Today, in a chat with a colleague at work, we were discussing the viability of leaving the electric grid and adopting solar power in our houses. Since I have been studying this subject for a while now, I would like to compress that knowledge into a blog post. Hence, I apologize for all the sports and fitness fans out there and I decided to make a pause from that subject and address the question “is solar power worth it?” instead. I hope it helps anyone out there making its mind on whether you should adopt this technology to power your place or not. So, without further ado, here it goes.
Is Solar Power Worth it?
As new technology emerges there is always a question as to whether or not new products and services are worth the cost. Will they save us money? Will the benefits to the environment be noticeable?
When it comes to solar panels the answer used to be no. Long-term, it was possible to save money, but not probable. Additionally, unless everyone in a neighborhood was making the move to solar, and you lived in a smog-ridden community, then the benefits of cleaner air would not be noticeable either.
That has all changed. While yesterday’s solar panels offered a 5% financial return, and the life of the panel was not very long, today’s panels pay for themselves after 7 years, and perform at this 13% ROR for 20 years before they begin to degrade, but still offer some energy savings.
The question many people ask, though, is not if having solar panels is worth it overall. That answer is easy to find. What they want to know is if solar panels are worth it in their specific situation, such as when they pay cash, obtain credit, or lease out their roof.
The Value of Paying Cash for Solar Panels
If you pay for solar panels (and installation) in cash, the value you will find is an immediate drop in your electric bill.
Depending on the amount of energy the solar array is able to absorb it is possible to have a negative footprint and the electric company will send you a check for the energy that is put into the grid.
While this can be the case, the typical return is about 13%, meaning that the panels, which are currently built to operate at prime capacity for 20 years, will provide a financial benefit of 3x their worth.
If they cost $10,000, then they will gain $30,000.
This is definitely worth it. And the best part about paying in cash is that if there is damage from a storm or another issue, then there won’t be the added stress of having to think, I’m still paying for these things!
Buying Solar Panels on Credit
There are plenty of great financing deals on solar panels, and for some, it may be the right way to go. After all, even if they take 5 years to pay off, the value will still be there.
Using the example of a $10,000 installation that returns $30,000, the profit will be reduced due to interest costs, but there is still plenty of room to make a profit and do something good for the environment. Additionally, there may be added tax benefits.
Having said this, if one cannot afford to pay cash for the solar panels, it might be best to forgo borrowing and simply lease out your roof for a smaller, more immediate, return.
Leasing a Roof for Solar Installation
On any given day one can head down to Madison Avenue and see the lunch shops, storefronts, and various professionals milling about, many of whom work in the hedge fund industry. Among them they will find David Katz, a Columbia University graduate who heads up one of the most advanced divisions of SunRay Power Management, measuring energy absorbed into the grid and applying discounted billing to his customers.
SunRay, like many new energy companies, pays people for the use of their roofs, installs solar panels, and then sends them a discounted bill for the energy they consume.
For example, if a factory owner has a monthly energy bill of $12,000 per month and wants to have solar panels installed, but cannot afford the large expenditure, he would call SunRay Power and they would take charge of the project. The factory owner will then find that, at no cost to himself, he is now paying $11,000 while having to lay out nothing.
Additionally, if a storm hits and damages the solar panels, the leasing company has to fix it because they own the equipment, not the factory owner.
For those who can pay cash, the value of solar panels is glaringly obvious. Others who need to borrow to install them may want to look into leasing. Regarding leasing, it is the most hassle-free method, but the cost of having minimal involvement is a lower economic benefit, which is perfect for big business and building owners who don’t want to make solar panels their business.
So, that’s it! Hope I shed some light on this subject, and that you’re now able to make an informed decision. And to finalize this post in a great fashion, I leave here a cool infographics that I found on the web while searching for inspiration for this post.
See you on my next post!