– one of the best investments you can make!
By George Harvey
Okay. Let’s forget that the big reason to install solar photovoltaic is that it is good for the world, good for the environment, good for the future of humanity and your cost of living. It is, but let’s forget that for now. And let’s forget that PV lowesr electric bills and adds value to your house, even though it does. Let’s see how solar PV really is an investment of the type an investment manager might make, by making comparisons to the sorts of investment that go into a mutual fund, pension fund, or retirement portfolio.
Part of the problem of calculating the value of a solar investment is that it depends a lot on the siting of the solar system. Just about any solar installer can give advice on this. Another part of the problem is that the return on investment (ROI) of solar installations depends on what might be termed local factors: the state incentives at the place of installation, the local cost of solar systems, and the local cost of electricity that the solar system avoids.
One important investment for comparison is the S&P 500 Index, which has historically had an ROI of 9.9%, but there is no guarantee it will continue to grow at that rate. Another important investment is 30-year US Treasury bonds, which have had an ROI of 3.7%, on average. A third figure is the 0.75% return of a five-year Certificate of Deposit (CD), which is considered pretty secure.
This leads us to ask, how do these numbers compare with the ROI of a solar system in our states? There is a nice website with a page telling us just about all we might want to know: costofsolar.com/solar-roi/. The folks who put this site up have given us data on states in the US, including the following for our area:
ROI State
17% New York
16% Connecticut
15% Massachusetts
6.6% New Hampshire
5.6% Vermont
4.8% Rhode Island
4.4% Maine
We might note that solar systems in all these states have ROIs that are far better than a 5-year CD, all have ROIs that are significantly better than 30-year US Treasury bonds, and three have ROIs that are significantly better than the average ROI of the S&P 500. These facts do not tell the whole story, however.
The calculations leading to these results included the local factors listed above, but they did not include some significant facts. First off, adding a solar application to a property increases its value, and that increase is not considered in the calculation. Second, after the investment for solar is paid off, the solar system will continue to operate, providing free electricity, a huge cost savings and reduction to your cost of living, and this usually continues for a very long time – even into a person’s retirement. All of these add great value to solar.
Our conclusion is clear: if you are planning retirement, include solar in your calculations. It is one of the best investments you can make.
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