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Going Solar

As a Timber Frame Home Builder, building green is one of the main focusses for Timberbuilt and our clients. Below is some great information that a colleague gave me about solar. As a financial planner he is showing his clients what a great investment going solar can be.

How much does it COST to go Solar?

There's a lot of interest surrounding solar energy these days. Solar Photovoltaics is the science of converting the sun's rays into usable electricity for our homes and businesses. The technology was invented by Bell Labs in 1954, however until recent years it has remained largely unaffordable. Early adopters of solar energy have been able to produce their own power, however it was at a cost far higher than the power readily available from their local utility providers. Thanks to federal and state legislation, increasing energy costs, and efficiencies in manufacturing the solar game has changed significantly in the last 6 months.

To understand why it could make financial sense to consider a solar panel installation for your home we need to look at the cost of energy, the cost of the installation, and the rebates or incentives available. First, consider the 6.7% rate of inflation in energy utility prices since 1970. Most home owners monthly bills exceed $100, and many consumers see monthly bills of $200 - $500. These numbers will only continue to go up, possibly at an alarming rate. Secondly, a solar system will typically run about $8-$10/watt installed. In order to offset half of an average home owner's electric bill you'd need about a 4 Kw (or 4,000 watt) system. Therefore, a 4Kw (remember 4,000 watts) system @ $9 per watt would result in a retail cost of $36,000. If you're like most people, this sounds like a pretty hefty fee to get started. Let's look at the incentives. The stimulus bill included a federal tax credit of 30% with no cap until 2016. Many states rebate money at the time of purchase too. For instance, New York offers a rebate of $3.00 per watt and a 25% state income tax credit. These incentives result in 60%-80% of the solar system being paid for by tax credits and incentives!

After all the math is done many homeowners will be able to have a 4 Kw renewable energy system installed for less than $10,000. Calculating the savings on your electric bill over 20 years it usually results in an internal rate of return (IRR) well in excess of 10%. Most systems come with a 25 year warranty, however much evidence suggests they'll last 50 years or longer. After all, the first ones built in the late 50's are still cranking out ample power. Not staying in your home for the next 50 years? That's OK too, as it's been determined that every $1,000 saved on annual utilities raises your resale value as much as $20,000. Not a bad investment when you consider it'll increase your monthly cash flow immediately, increase the value of your home, and help save the planet... try to find a mutual fund with those benefits

Jeffrey Ranke is a dynamic financial advisor who helps his clients position assets in every available resource. His innovative practices have won the praise of his clients and peer alike over the past 8 years. If you'd like more information about how solar energy could fit into your financial plan please contact him at jeffrey.ranke@lpl.com or (716)652-0877

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Comment by Stephen Morrison on October 26, 2010 at 2:51pm: When we built out timber frame shop in 2002 we decided then to go solar. We installed a 36 kw grid tied system and love it. At the time, we could not qualify for any government money and now we don't qualify for any of the new money. But the reality is, if every decision in your life is based entirely on the bottom line, you may not be making the best decisions. As much as anything, we have enjoyed the time spent explaining the system to people, everyone who comes by from lost tourists to the UPS man to clients to groups of home school kids, they all get a bit of solar education.

Comment by Les Schaub on August 14, 2009 at 4:58pm: Joe wrote:
Your county might want to talk with Sarasota county, FL where I live They just did a big study on subsidizing, renting or whatever means to retrofit solar hot water heaters. They just couldn't justify it when they looked at the entire picture of cost, maintenance and return on investment over the long haul.

I'm not sure if you are commenting here on the county bonds, or solar hot water. In the stategy I mentioned I don't think there is any subsidies involved. It is supposed to be a zero net cost to the entity issuing the bonds. All money loaned to owners is to be paid back into the fund. I have seen reports that solar hot water is a pretty quick payback. In FLA you would be mostly using it for domestic hot water, in my climate (7000') it would suppliment a very efficient heating system too. That could be a difference.

I do think there is a value in roof top PV. Yes, it is expensive and the going rate for electricity is much less. Solar PY installation are helping maintian that cheap rate by delaying or stopping the need for new power generation plants. That would constitute as saving of resorces, I would think.

I agree that insulation, building smaller, etc is the single best way to use less energy, and produce less CO2. But to achieve the goal of drasticly reducing our impact is not going to be done with just one stategy, and unfortunately, weatherstriping in not a sexy sell.

Comment by Brian Kempisty on June 10, 2009 at 11:08am: The information above is about using tax dollars that have already been put aside for solar. Like it or not these dollars will be used. If people don't agree with the program talk to your legislators who approved the stimulus. What Jeffrey is doing is simply letting his client know what is available to them.

We have all paid our fair share of taxes. At least I know I have. These dollars will be used by someone, so we are just trying to make them available to clients interested in reducing their carbon footprint. If it is not used by folks, then it will be used by someone else.

I do happen to agree with many of your facts, particularly about making a small investment in insulation for a huge return. That return will be realized by the homeowner as well as the government. It is unfortunate that more efficient insulation is not as en vogue as solar.

Comment by Joe Volpe on June 10, 2009 at 10:54am: Les,
Your county might want to talk with Sarasota county, FL where I live They just did a big study on subsidizing, renting or whatever means to retrofit solar hot water heaters. They just couldn't justify it when they looked at the entire picture of cost, maintenance and return on investment over the long haul.

What is beyond my ability is too look at the entire carbon effect when you take into consideration the manufacturing effect on all of the green technology. I think the best approach is too improve the entire structures efficiency and get the size down. They just built a 8000 sq ft house down the block from me replacing a 2000 sq foot one. The carbon foot print just took a huge hit.

The hybrids so far are once again a nice pandering to environmentalists. The car companies lose money on them as the battery and motor technology is not there yet. China estimated that it would cost them an extra $7,000 per car to make it a hybrid. That's at their labor and material rate. It will come to pass but technology has to catch up. We just had a serious accident involving a young driver and his brand new hybrid. He couldn't make a turn, which was very gentle. He wasn't drinking but probably going too fast. What may be surfacing is like the SUV handling problem. It may be that the weight balance, etc is going to turn out to be a problem in the hybrid. We shall see. If you notice front wheel drive is going out the window even though it allows for a nice small car. There are real problems with weight balance with 80% on the front tires thus handling is not the best. Hybrid sales are an inverse reaction to the cost of gasoline once the purists are taken out of the picture.

Intelligent engineering and design are the true answers and trying to force innovation can lead to worse problems in the long run. From a building stand point every state needs to mandate that the national building codes be followed as a minimum. Right now there are southern states that essentially have no requirements and/or it varies from county to county.

Comment by Les Schaub on June 9, 2009 at 11:34am: While I have become somewhat skeptical on the true value/payback of roof top PV, a point that Joe may not be taking into account is that everyone does benefit if there are less carbon emissions when roof top PV are installed, and each installation is hopefully building momentum for the alternative energy movement. Thernal solar appears to have a much better payback to me.

Our local, state, and especially the Fereral Government have a long history of initially subsidising new technology to get it moving. I wonder about the tax credits for hybrid vehicles, for example.

A very interesting way of financing rooftop PV and, Thermal Solar has been approved in Colorado. It allows local governments to issue bonds to set up a fund that homeowners (and probably business owners) can borrow from to finance new installations. The payback is then part of the borrower's property tax bill. No one who doesn't borrow the money has to pay for it, and the billed is amoritized over, say, 20 years. That mean the cost of the project stays with the property when it is sold. Boulder has issued some bonds to start doing this and the county I live in (Garfield) is watching how it goes there, but is considering giving it a try.

Comment by Joe Volpe on June 9, 2009 at 9:19am: Perhaps advising clients to not install items like solar power because it is not cost justifyable without other people paying 60 to 80% of the true cost is exactly what you need to do. We are in a huge mess because ethics went out the window due to rationalization and greed. Remember, the telephone salesman you refer to needs someone at the other end who thinks he is going to get something for nothing. Both parties are guilty. Both parties rationalize.

Right now the technology does not exist to make solar power generation using cells on an individual basis efficient. Even on a large scale, it's costing the power companies about 22 cents per kilowatt using cells but it makes for good PR so they do it. There are other solar methods such as solar reflectors to generate steam for power generation that have greater promise on a commercial scale but if the money is squandered subsidizing home owners we will never get there. The very politicians that you mentioned have created these tax credits etc. but they are part of our entire problem by pandering to environmentalist who really have no idea about what they are talking about. Green at any cost seems to be the moto.

"Green" is being used by too many to justify doing things that are not truely helping the planet and only delaying the discovery of truly innovative solutions to the problems. Subsidizing an inefficient power generation system doesn't get us greener sooner, it slows us down.

Comment by Jeffrey Ranke on June 8, 2009 at 12:14pm: Joe, thanks for reviewing the article. Your strategies to save energy are excellent, and I'd always recommend energy conservation as an important first step in making the planet more "green". As for your thoughts regarding me being "the kind of financial planner we don't need"... that might be a little harsh. It's noteworthy that many of the energy conservation strategies you mention are also eligible for rebates & tax incentives. Are you suggesting we advise customers to NOT accept this money because it would mean "sticking it to other taxpayers" in order to save money on their energy bill? I'm not sure I follow your logic. My recommendations aren't unethical, just as yours aren't. The tax credits and incentives were put into law as a means to getting greener faster. I'm sure there are some financial planners that we don't need... like the ones shamelessly & recklessly pushing risky high commission investments over the phone. I'm pretty confident I'm one of the good guys. :-)

Comment by Joe Volpe on June 6, 2009 at 3:32pm: This is the kind of financial planners we don't need. What this comes down to is asking the rest of us to subsidize 60 to 80% of someone else's electric bill in the name of ecology. It would be better to take the $10,000 and increase the insulation in the roof, install triple glazed windows, downsize the house a little, use 6 inch wall studs, install led and flourescent lighting throughout the house, plant trees to cool the house, etc. I'm not impressed with being "green" if it means sticking it to other taxpayers. That money could be better spent to research out other "green" solutions that work for the public as a whole.
Joe Volpe