Solar Beats Stock Market in 46 out of 50 Largest U.S. Cities
Steady Solar Energy Achieves Near Parity with Inflationary Utility Power
There are lots of reasons to go solar. It’s clean. It’s quiet. It gives you ownership over your energy.
But now, more than ever before in all of history, a solar investment is becoming a smart financial move as well. A 2014 study by NC State University unearthed some startling discoveries about the financial viability of investing in solar compared to investing in an S&P 500 index stock fund.
Over the 25-year minimum lifespan of solar panels (25 years is the warranty – the actual lifespan therefore should be longer), the study found that in 46 out of 50 American cities, you would actually earn greater returns from a fully financed solar energy system than the stock market.
It also found that 9.1 million American households could buy a PV solar system with cash today, and over 25 years they’d pay less for their energy than through the utility.
Are you one of those households? Ask a solar consultant to come out and assess your home.
Why Solar Is a Better Investment than the Stock Market
If you’re expecting to live in your home for a while (or operate a business), you should take a fresh look at solar as a financially smart move, in addition to all the other reasons to do it.
There are two reasons solar pencils out ahead of stocks over a 25 year time period.
1. History Repeats Itself – Volatility
2008 was a bad year. So were the first years after it. It took years before the stock market recovered. This kind of collapse will happen again. More than once. It’s simply a question of when, and how bad. Stocks have shown themselves to be volatile and unsteady.
If the next stock market collapse arrives right before a key moment in your life, such as retirement, or right before you send your kids off to college, you can be in serious trouble. You might have to alter your plans for a few years until things recover again.
Unlike stocks, the long term financial prospects of solar are virtually guaranteed. Why? Because every month, you save money on power, and there’s nothing that can prevent it. Even if stocks go down to zero, you still have to turn the lights on and keep the freezer going. That means you need energy, and solar saves you from having to pay for it.
Your investment returns on solar add up every month, no matter what, and keep getting larger.
2. The Cat Keeps Getting Fatter
Inflation. It happens in energy, just like everywhere else. Go find your power bills from ten years ago and look at the price you were paying then, per kilowatt-hour. Actually, don’t do that. First, get a fan, some ice water, and a comfortable place to sit. Then look at your bills from ten years ago. You don’t want to faint from shock.
In just ten years, prices have nearly doubled in some parts of the country. So the investment returns on solar aren’t linear. Like any good interest rate, the returns from solar accelerate over time.
You might use the same amount of power in ten years, but the COST of that power will be much higher from the utility. Because of inflation, even using the same amount of power saves you more money over time, through solar.
That’s why, the sooner you can go solar, the sooner you’ll start stomping on inflation. You’ll profit from solar for more than 25 years. How much will inflation go up in that amount of time?
The study estimates a 33-83% rise in utility rates over a 25 year period.
NC State Study Analysis: Why Solar Investments Pay Off
Many people misunderstand how much solar can benefit them financially. One common belief is that solar only pays off in “good weather” places like Arizona and California. But the data disagrees. They ranked the 50 largest cities. Guess who’s number one and number two? New York and Boston. Apparently, they compete in solar viability as feverishly as in baseball.
So how did New York and Boston outrank LA and Phoenix for solar (though they too ranked well at #7 and #11)?
The study looked at three factors as part of their rankings:
- First year average monthly savings from solar, assuming a 5kW residential system
- Long term investment value compared to the S&P 500 index
- Levelized cost of energy – comparing the per-kWh cost of solar with the utility over 25 years
So how did New York reach the top? No pricey free agents this time. Here’s how they scored in these three factors:
First, their average first month savings were $91. That’s very good, almost $1100 a year. With zero inflation, that comes to $27,500 over 25 years. Next, the comparison to stock investments came out way ahead whether the solar panels were financed or owned. Finally, their levelized cost of energy was 10.9 cents per kWh.
New York’s utility rates are higher than 10.9 cents. So not only does the solar system pay for itself from the monthly savings, but the 25-year cost is actually less than just paying for power the old-fashioned way. In New York (and many other cities in the study), solar is actually cheaper!
This is called “energy parity.” It means previous arguments that solar is more expensive than other forms of energy are approach the point of being obsolete. It’s already true in places like New York.
The Number That Matters – Energy Bill Offset
Another reason weather doesn’t matter as much as people think is because it’s the wrong question. The question isn’t how much solar energy you can produce. The question is, how much of your bill does it offset? Those are your real savings, in dollars.
Because of weather and latitude, a 5kW system in Boston averages 567 kWh of energy production per month. In Phoenix, a similar solar array will produce 735 kWh. That’s almost 30% more than Beantown.
But what’s the other side of the coin? Phoenix homes use an average of 1077 kWh per month, but Boston uses only 761. All that Arizona heat demands big-time air conditioning. See what we’re getting at?
Boston may produce just 567 in solar energy, but if their total bill only charges for 761, solar is eliminating 75% of their energy bill. Whereas in Phoenix, producing 735 is great, but that’s only 68% of 1077.
Boston doesn’t need to produce as much to offset a greater percentage of their bill.
And the point here isn’t to say Phoenix isn’t a good market for solar. Not at all. They’ll save on average $105 their first month, over $1200 a year. The point is simply that the weather isn’t as important as you might think it is when it comes to profiting off an investment in solar energy.
The Financial Rewards of Investing in Solar
When you add in the other benefits and incentives offered by many cities, states, and utilities, such as net metering and ‘value of solar’ tariffs (which the study explains), there’s a lot working in your financial favor depending on where you live (or where you move next!).
So is solar right for you?
You might not live in one of the 50 largest cities. You have a different utility provider. Different incentives. Different power needs. Statistics and studies aside, solar viability comes down to a case by case analysis. All this study shows is that solar is a better investment for more people today than ever before, and the numbers are increasing.
How much does solar power installation cost? To find out for your home, you need a solar consultant to come out and do an assessment.
Coastal Solar does these at no charge. Why wouldn’t you want to know if solar is a good investment for you, like it is for so many others? Invite us out, see your numbers, and then make an informed decision. Have a solar consultant come out and pay you a visit!