to calculate true payback – when your total revenue exceeds your total costs. What’s more, it calculates the effective interest rate of your investment, known as the internal rate of return. This is the measure by which wise investors decide whether its better to invest in a PV system, or leave their money in the bank.
In short, a simple payback of 7 years often overestimates the true payback, which is likely to be less than 6 years in many cases. Even with conservative assumptions, 10 year payback is possible without a feed-in tariff, so you can imagine how a feed-in tariff improves true payback.
What electricity price rises are forecast in Australia?
In NSW, the answer is at 20-42% over the next three years, depending on where you live. Read more from the IPART.
In QLD, it will rise by 13.29% in 2010-11, as determined by the QCA. Over recent years it has risen by a comparable amount.
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