A solar system in Houston will pay for itself in about ten years. It does this by generating electricity you would otherwise buy from the grid, that you can use to power your electronics, iron your shirts, keep your drinks cool, whatever you want to use it for. At current costs (and they get cheaper to install every year), your solar system will have saved you enough on your utility bills in a decade to equal the money you initially spent on it. After that, it’s all gravy.
And that gravy is worth talking about rather extensively, because while ten years may seem like a long payoff period to many, it’s actually a fairly remarkable return on investment. Let’s do the numbers.
An 8kW solar system will cost you about $15,000, once you’ve factored in the longstanding 30% federal tax rebate. Houston is a fairly sunny place (4.7 peak sun hours), so on average, your 8kW system will generate just over 37 kWh per day. Around here, that much power costs about $4.25 if bought from the grid, but of course you won’t be buying it from the grid because you’re making it yourself.
So for an initial investment of $15,000, you can save $4.25 per day, or $1,550 per year. That’s an annual return of over 10%. In less than ten years, you will have recuperated the full amount in savings, and will essentially be making a profit from that point on. 19 years out, you will have doubled your money. Compare this 10% APY to any other investment, and you’ll see it’s actually very attractive.
Solar vs. Annuity
Solar vs. Savings Account
Solar vs. Mutual Fund
Solar vs. Certificate of Deposit
Solar vs. Treasury Bills
Solar vs. Annuity
Many of these investments have one slight advantage over solar that is worth considering. You can cash them out much sooner–some of them at any time–in the event you need cash for something urgent. You can also leverage some of them–particularly mutual funds and real estate–as loan collateral. It’s highly unlikely that someone will buy your solar panels off you in a pinch, at least for a price close to what you paid for them.
But if recurring cash flow is your primary objective, as it is with most people, solar is a very solid investment, in that it permanently lowers the cost of everyday living and frees up cash.
Of course, if you plan on becoming a hermit and never using electricity again, the greatest photovoltaic system in the world isn’t going to add a dime to your bottom line. Utilities won’t write you a check for generating more energy than you use–the good ones will discount your bill, but only to the point that your account zeroes out. They’ll just take the excess back to the grid and charge your neighbors for it. But since electricity is a commodity that you can count on using for the rest of your life, reducing the money you spend on it without affecting your lifestyle is the same thing as putting money directly into your pockets.