Does it make more financial sense to purchase solar panels to cover the price of household electricity usage or instead to invest the money that would have gone into the purchase of solar panels into the local electric company and use the dividends to pay for the respective household electricity usage?
There are several factors to consider that the average individual may not think of:
Difficulty to Establish
Investing in a utility company and receiving a dividend check in the mail every quarter is pretty straight-forward and a great way to hedge against inflation and the future cost of electricity seeing as the stock price of the electric company would likely rise with the cost of electricity rising. However, that dividend yield is subject to taxation, there is a small-yet-real risk associated with investing in a public company, and there are investing fees associated with the transaction to purchase the electric company stock.
Tax Incentives and Value
There are massive tax incentives and subsidized loans available for folks wishing to purchase "green" solar energy products. However, once the solar energy system is purchased, your home's value doesn't necessarily increase one-dollar-for-every-dollar-paid and you're basically stuck with an asset that has to be insured, maintained, and may even increase your local property taxes. Additionally, you are still going to need to be connected to the local grid to avoid storing the solar energy in super-expensive batteries to cover your electricity usage during nights and cloudy days. Since your home is still connected to the grid, you may still be subject to local franchise fees and "hook-up" fees.
Liquidation Viability
Unlike the investment in the utility company, the solar panels you purchased are relatively difficult to sell for cash... and if they do sell, you would almost certainly take a substantial loss compared to the panel's purchase price since the cost of installation and uninstallation is fairly high.
Amount of Sunlight Hitting Panels
I live in a developed urban neighborhood in Kansas City, Missouri. We average about 4.5 hours of sunlight per day. However, Kansas City happens to be located in an environment that several species of Oak, Poplar, Elm, and Ash trees thrive in. These trees grow tall and contain large leaves that in turn provide a great amount of shade. Because of all the trees in my neighborhood, a large section of my roof only sees roughly 3.5 hours of sunlight per day instead of the 4.5 hour average.
Price of Electricity, Solar Panels, and Installation Labor
The price of electricity and the solar panels are obviously large factors in this equation. The higher the price of electricity, the quicker the solar panels would pay themselves off. The cheaper the solar panels/installation, the quicker the solar panels would pay themselves off.
Political Legislation
The political environment could one day lead to the passing of a carbon tax. Electricity produced via the release of carbon (fossil fuel) will inevitably get more expensive if this occurs.
Proximity to Grid-Electricity
In some remote areas you may not have access to an electrical hookup without spending thousands of dollars to reach the grid. Solar panels would likely be a pretty viable option in this case.
New Technology
It's possible that in the future solar panels are not only cheaper, but also produce twice the amount of electricity. Or better yet, scientists discover a new cheap-clean power source that is economically viable which renders solar panels obsolete.
Capacity Concerns
I own a 220V hot tub that I keep at 102 degrees F all winter long. The hot tub uses a vast amount of electricity. (A price I glady pay as I sit in 102 degree water while it snows) Couple that electricity usage with TVs, a microwave, a clothes drier, and the electricity that goes into powering two computers containing Intel I7 processors and I'm looking at roughly 1000 Kilowatt-Hours per month. Generating 1000 kWh of electricity on my relatively shady roof in a deciduous climate might prove to be a bit of a challenge.
Conclusions:
At current prices and interest rates, I would be better off investing a large sum of money in my local utility company than I would be investing a large sum of money in solar panels. The solar panels, after factoring in what was mentioned above, would have to cost less than roughly $22,500 over 20 years. The system I would need to generate my current electricity usage would cost me well over $40,000 over 20 years. This calculation would be drastically different if I lived in a remote area that receives a lot of sunlight.
Ideally, a company would come along to provide me with a long term solar panel lease that lowered the price I paid per kWh!
No comments:
Post a Comment