anyone using solar as an alternative investment

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lomarica01
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Joined: Sun Jul 05, 2015 10:57 am

anyone using solar as an alternative investment

Post by lomarica01 » Sun Oct 23, 2016 11:41 am

I have a small solar system and am thinking of expanding it with "extra" cash I have in a regular savings account. Would anyone consider this an alternative investment compared to putting the cash into bonds or stocks? Without getting into the details of the payback period, rate of return etc... it seems like a good way to put some extra money to work especially if one is already satisfied with their AA. In theory I guess the cash AA would go down slightly but it would not change significantly.

thanks for any comments

dbr
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Re: anyone using solar as an alternative investment

Post by dbr » Sun Oct 23, 2016 11:55 am

I don't think the decision to expand your solar installation would depend on whether or not you "consider" this to be an alternative investment.

Whether or not it is a good idea depends exactly on getting into the details of payback period, rate of return, etc.

I think one issue is that if you want to consider this part of an investment portfolio then you have to find a way to state its properties in a way that is commensurate with the rest of the investments in the portfolio or you don't have a valid portfolio theory analysis. I would say that like investing in a parcel of real estate, or part ownership in a small business, or a collection of roman coins, that the solar equipment is too different from stocks and bonds to consider it an investment in that sense.

It is also possible the system should better be viewed as the capital input to a business. That is also an investment, but not in the sense we usually mean on this forum.

ralph124cf
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Re: anyone using solar as an alternative investment

Post by ralph124cf » Sun Oct 23, 2016 12:10 pm

I would consider this an investment in exactly the sense that a new, more efficient furnace, air conditioner, or Tesla is. That is, it is a life limited consumer good that saves some money each month that it is in use.

Presumably you had a site survey and analysis done when you purchased your system initially, and decided that it was worth it. What is the marginal cost of adding to your system? I would hope that it is less than the original installation.

Ralph

Stonebr
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Location: Maine

Re: anyone using solar as an alternative investment

Post by Stonebr » Sun Oct 23, 2016 12:21 pm

You would probably get more bang for your buck by reducing consumption than from increasing production.

We have put about $15,000 into weatherization and LED lighting in the past several years. I consider this an alternative to a fixed income investment. The returns on this investment are the savings of about $1250 a year, and these savings are after tax and therefore that much more valuable than interest. I figure that if loaned $15,000 to a friend, his payments to us (aka the annual savings) of $1250 a year would pay off the loan in about 15 years with interest at around 2.9%. In a 15% tax bracket this is the equivalent of a rate of about 3.4%. And, of course, the savings don't stop after 15 years, they go on as long as we own the house.

We also installed PV solar. But since the PV array already produces about 100% of our prior consumption through the net metering arrangement with our power company, increasing further would be a waste of money. Again decreasing consumption is the key to getting to 100% coverage. We only needed nine 285W panels.

We don't feel deprived in any of this. The house is far more comfortable than it was before, so it was worth doing even without any savings. It's also quieter. We like our LED lighting, and keep our appliances on power strips that get shut off when not in use -- including the modem and wifi router.
"have more than thou showest, | speak less than thou knowest" -- The Fool in King Lear

gus1961
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Re: anyone using solar as an alternative investment

Post by gus1961 » Mon Oct 24, 2016 12:08 am

lomarica01 wrote:.....small solar system and am thinking of expanding it ......
I believe upgrade costs are also eligible for the 30% federal tax credit?

I briefly spoke to a rep at HD yesterday and am beginning to research the cost and payback. But it was the tax credit that caught my eye..... would allow me to sell off and reinvest some of the stocks I've had over the years.... and neutralize the cap gains.

silverchair54
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Re: anyone using solar as an alternative investment

Post by silverchair54 » Mon Oct 24, 2016 8:36 am

I don't live in California or a state with Solar City, but I believe their model is installing and providing equipment for free and you pay a lower electricity rate. Maybe it sounds too good to be true. When I first heard it, I wasn't sure why everyone in California isn't already using solar.

Hukedonfonix4me
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Re: anyone using solar as an alternative investment

Post by Hukedonfonix4me » Mon Oct 24, 2016 4:03 pm

silverchair54 wrote:I don't live in California or a state with Solar City, but I believe their model is installing and providing equipment for free and you pay a lower electricity rate. Maybe it sounds too good to be true. When I first heard it, I wasn't sure why everyone in California isn't already using solar.
Are you referring to leasing solar though a power purchase agreement (PPA)?

With a lease, there are no upfront installation costs and the solar company usually handles permits and ongoing maintenance and repair.

Sound good?

Catch is if/when you SELL your home. A potential buyer must qualify for BOTH a mortgage and the long-term PPA on your leased panels.

Some buyer(s) may not qualify, and for the ones who do, why do they want to take over the obligation from a former owner?
"While some mutual fund founders chose to make billions, he chose to make a difference." | -The Bogleheads' Guide to Investing

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Dutch
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Re: anyone using solar as an alternative investment

Post by Dutch » Mon Oct 24, 2016 4:08 pm

Sure, it's at least a pre-payment of future expenses. You could certainly regard it as an investment. Part of your liability matching portfolio.

If it's a better investment than other options ....... I have no idea.

Valuethinker
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Re: anyone using solar as an alternative investment

Post by Valuethinker » Tue Oct 25, 2016 9:54 am

Compared to other investments this:

- lacks any liquidity

- your return of capital is in the investment. Until you hit payback you haven't really made a positive return at all (because you never get your original investment back)

That makes it very hard to compare with an equity or bond investment, say. Or a REIT fund.

The suggestion above that weatherproofing and insulation is a better investment for most people is true. Making sure all light fittings take LEDs etc. Proper leak check.

Sometimes the incentives for solar panels "tilt" the table towards solar panels. My issues with this are:

- you are not doing as much good for the planet as if you save energy

- the incentives such as Feed In Tariffs might, in future, be changed or withdrawn (without grandfathering clauses)

- they depend upon the performance of your system, which can be idiosyncratic i.e. depends on weather, location etc.

In addition the system will be in place longer than your likely tenure in the home, and therefore there is a question whether you will recover some, or any, value when you sell.

My overall conclusion is:

- do the energy saving first

- then install solar panels to cover your home's energy needs. You will still net meter, because you will likely generate more energy than you need in daytime, but have a deficit in nighttime. Also summer-winter split. But you will be c. energy neutral (for electricity) with the grid

- efficiency of solar cells may well improve dramatically in the next couple of decades, so waiting might let you get better (and/or cheaper) technology

Valuethinker
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Re: anyone using solar as an alternative investment

Post by Valuethinker » Tue Oct 25, 2016 10:02 am

ralph124cf wrote:I would consider this an investment in exactly the sense that a new, more efficient furnace, air conditioner, or Tesla is. That is, it is a life limited consumer good that saves some money each month that it is in use.

Presumably you had a site survey and analysis done when you purchased your system initially, and decided that it was worth it. What is the marginal cost of adding to your system? I would hope that it is less than the original installation.

Ralph
This seems to me to be a better approach.

A solar panel "investment"

- has zero liquidity. Worth saying again: zero

- generates a "cash flow" of savings. Until you have repaid the original cost, your return on the investment is negative

It is not a given on sale of the house that you will get back your original investment. Probably only your depreciated value (say 4-5% pa straight line depreciation rate).

Note also inverters tend to be replaced around every 12 years? Whereas panels every 25?

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