Solar As Investment

Is Solar a Good Investment: Factors that Impact all Financial Models

If you were to do a fair comparison on the financial implications of owning a car versus using public transportation, you would need to include not just the cost of the car, but the weekly gas, bi-annual tune-ups, annual insurance, etc. Offsetting these extra costs might be extra benefits, like the value of not having to wait in the rain for a bus, the ability to get to places that buses don’t run, etc. And a proper analysis would need to include when each expense was incurred, versus when the different benefits were enjoyed.

Solar is the same. An accurate analysis requires the inclusion of costs and benefits, and an awareness of when they occur on the time line.

Factors:

  • Some communities are sunnier than others, meaning that the same solar system will produce a different amount of energy, depending on where it’s located. Northern California happens to be a fine place for solar: sunny, but not too hot.
  • The price of energy varies. Here in PG&E territory, you might be paying 12 cents per kilowatt-hour, or 48 cents.  Most likely, you’re paying a mix.
  • A solar photovoltaic system costs $10,000 – $30,000 or more, before it produces any value.
  • The federal tax deduction acts as a 30% rebate on the cost of your solar, in the same year as activation.
  • Panels are described as lasting 25-30 years, but they typically last even longer — perhaps 40+ years.
  • Panels degrade steadily.  Not by much — perhaps 1/3% per year, but it adds up.
  • The inverter costs a few thousand dollars (~ $0.40 per watt), and it will only last ~ 10-15 years, before needing replacing.
  • Utility rates will climb steadily. If rates increase 5% a year, in 14 years, your rate will have doubled. (More realistically, they’ll probably climb 2% a year.)
  • There is an opportunity cost to any investment. That $30,000 investment in solar might have been invested in Google shares.  Or Enron shares!
  • Your energy bill is paid in after-tax dollars. Alternative investments are typically measured in pre-tax dollars.
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