According to a new report by SolarPower Europe (SPE) and Energy Brainpool, high interest rates and heavy investment will increase the average payback period for solar power in Germany, Spain and Italy to around 20 years in 2022. pv magazine recently spoke with SPE market analyst Christophe Lits to crunch the numbers.
The energy modeling done by the German consulting company Energy Brainpool examines three different scenarios. It looked at a “fossil dumping” scenario in which global demand for gas drops dramatically, leading to low fossil fuel prices. It looked at a “new normal” scenario where gas prices remain at current levels. It also looked at a “return to crisis” scenario in which gas prices return to the high prices of fall 2021. The capacity of residential solar power systems was assumed to be 8 kW in Germany and 7 kW in Spain and Italy.
According to the model, the payback times for solar electricity are around 18 years in Germany, 19 years in Spain and 14 years in Italy under the “new normal” scenario. The “fossil dumping” scenario shows payback periods of 20 years, 25 years and 17 years. Rooftop solar has the lowest payback period in the “return to crisis” scenario, 17 years in Germany, 12 years in Italy and 11 years in Spain.
“We were surprised by the payback period results because we often hear that the payback period is less than 10 years,” said Christophe Lits, market analyst at SolarPower Europe. pv magazine. “The model has taken into account everything from 2022: investment price, electricity price, interest rates, feed-in tariffs, discount schemes… there is no magic in how we have calculated the payback period, we looked at how much you paid for (the PV system and its) installation and how much electricity there was no need to buy online. Then we just looked at how many years of those savings it would take for the total cost of the fixed assets to match.”
According to Liets, three main factors contributed to the high payback times of PV in 2022: high fixed assets, an assumed €1,600 ($1,742)/kW without VAT, lower electricity prices in the years after 2022 and their high interest rates. using loans to purchase a solar power system.
“When we talk to installers about payback times, they don’t really look at all the differences in subsidies or investment price increases, but basically how much electricity you save by installing solar – when you look more closely, the results are more accurate,” Liets said, often referring to the difference between the suggested 10-year payback period and the analysis results a sharp difference.
After the report was published, SolarPower Europe and Energy Brainpool also performed a sensitivity analysis of payback periods with varying fixed asset values.
“With fixed asset values seen four to two years ago, €1,200/kW or even €1,000/kW in Spain, the payback times are going back to around 10 years in Germany and seven years in Spain,” Liets said.
The report states that support for investment is critical to reducing repayment periods in an “inflationary environment with high interest rates and high labor costs.” It proposes several ways in which Member States can provide investment support. It states that the 30 percent investment subsidy will reduce the payback periods of solar electricity and heat pumps by six to eight years in Germany, Italy and Spain.