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These are often quoted in relation to renewable energy. They relate to the time it takes to 'pay off' the investment in renewable energy equipment, in savings made from buying less fossil fuels or grid electricity. Payback times have nothing whatsoever to do with the environment, they are purely an economic consideration.
Some manufacturers and suppliers of renewable energy equipment give very misleading information about possible payback times in a bid to lure in new customers. Products include micro wind turbines, heat pumps and solar panels. Because the calculations are not always easy to make, the unsuspecting customer takes the information offered them as gospel truth.
Here is an example:
Claim: The payback time of solar panels is as little as 4-6 years.
Lets examine this.
The average household uses 2400-3200 kWh of energy per annum for heating domestic hot water.
The cost of this varies according to the fuel/source of energy .
If standard rate electricity is used to provide domestic hot water, it costs €360-480 per annum.
If a heat pump is used in conjunction with an immersion heater on day and night rate electricity, this falls to €170-230.
If an oil fired boiler is used, it costs €240-320.
The maximum contribution made by solar panels towards domestic hot water is usually in the region of 60%. Often however, it is as little as 30%. This can be for a variety of reasons including the lifestyle of the household, size of system, size of thermal store (hot water cylinder), effectiveness of energy conservation measures, aspect and angle of the solar panels, and type of panel.
Because solar radiation levels in December and January are only one eight or one tenth of the levels in June, the output from solar installations is very low in the depths of winter. As a result, the contribution towards winter domestic hot water requirements is very minimal. Examination of Met Eireann data from Dublin airport over a 12 month period revealed that the total solar radiation on the 100 worst (lowest daily total of solar radiation) days of the year amounted to just 6% of the total annual solar radiation. The contribution to domestic hot water heating on these 100 days would be close to zero.
Even if the panels make a 90-100% contribution during May June July and August, and a 50-60% contribution for a further four months ( March April September and October), the total annual contribution will still be under 60%...
Let us take the best case scenario: 60% .
If it replacing hot water heated by mains electricity, the solar output is worth €216-288 per annum.
If it is replacing hot water from a heat pump supported by an immersion, it is worth €102-138.
If it is replacing water heated by an oil fired boiler it is worth €144-216.
Even after factoring in the Governement grants, solar heating systems are typically costing €2-4000. So where does the 4-6 year payback time come from? Alice in Wonderland perhaps.
Assuming the price of conventional energy continues to rise by 10-15% per annum, there is no question that many of these systems will eventually pay for themselves, perhaps in 12 or 15 years time, but the idea of a quick 'payback' is a ludicrous one.
No-one thinks about 'payback times' when purchasing a car, a house or a foreign holiday. Its a choice based on personal needs or wants, the cost of the goods or service desired, and the money available to buy it. The main criteria are often value for money, reliability, and the quality of the product.
These criteria should also be the basis for investing in renewable energy equipment. The equipment should be dependable and easy to use, with good after sales service and easy availability of replacement parts. Companies which emphasise the massive 'savings ' which will acrue as a result of buying their product should probably be avoided.
If you want a good payback time, invest in a chunky second hand woolly jumper from Oxfam and turn your heating down. It'll pay for itself in a week.
A more equitable way of evaluating renewable energy equipment would be to examine the net benefits to the environment - in terms of reduced carbon emissions for example - that result from using the equipment over its expected lifetime. This calculation would require knowing the carbon and resource footprint of the renewable energy installation or appliance, as well as the footprint of whatever conventional equipment it was replacing. It would add to the credibility of renewable energy equipment manufacturers if they would provide the relevant data for their own equipment- or better still have allow the calculations to be made by an independent carbon/resource auditor.
The energy required to manufacture some micro wind turbines, notably the Windsave model which is intended for mounting to buildings, is probably considerably more than the equipment could generate over its operating lifetime in most real world situations! Such equipment is probably a net energy loser.