Solar power investment questions answered
What will drive solar power investment in the future? You may think that a concern for the environment would drive funds toward renewable energy, but actually, its much like any other capital venture: how to make more money.
In a recent Reuters blog post, Ray Kurzweil, a futurist and inventor, discussed the fact that billions of dollars are currently invested in solar power and that new advances will drive down the cost of solar energy:
“As a result, the amount of solar energy is doubling every year two years. But ultimately it will be very inexpensive. So what’s motivating (its adoption) is economics. It has the side effect that it’s environmentally much friendlier.”
That all sounds great to me, as a homeowner and someone concerned about my finances, but how will it actually work?
What kind of solar power investment will you make?
For now, we will have to wait for prices to continue to drop, particularly if we’re making a solar power investment. The factor to consider before jumping in is the ROI, or “return on investment.” This is a measure of when the money you put in at the outset will pay you back.
For example: your solar panel array costs you $20,000, after tax credits and incentives. Let’s say that you save $1000 a year on your utility bills, and the price of your home increases by $10,000. What will your ROI be? In other words, how many years until you break even? This will vary between 5-10 years, or even less when you consider the fact that you will guard against utility bill increases once you install a solar panel system.
I sincerely wish that solar power investment was more closely related to a long-term consideration of global concerns, rather than short-term thoughts about the market. But, after all, in today’s economy, many people are more worried about their nest egg, than the health of the planet 40-50 years from now.
Where do you stand when it comes to investment in solar power or other renewable energy?
Tags: return on investment, solar panel array, solar panel system, solar power investment
July 26th, 2009 at 9:10 am
I'm not so sure about the increase in the value of the property from the solar installation. If we take that out of the equation you're looking at about 20 years to get ROI, and that's with substantial federal incentives.
Solar still has a long way to go before it is affordable by regular people without huge subsidies.