Solar Panel System Investment for Retirement Low-Risk High Returns?

solar panel system

We all love to cut expenses, save money and garner high-returns for our retirement savings. One smart thing you and I can do is cut our utility costs and invest the savings in our retirement account; month after month.  Buying a solar panel system then comes to mind.

I, for one, have evaluated the financial returns for installing solar panels. In the past, the technology just wasn’t as efficient as it needed to be. Also, the returns typically required too much upfront capital and a payback period far too long.

However, the landscape is changing and it is time for us to re-evaluate the financial aspects of investing in a solar panel system.  What primary factors are driving the increased interest in solar panels and financial returns?

Is it Time to Consider an Investment in Solar?

solar panel systemThe primary factor driving my increased interest in a solar panel system is financial. For those that own a solar panel system outright the annual returns can be more than 30%, and as high as 10% for those that don’t own the system (leased systems). On average, many can now “break even” on a solar investment within 7-8 years. In fact, if you install a solar energy system at age 50, by the time you are 75 years old you’ll have saved tens of thousands of dollars on electricity costs (assuming a typical 25 year lifespan of your solar energy system).

Low-Risk, Predictable, High ROI 

The cost of installing a solar panel system is decreasing year after year as better technologies come to market. This lower cost reduces your time to break-even (payback period), lowers your risk, and increases your predictable investment return. In fact, the returns are significantly higher than your typical investment returns from stocks and/or bonds.

Also, consider the following:

  • Your solar investment helps you create a more diversified retirement portfolio
  • The ROI increases as the cost of electricity increases
  • A solar investment produces a consistent, safe return not subject to market fluctuations
  • Your returns have both federal and state income tax advantages (savings, not taxable income)
  • You free up capital (savings) that you can redirect to other retirement investments
  • Solar energy systems are proven to increase property values
  • In some states, your solar panel system can produce income (Solar Renewable Energy Certificates – SREC)
  • You receive a federal government tax credit equal to 30% of the cost of purchasing your solar energy system

Based on the above, it does appear to be worthwhile to evaluate an investment in a solar energy system. It also appears to be particularly beneficial for retirees and those living on fixed incomes.

However, it is wise to compare multiple quotes from qualified solar installers in your area before investing in a solar panel energy system. Here are a few things I learned when obtaining quotes in the past:

  • Some of the “lower cost” quotes included older solar technology (NOT the latest, greatest solar panels or components)
  • Lowest cost is NOT necessarily the way to go, in most cases, given the quote may include cheap, outdated solar panels (some of the cheap, made in China, solar panels are NOT worth buying today)
  • Solar energy systems include multiple configurations and components and some are more efficient at producing electricity then others
  • There are companies in the United States making high-quality solar panels of value but worth buying even though they may cost a little more upfront
  • Make sure you and the system you are considering qualifies for the state and local incentives mentioned by the installers/providers, confirm you qualify for the incentive(s) before you buy (many incentives have expired or may expire before you purchase/install your system

Either spend the time necessary to educate yourself on solar or hire an independent solar consultant/expert that doesn’t sell solar panel systems. That person will know the best configuration for your location and he/she will be able to determine if you are eligible for incentives in your area. The incentives can make a big difference in total system cost and your resulting return.

Homeowner Solar Investment Returns

According to a promoter of solar energy systems (EnergySage),

Investing in a solar energy system for your home can turn $15,000 into more than $115,000 over a 20-year period.
(SOURCE: EnergySage, Installing Solar: The Best Way to Invest $15k)

I would not recommend relying on EnergySage for all of your quotes; they are in the business of selling solar energy systems. Ask around and do your homework to find local experts yourself. Four or five years ago, I obtained quotes for installing solar on my property. At the time, I’ve found the quotes to vary significantly and none produced the returns that appear to be available today.

Another thing to consider is purchasing the system when you are expecting a high tax bill given the federal government tax credit. Installing and owning (verses leasing) a solar energy system can reduce your expected tax liability. Currently, the tax credit will expire for homeowners in 2022. If you are considering a solar investment, definitely speak with your financial advisor to determine if an investment in solar is the right thing for you.

Additional Resources

Learn more about solar energy by watching the video below from sonnen. It explains the difference between kW, kWh, and kWhs. Also, it touches on the conversion of power from DC (battery storage) to AC (used in the home) using inverters: 

Map of State Renewable Portfolio Standards (RPS) with Solar or Distributed Generation Provisions (PDF): The Database of State Incentives for Renewables & Efficiency (DSIRE), operated by the N.C. Clean Energy Technology Center, is a comprehensive source of information on incentives and policies that support renewable energy and energy efficiency programs in the United States. DSIRE provides state-specific information on RPSs with solar carve outs or provisions.

Database of State SREC Programs: DSIRE, operated by the N.C. Clean Energy Technology Center; this table provides details on state-specific SREC programs, including which type of entities are eligible for the program, what size and type of solar systems are eligible, and information on the financial incentive offered.

Boss Man Jax: If you are looking for more retirement and financial independence articles and resources, visit BossManJax.com.

THE ECONOMICS OF ZERO-ENERGY HOMES – Single Family Insights by Alisa Petersen, Michael Gartman, and Jacob Corvidae: This report demonstrates that the cost increase to build a Zero Energy (ZE) or Zero Energy Ready (ZER) home is modest. Notably, it is far less than consumers, builders, and policymakers realize. The report highlights methods builders and policymakers can use to drive increased market penetration. Costs are expected to continue declining over time.

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