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Absolutely!
We can think of our solar installation as an investment that pays in after-tax dollars. It's like a Roth IRA in that way; pay taxes on the conversion of your money up front and the dividends are tax free for the rest of your life. So in this case, with solar, taxes are paid on the money we use to purchase the system with, that's the capitol, and the return is that you are 'paid' in the amount of money you keep in your checking account instead of paying it to the electric company. You can also view your solar as long term investment like an annuity or a pension. If you use any of the many annuity calculators available from insurance companies, you can plug in the money you spent on your solar and see what they would have paid you as an income for the rest of your life. Be sure to include that it's adjusted for inflation, because your electric company is going to keep adjusting it's rates for inflation. I mention an annuity, but you can compare this to any sort of long term income producing investment as well.
So figure out how much your solar cost you. Then, using an investment calculator, figure how much income you could draw if you had invested this money instead. Use a 25 year draw down on the investment to account for the fact your solar is warrantied for 25 years. Also figure the draw has to cover taxes both federal and state.
Let's use my solar as an example;
I paid a total of $16,414 for my solar which consists of 16 panels of SolarWorld 315 watt panels and a SolarEdge inverter. (plus all the incidentals) A 5kw solar installation. Actually I paid $18,414 and got a $2,000 refund because they missed deadlines I had insisted be in the contract. Now deduct the tax credits you get as a refund on your federal tax return which is 30%. For me, I can use the $18,414 dollar figure since that's what my receipt says and my tax accountant will use. I get a $5,524 credit on my taxes. Now my system has cost me an actual $10,890.
My electric bill was $130 a month and I used the monthly averaging option to pay my bill, where PG&E figures out your annual payments, then divides by 12 months and bills you a fixed monthly amount with a correction once a year to zero out the account, sort of like solar does.
For me to get a return of $130 a month on a $10,890 cash investment that draws down to zero dollars after 25 years I would need to invest that money in an account that has a return of 14%. I'd be lucky to find an investment that pays 4%, let alone 14%. Now figure in the return, $130 a month, is adjusted for inflation at 3% a year. The return would have to be more than just 14%.
What a DEAL solar is!!
Use your own actual dollars spent to buy your solar and the amount of money it saves you from paying to the utility company as see for your self what the comparable interest rate would need to be. Even if I had paid the full $18,414, never got a refund of $2,000 and never got the tax credit of 30%, I would still need to invest at 7% to get the same return I'm getting by not paying a monthly electric bill.
This is astounding! Anyone who has some long term investment money that is looking to convert it to income, as most will as they retire, needs to consider solar as a way to diversify out of the volatility of the stock market.
The only downside is you need to live 25 years in order to realize the investment's growth. But since there is still the investment solar installation if you were to die early that someone else will benefit from, it's even better than a pension or annuity as those evaporate upon your death and the capitol is lost back to the investment house or insurance company.
I'm sorry if I've hijacked your thread here, but I think the way we view solar as a way to manage our costs needs to include how it also works as long term income. Hope this helps!!
We can think of our solar installation as an investment that pays in after-tax dollars. It's like a Roth IRA in that way; pay taxes on the conversion of your money up front and the dividends are tax free for the rest of your life. So in this case, with solar, taxes are paid on the money we use to purchase the system with, that's the capitol, and the return is that you are 'paid' in the amount of money you keep in your checking account instead of paying it to the electric company. You can also view your solar as long term investment like an annuity or a pension. If you use any of the many annuity calculators available from insurance companies, you can plug in the money you spent on your solar and see what they would have paid you as an income for the rest of your life. Be sure to include that it's adjusted for inflation, because your electric company is going to keep adjusting it's rates for inflation. I mention an annuity, but you can compare this to any sort of long term income producing investment as well.
So figure out how much your solar cost you. Then, using an investment calculator, figure how much income you could draw if you had invested this money instead. Use a 25 year draw down on the investment to account for the fact your solar is warrantied for 25 years. Also figure the draw has to cover taxes both federal and state.
Let's use my solar as an example;
I paid a total of $16,414 for my solar which consists of 16 panels of SolarWorld 315 watt panels and a SolarEdge inverter. (plus all the incidentals) A 5kw solar installation. Actually I paid $18,414 and got a $2,000 refund because they missed deadlines I had insisted be in the contract. Now deduct the tax credits you get as a refund on your federal tax return which is 30%. For me, I can use the $18,414 dollar figure since that's what my receipt says and my tax accountant will use. I get a $5,524 credit on my taxes. Now my system has cost me an actual $10,890.
My electric bill was $130 a month and I used the monthly averaging option to pay my bill, where PG&E figures out your annual payments, then divides by 12 months and bills you a fixed monthly amount with a correction once a year to zero out the account, sort of like solar does.
For me to get a return of $130 a month on a $10,890 cash investment that draws down to zero dollars after 25 years I would need to invest that money in an account that has a return of 14%. I'd be lucky to find an investment that pays 4%, let alone 14%. Now figure in the return, $130 a month, is adjusted for inflation at 3% a year. The return would have to be more than just 14%.
What a DEAL solar is!!
Use your own actual dollars spent to buy your solar and the amount of money it saves you from paying to the utility company as see for your self what the comparable interest rate would need to be. Even if I had paid the full $18,414, never got a refund of $2,000 and never got the tax credit of 30%, I would still need to invest at 7% to get the same return I'm getting by not paying a monthly electric bill.
This is astounding! Anyone who has some long term investment money that is looking to convert it to income, as most will as they retire, needs to consider solar as a way to diversify out of the volatility of the stock market.
The only downside is you need to live 25 years in order to realize the investment's growth. But since there is still the investment solar installation if you were to die early that someone else will benefit from, it's even better than a pension or annuity as those evaporate upon your death and the capitol is lost back to the investment house or insurance company.
I'm sorry if I've hijacked your thread here, but I think the way we view solar as a way to manage our costs needs to include how it also works as long term income. Hope this helps!!
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