Solar energy is a bad investment for homeowners

William O'Keefe:
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Power for the USA a website by Donn Dears has recently published a piece that concluded on the basis of data from the Project Sunroof website that payback periods for a number of cities range from 13 to 27 years. Dear’s points out that, “An acceptable financial payback is usually less than 3 years. Any investment that requires more than 3 years is probably not a good investment. Payback periods of 6 years or more are bad investments.” Why would a homeowner invest in a system that doesn’t make economic sense?

The answer comes from Congress in the form of generous subsidies for purchasers of solar panels—30% of the purchase price.

The alternative energy tax credit is a classic example of stealing from the many to benefit the few who are financial entrepreneurs. These are the solar manufacturers who only survive because of subsidies and the Wall Street magicians who are ingenious in figuring ways to make money.

Here is how taxpayers get fleeced. Solar manufacturers and some Wall Street firms lease the solar systems to homeowners for a price that is slightly less than the cost of energy from the local utility. In exchange, the lease-holder gets the 30% tax credit. The lease holder also makes money by selling excess power back to the utility through a program called net metering.

Wall Street firms, like Goldman Sachs, set up LLCs to own the systems and collect homeowner lease payments. Once the system’s cost is repaid, the lease-holder’s profit skyrockets. As these systems age, they become less reliable and more costly to maintain, so the Wall Street firms bundle them into solar backed securities, which they sell to get them off of their books. The purchasers end up holding a security of questionable value.
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Despite the drop prices and the incentives, the payback period is in many cases longer than the useful life of the system.  This something I noticed nearly 20 years ago when I was building my house and the drop in prices has not really changed that dynamic.  Homeowners who have bought into these packages have also found that it makes their homes harder to resell during the term of the lease.

The best investment if you are building a new home is come up with a passive solar home.  It adds little to the cost and requires no additional maintenance.  The design should have a lot of windows or sliding glass doors on the south side of the house and a roof with a three-foot overhang.  During the winter months the sun is lower in the southern sky during the day and if you have a concrete slab and tile flooring it will absorb the heat during the day and dramatically lower heating costs.  In the summer when the sun is higher in the sky the overhangs blocks the direct sunlight keeping the house cooler.

I also designed the house with a 16 by 16 center court with a 20-foot ceiling and a ceiling fan.  In the winter, the warm air collects in that area and can be recirculated.  I also superinsulated the house which cuts down on the heating and cooling cost.

Comments

  1. You clearly don't know enough about how residential solar works to be writing an article about. First of all, it is the homeowners themselves that sell the extra energy for credit back to utility companies, not the leasing company. The homeowner is the one that owns all the energy produced by the solar, that is what their monthly payment is for. The solar investor doesn't get any money from the utility. Secondly, if a homeowner buys a solar system and makes complete ROI in 5 years, how is this a bad investment? After that 5th year they will be getting thousands of dollars in savings year after year. There is no other low risk investment that can accomplish this. There is also no evidence that having solar makes it harder to sell your home, actually there is evidence of the opposite.

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    Replies
    1. There is substantial evidence that the lease deals make it harder to sell homes. http://www.bloomberg.com/news/articles/2014-06-23/rooftop-solar-leases-scaring-buyers-when-homeowners-sell This is just one of several articles on the subject.

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  2. And how long have you been working for the Koch brothers?

    ReplyDelete
  3. WILLIAM YOU ARE SPOT, I DEAL WITH IT EVERYDAY I AM A REALTOR, UNLESS YOU PLAN ON STAYING IN YOUR HOME 10 YEARS OR MORE TO BREAK EVEN, ITS A BUST, BAD INVESTMENT, PEOPLE CRY ON MY SHOULDER EVEYDAY WHY OH WHY DID I LISTEN TO ALL THAT BS, JUST CALL A REALTOR WE HAVE TO SELL THE HOUSES AFTER YOU PUT THEM IN

    ReplyDelete

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