WHY YOU NEED TO GET INTO SOLAR NOW
Installing solar impacts the air we breathe, the water we drink and our overall quality of life. In 2015, 67% of the electricity generated in the US was through fossil fuels (eia.gov). We can reduce the pollution created by those sources by generating our own energy at home and supporting more renewable energy resources in the US.
Ok, environmental education complete; let’s talk money. Besides producing electric power, a solar investment can generate healthy returns for your pocketbook as well.
You pay PG&E for electricity, but as their rates increase every year, are you provided more electricity? Nope, your payments are increasing for the same level of service. If you could virtually eliminate that payment, what would you do with it? Remember, a solar investment is initially a return in the form of savings. You could put that savings into a new car, a higher clothing allowance, or whatever. If you put it into a typical stock market investment, you’ll see it grow.
Using the example from my first article (April 2017), let’s say your new system costs $35, 998 and reduces your bill from $350 a month to $19. With those savings you pay your system off in about 6 years.
Added bonus: The tax credit! Yes, it’s true that you get a 30% federal tax credit on the cost of the system. Here’s something you may not know – when you integrate solar with a new roof, you may be eligible for an even greater tax credit.
So, how do you hit ROIs in the first year of more than 15% in solar? Our assumptions:
- Your utility bills will steadily increase
- Your electricity usage stays the same
- You receive a 30% tax credit on the system itself (more if you reroof at the same time)
- 25 year life of the system (most generate for up to 40 years)
- The sun’s remaining life is roughly five billion years
The basic numbers: Saving $331 a month for 25 years totals $99,300. That’s just stuck in the cookie jar, not invested, no PG&E rate hikes, just cash savings. The return on your initial investment in the first year is 15.8%. With utility rate increases, it only gets better. The question then is, how can you really make it work for you?
For the sake of this article, I’ll be conservative and use a basic 5% rate of return that you might get in a typical investment. At that rate, $331 a month over the life of your system nets you about $200,000. If you drop your tax credit in as an initial investment, that number hits $235,000. Nice.
And that’s just with today’s bill. I can’t even begin to figure in PG&E’s estimated rate hikes per year. This is the most volatile component of the equation.
That’s even more cash you’ll be paying out for the same service, unless you choose to install solar. If you figure those hikes into your annual investment contribution, the returns are staggering. Roughly, at a 5% per year utility increase, in 25 years you’ve got close to $400,000.
So, to recap, without taking rate hikes into consideration (considering $350/mo electric bill):
Solar investment: $35,998
Tax credit: $10,800
Actual system cost: $25,198
Electric bill savings per month: $331
First year ROI: 15.80%
Pay back: 6.3 years
ROI in 10 years: 156%
ROI 25 years: 394%
Of course, these are estimates, past performance in the stock market is no indication of future results, and I’m no investment banker. What I do know is that solar works. I also know that it’s environmentally beneficial. There may be investments that go south, but I can bank on the sun rising every day, and that’s a great place to put your money.