How often do you buy something that grows in value after you buy it? Think of all the things you buy throughout the year. Clothes, food, entertainment, cars, toys, ATVs, vacations: none of those things, as fun as they are, make you any money at all. Those “investments” go down in value. Most people only make money from one asset: their home.
The average home goes up in value by about 3% annually. Think about how great that is, you need somewhere to live so you’re gonna buy a house anyway. Just living there and paying the mortgage increases the value of the home every year without any extra effort or management.
In the financial world, things that make you money are assets and things that lose money are liabilities.
A solar system installed on your roof is an ASSET. It’s just that simple. Not only does an installed solar system on your roof add an average of 4% of value to your home, but it generates electricity every single day without your involvement. Electricity purchased from the grid costs money and it ends up costing more every year due to inflation.
Let’s break it down. You purchase a solar system and usually the monthly cost to finance the loan is less than or equal to the amount of electricity cost it saves, year one. But in the case where it may not be exactly equal or you are paying a small amount each month for your system, all you have to do is wait a bit. The panels will continue to make the same amount of electricity but the price or VALUE of electricity goes up every year. So the panels become more and more valuable every year.
Now fast forward to year 21 when your typical 20 year loan is completely paid off. Your electricity bill will likely be reduced down to the bare minimum which is usually around $10 and ALL of the rest of the electricity the solar panels produce is yours to benefit from, if you also have a home battery or net metering.
So if your bill is around $310 per month, you will pay $10 to the utility company and the remaining $3600 in savings per year is yours to keep. You can do whatever you’d like with that money, invest in the stock market, buy a rental property, pay off debt, give your money away, it’s your decision.
Is home solar a good investment?
Investing in solar energy is a smart choice for many homeowners due to its ability to freeze electricity costs during a time of rapidly increasing energy expenses. Similar to purchasing a home, investing in solar energy fixes your electricity bill at a low rate for 25 years or more, providing protection from rising costs. There are financing options available for solar installations that require little to no upfront payment, just like buying a home, however, a larger down payment results in a higher return on investment.
In September 2022, the average national grid electricity price was 16.7 cents per kilowatt-hour, a 16% increase from the previous year, while the average cost of solar energy purchased on solar.com was around 7 cents per kilowatt-hour after the 30% federal solar tax credit was applied. A comparison of the cost of grid and solar energy for the average American household highlights the benefits of investing in solar energy.
