Logic Or Emotion? Thoughts On Home Solar Power Systems

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Logic Or Emotion? Thoughts On Home Solar Power Systems

With all the economic stimulus-induced hype about Green Energy, solar electric panels have become a hot topic again. Not since the mid 1970's have we seen such a surge in solar installations. Interest in this technology rises and falls in step with oil prices, and waxes and wanes as tax credits are legislated, then expire. Nevertheless, home solar power systems should be seen as long-term investments, not a passing fad.

The choice to go solar is driven by a mix of logic and emotion. On the side of emotion, pride in reducing your carbon footprint, fear of spiraling energy costs, and the desire to live "off the grid" all fuel the fervor for solar installations. On the side of logic, installing solar electric panels on your home is an investment that will immediately begin paying dividends in the form of energy savings. This investment will eventually more than repay itself once you've survived the payoff period.

Unfortunately, any payoff period calculation for solar panels is bound to be way off. Because this calculation is extreme sensitivity to input factors such as the long run cost of grid power and the interest rate you'll be paying to finance the purchase, positive emotions must trump financial logic as the stronger drivers to install solar electric panels.

We do know that the federal government is offering a 30% federal tax credit (up to $1000/installed kilowatt maximum) for your primary residence, expiring in 2016. Many states are offering similar credits.

Even considering federal and state tax credits, sober calculations of the number of years it will take to break even on a US-based solar installation can easily range from 20 - 60 years. If we can offer one bit of advice, it would be to challenge any solar installation company's sales pitch about long-term savings if their calculations ignore the cost of borrowing by assuming a zero interest rate!

   

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