Archive for July, 2008

Is a solar hot water quote the answer to global warming? Not for everyone, but for many.

“Once you knew what did you do?”

I cannot remember who that quote is from, but it stuck in my mind ever since I heard it.

Man-made global warming is a reality very few people deny today. We all know it is happening, we all know something needs to be done about it. But most people are stuck as to what can be done on a personal level.

Sure, I can go and plant trees as a volunteer. I can turn off lights. I can walk sometimes instead of driving. But reality is that we value convenience and an immediate personal benefit above most other things. I am certainly being driven by these two motivations.

Convenience

Life is very full. So every change in behaviour needs to be convenient in two ways:

1. Making the change
2. Living with the change

Immediate Personal Benefit

With a choice of doing something for the greater good or getting an immediate personal benefit, most people would go for the latter. It is normal and human and ensures our survival as individuals.

So we need solutions that combine:

1. Immediate personal benefit
2. Positive impact on the planet

Solutions to Climate Change

Most proposed solutions do not meet any of these requirements. Many are actually contrary to them.

My goal was to come up with a solution that covered all four areas and I found it in Solar Hot Water

Living with the change is very easy. You do not really notice it (apart from the guilt-free hot showers).

Making the change requires a bit of effort. Finding the right system, finding the right installer, finding the money, understanding the rebates takes a bit of time. Hence the Solarpay service that does all that for you.

Reduced energy bills (savings of $300 to $700 each year) are an immediate personal benefit. And that will continue for the life of the system (20 years or more) and rising with increased electricity prices.

The positive impact on the planet is reduced greenhouse gas emissions (25% of each household or 3,000kg per year).

Once You Knew What Did You Do?

The problem: climate change and global warming

The best solution I could find: solar hot water

The question: What will you do?

1. Take action and get a solar hot water quote now.
   
2. If there are unsurmountable obstacles for you, leave a comment so we can find ways to overcome them.
3. If you have a better solution, please share it so we can all benefit from it (directly and indirectly).

No upfront cost always means financing in some way. That is true for an interest-free deal, for a bank loan or using a credit card.

However, as a solar hot water heater reduces your energy bills, the sun can effectively pay for the system and the interest. The average household in Australia spends $300 to $700 per year on hot water. Most solar hot water heaters cost between $1,800 and $2,500 (after all possible rebates).

Option 1: Pay Solar Hot Water Heater Outright

This is always the cheapest option.

As you can see in the graph, you start out in the negative. Then there is a steady improvement of your cash position until you are far better off than without a solar hot water heater.

The sharp rise represents the $1,600 federal rebate.

If you currently have a line of credit or a loan with a good interest rate, you might want to look into a redraw. Check for the best interest and cheapest fees.

Option 2: Finance with a Credit Card or Loan

Financing with a credit card or loan, you may be able to better manage your cash flow.

Apart from the first two months (before you receive the federal rebate), you actually have more cash than without financing the system. The overall return is lower than paying outright. But it is still substantial.

The Choice

If you can, pay upfront. It will always be the cheaper option. However if you do not have the cash to cover the initial cost, Option 2 might be beneficial. When money becomes available (e.g. from tax rebates) it is good to use it to repay the loan to minimise your costs and increase year benefits.

Assumptions

Please note that this is not financial advice. Speak to your financial adviser if you are unsure which approach is appropriate for your situation. For the graphs, we have assumed:

• purchase price of $3,000 (before getting the $1,600 federal rebate)
• minimum repayments of 2.5% of loan or $40, whatever is higher
• fees of $49 per year and interest rate of 12.8%
• not using the $1,600 federal rebate for repayments
• electricity savings of $40 per month (or $480 per year)

Financing the system in this way would cost approximately $1,770. By using the $1,600 federal rebate for repayments when it comes in, costs can be reduced to $880. To further reduce the total costs, just repay more than the minimum monthly repayments. If you can afford slightly higher payments, the Bendigo Bank Green Loan might also be useful for you.

Andy got his solar hot water system installed yesterday. I spoke to him to find out why he decided to go for solar hot water, rather than a conventional electric heater.

Andy went for solar hot water, because…

1. The electric hot water system broke down.
2. His wife had always liked solar energy.
3. Andy researched solar water heating and learnt about the large solar hot water rebates.
4. A quick financial return on investment clinched the deal and
5. he acted, knowing he would do good for the environment.

Payment for renewable energy certificates have fluctuated between $10 as recently as 18 months ago and a current high of $49.

Every owner of a solar hot water system can generate a certain number of renewable energy certificates (REC’s) and sell them. We look after all the organisation and paperwork for you, so all you will notice is a reduction of the purchase price.

Why does the renewable energy certificate price fluctuate?

Simply because of the demand. Energy retailers have to purchase a certain number of REC’s to reach the mandatory renewable energy target. Other offsetting companies use them to offset greenhouse gas emissions. As more people are demanding these services, the price goes up.

You benefit, because you are paid the value of the renewable energy certificates that are created for your solar hot water system.

Can the prices fall again?

Yes most definitely. They can and have done so in the past.

Can they rise higher?

In theory yes. It just needs more buyers who are willing purchase at higher prices.

However, the mandatory renewable energy target stipulates a penalty rate of $40 (plus 30% company tax). This means that when prices rise above $52, it becomes cheaper to pay the penalty.