To my wife, going solar made “green sense.” For me, the decision had to make “greenback cents.” It was when we viewed the decision in the context of our retirement income that it made sense for both of us.
Like many families, my wife and I are often split on our political views. Although many of her positions on the environment match my own, I’m always viewing them in the context of the economic realities and implications. Years ago, it was her idea to install solar panels on our house.
I balked at the decision because of the economic reality that putting 36 solar panels on my roof came with a steep price tag. So although the virtues of producing our own energy was discussed and debated in our house, the cost associated with it put the decision on the back burner.
Man installing alternative energy photovoltaic solar panels on roof
It was only when I decided to get serious about detailing my expenses and retirement income needs that the solar power discussion came back. I grabbed a recent electrical bill to fill in the line regarding utilities on my spreadsheet. I knew that energy costs were rising but when I saw a $300 monthly electric bill, I stopped in my tracks. My wife, who I think was waiting for this moment, waved some smelling salts under my nose to revive me and told me, “Oh yea, that’s usually what they cost each month.”
My wife, who as I said, seemed to be waiting for this moment, reminded me that our house would be a great candidate for solar panels because the back of our house faced south. So we called the solar guy to get the facts straight.
The system would cost me about $40,000. I would receive 30% of this in the form of a residential renewable energy tax credit (this is a federal program and some states also have their own programs and their own rebates). Thus my cost for the system would be about $28,000 after that credit.
The solar guy also pointed out that the system would produce extra energy that would create SRECs (solar renewable energy credits), which I could sell back on the spot market. (I will admit that when I put the system in, these SRECs were $750 each, and last month I sold mine for $75, so these are numbers that you need to carefully consider in the equation. Yet, over the last year, these SRECs have averaged about $100 a month in extra income).
The close for the solar guy was to add up the estimated monthly savings on my electric bill (I’d save about 2/3 of my current monthly bill) with the approximate return on the SRECS, and the payoff on the system would probably be less than 10 years.
The close for me however, was to go back to my retirement income spreadsheet and realize that that meant that the solar panels would probably produce about $250-300 a month (between electric bill savings and the monthly SRECs). So in terms of my retirement income, this was like earning up to $3,600 a year. I checked my local CD rates and it would take me $200,000 in a five-year CD to earn that much income.
So now I observe the hard work that my solar panels are doing from the comfort of my hot tub. Buying that was my idea. After all, I’m an energy producer now.
Note: These are simplified numbers and based on my own experience. You should carefully evaluate the costs and approximate benefits associated with your own situation before taking the solar plunge.
Hire Note: The incentives in our region are VERY different (and better) than the SRECs that Mr. Tatar is talking about but many of our customers see the importance of reducing overhead expenses in their golden years – and they are doing it with solar!