Should you invest in home solar power instead of the stock market?
In 50 of America's largest cities, a home solar power system offers a better return on the stock market.
In 42 of those cities, the cost of solar power is less than the cost of electricity from the local utility.
Going Solar in America, a recent report from the NC Clean Energy Technology Center, found that that in nearly all of America’s 50 largest cities, an average size solar PV system delivers a better payback than stock market investments. In many of those cities, solar power is cheaper in the long term than power from the utility.
“Right now, buying an average-sized, fully-financed solar PV system costs less than electricity from their local utility for 93% of single-family homeowners in America’s 50 largest cities, and in most places, is a better investment than many of the stocks that are in their 401(k).
Nevertheless, most people are unaware that solar is this affordable for people of all walks of life. We hope that this report will help to close this critical information gap and reduce soft costs,” Jim Kennerly, project manager for Going Solar in America, wrote in the report.
The report found that due to the falling costs of solar modules and installation, solar energy is an affordable option in 20 of the top 50 US cities, where if you can pay cash up front for a home solar PV system with a 25-year lifespan, you will get a better return than investing in the stock market.
According to the report, these are currently the top 10 cities that offer the best financial value for solar energy:
1. New York, NY
2. Boston, MA
3. Albuquerque, NM
4. San Jose, CA
5. Las Vegas, NV
6. Washington, DC
7. Los Angeles, CA
8. San Diego, CA
9. Oakland, CA
10. San Francisco, CA
The cities were ranked based on three metrics: (1) the average savings in first-year monthly bills, (2) the “overall present-day value of a long-term investment in solar” as compared to a stock investment with an average return, and (3) the levelized cost of energy generated by a rooftop solar system.
Various factors can influence the cost of solar in specific areas and cities, and solar incentives and/or net metering regulations will vary by the state or county, but in many of the most populated regions in the US, investing in solar is already a smart move.
According to the report, 9.1 million single-family homeowners in America’s 50 largest cities already live where solar costs less than their current utility rates if they bought a PVsystem outright – and nearly 21 million (93% of all estimated single-family homeowners in those cities) do if low-cost financing is available.
Unfortunately, most homeowners don't understand that solar can generate both significant monthly savings and long-term investment value, and not infrequently, cost less than energy from some of America’s largest electric utilities.
"What’s more, it is our hope that people will come away realizing that solar is now not just an option for the rich, but a real opportunity for anyone looking to take greater control over their monthly utility bills and make a long-term, relatively low-risk investment," Kennerly wrote.
When the declining cost of solar is coupled with the rising cost of grid electricity, the financial case for solar (given the strong odds of future rate increases) can be quite persuasive, particularly for locales with higher than average electricity rates, such as California and the Northeast.
Perhaps surprising, data from the U.S. Energy Information Administration (EIA) shows that customers in regions with the lowest rates tend to use the most energy and pay the highest monthly bills.
This data strongly suggests that maintaining lower rates does not have the desired effect of consumer protection, or of promoting efficient energy use.
The EIA also forecasts that utility rates will rise between 33%-83% over the 25-year typical life of a solar PV system. Many customers still mistakenly believe, however, that solar PV is not an option for them. This stems, in part, from a belief that they may not be able to afford it, and because their area does not have enough sunshine year-round.
In fact, solar PV’s value to a customer tends to be most closely related to the degree to which solar can offset their typical use of grid energy.
As the cost of hardware falls, soft costs for solar – fees, permits etc – becomes a larger part of the costs involved.
Other threats to wider adoption include:
- The expiration (under current law) of the 30% federal investment tax credit (ITC) by the end of 2016, and the market disruption that could occur as that deadline approaches.
- The continuing reduction and/or elimination of state, local, and utility incentives as costs continue to decline.
- An increased clip of legislative and regulatory debates related to the costs and benefits of net metering policies.
- The continuation of a series of contentious international trade disputes that could impact the cost of solar PV hardware.
Kennerly recommends targeted actions to reduce soft costs, local governments can help to make costs can come down even further and allow an even greater portion of the American public to choose solar energy.
Read more about solar power for your home.
Companies: Solar Energy Industries Association