So yup, I somehow built a solar farm, and it was tricky, but now is the relatively easy bit, where I just have this huge capital asset sat on a hillside somewhere, and hopefully it makes some money? Lets look at what an actual real uninterrupted solar farm ownership year looks like. Which obviously means looking at the annual combined chart from the 10 Solis inverters:
I also have very similar data from the actual overpriced meter that measures the farm output. Thats normally lower (and is sadly the metric I get paid on), because there is some leakage of power in the transmission from inverter to to meter. However there was some data-outages in the inverter reporting during the year (since fixed with a better router), so some inverter data was lost, but caught by the Orsis meter, which is therefore a higher number! Here is that chart:
So in general the chart of output was pretty much as expected, as was the total output. There was a bit of a weird skew towards earlier in the year. March and April were weirdly high, and July and August weirdly low. Normally I would expect a perfect bell curve. BTW if you have home rooftop solar and think this chart looks weirdly smooth, be aware that we have obviously no shading, and the panels cover 4 acres, so any minor fluctuations do tend to cancel each other out. But anyway, lets talk business!
I do not have actual accounts for that period, but a quick rough check shows that the money paid to me in that 12 months by the energy company I sell to (Ovo) totalled about £146,000. That includes selling the REGO certificates, also to Ovo. That sounds quite nice until you deduct all the costs. So for example:
- Energy import costs (to run the site) £6,000
- Rent payment to landowner £6,200
- Internet/Connectivity for meter £800
- Accountancy for company £1,000
- Repair costs for storm damage £8,000
- Other minor costs £100
- Maintenance (Annual) £9,300
So some quick sums show a whopping annual profit of £114,600. OMG amazeballs.
But hold on a minute… surely I need to depreciate a solar farm that has cost me about £1.6m to build. So over 25 years that becomes an annual depreciation of £64,000. so that leaves me with a profit of £50,600.
I would be very happy with that, but in truthy I need to set aside funds for two other events. One would be the failure of an inverter. They are not cheap, and replacement costs are non trivial, so lets assume this costs me £10k every year. Lets also assume there is some money set aside for some catastrophic event requiring panel replacements, or theft of cables etc, and put that at another £15k a year (minimum). Thats then a profit of £25,600 per year.
Also be aware that the output from the panels will very slowly degrade over time, so the revenue may actually fall, and if wholesale energy prices fell, they could fall further. But lets be optimistic and go with £25k a year in actual profit. That works out at a return on investment of about 1.56% a year. Now to be fair, everything needs to be inflation adjusted, as prices will rise, but so will costs, and therefore that 1.56% is a REAL return, not the same as interest on a bank account. So for example, right now my company bank account pays 4.25% but inflation is 3.5% so the ACTUAL rate of return is only 0.75% which means…
THIS GIVES ME A BETTER RETURN THAN A SAVINGS ACCOUNT
Which is a relief (that its not actually losing money), but still a little less than hoped for, But if you know me, you know I did this for the environment, and to do my bit in the fight against climate change, even if certain maniacs in the US are determined to actually do the opposite and kill us all. This was never a business decision, but a passion-project one. And who knows, energy prices could rise! And in terms of ‘the solar business’ I did a VERY BAD JOB of getting this built. That £1.6m could have been more like £1.3m if I was more aware of what I was doing. I am very sure that big solar farm developers, or just more experienced ones do a better job, have economies of scale, and get better returns.
I regret nothing. I won a solar farm and its awesome. I didn’t do a good job of getting it built, but I made it happen!
