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  • Rickey Sipila

Residential Solar in 2021

Hello!


Chances are if you are reading this, you may be interested in installing solar panels on your house. I’d like to show you that getting solar installed on your roof is not a sacrifice you need to make to reduce your carbon footprint. Right now it is one of the best investments your money can buy. This blog will go over three main points:

  1. What a solar investment looks like

  2. Conceptualizing the return on investment of solar

  3. How to get started

I will save the majority of readers’ time by stating the facts right from the start. To be able to offset 100% of your energy with solar:

  • a small house, 1500 sq ft will cost $10,000

  • an average house, 2500 sq ft, will cost $15,000

  • a large house, 4000 sq ft, will cost $25,000

But hear me out - for all people who live in Minnesota the federal government will pay you 26% of your costs when you do your taxes. So the cost rather look like:

  • a small house, 1500 sq ft will cost $7,400

  • an average house, 2500 sq ft, will cost $11,100

  • a large house, 4000 sq ft, will cost $18,500

And from there, on average, you will get a huge 9.5% return of value during the next 10 years of the installation of your solar system. This money will come from the energy savings you would typically spend on your electric bill and incentive by Xcel Energy. The fact of the matter is that with the incentives given by Xcel and the federal government, solar will give you about on average 9.5% return on your investment. This is a very good deal.


Why is a 9.5% return such a good deal? Let me see if I can try to conceptualize that for you. Below is how solar compares to other common types of investments:

Number based on: https://www.thebalance.com/good-rate-roi-357326

https://smartasset.com/retirement/average-roth-ira-return

https://medium.com/money-clip/can-i-expect-a-10-annual-return-from-my-index-fund-6f32307985d7


As you can see, solar will earn you just about as much cash as investing in an index fund or retirement account, but with some added advantages.

  1. Solar is a low risk investment. Most solar companies and equipment manufacturers will warranty any equipment that breaks down within the first 10 years. The risks of your array getting wrecked by hail is extremely slim as today’s panels are made to last the heaviest of downpours. Since long term weather patterns are consistent, it's a guarantee that the sun will shine on them.

  2. Solar adds value to your home. All the money you put into a solar array will add the same value to your house with the added benefit of not raising your property values because of Senate Bill 871. Solar panel’s efficiency only degrades about 0.5% per year, which means it will still be producing at 80% efficiency in 30 years.

  3. Since this value comes from energy savings, no taxes have to be paid for your profits because it is not income!

Let's look at an example comparison using the average rates above: Jim and Jan both are both looking to invest for their future and are able to save up $15,000.


Jim decides to put all of this money into an index fund, which is currently one of the highest-rated investments you can make in stocks. It involves no additional work, as it is a passive way of creating income. After waiting 10 years, he finds it has given a 8.5% return earning him a total of $18,915. So Jim now has a total value of $33,915.


Jan goes ahead and puts her $15K into a solar array on her garage. A safe way to provide a consistent source of energy to her house. In 10 years, this investment makes her $23,907 by incentives and energy savings. Her house’s value also increased by $15K, but degrades slowly, less than 1% per year. So Jan now has $23,907 cash plus an added $13,500 to the value of her home. Jan’s total value equals $37,407.


To conclude, both options are fantastic. An index fund will give you flexibility with your money, but will be more risky. Whereas solar will not be as liquitable, but will earn you more over time with much less risk because your finances will be dependent on the sun rather than the wellbeing of the economy.


Now imagine a third scenario with Jim and Jan’s friend Joe. Joe is a smart guy who really is interested in making money. He installs solar on his house for 15K too, but instead of taking all of his money saved and keeping it in his bank account, he instead takes all of the monthly cash saved from his electricity bills and solar incentives and puts them straight into an index fund. This starts out with a big lump sum of $3,900 in his first year, because of the federal government’s solar incentive, and then approximately $92.50 per month. In the end Joe is the financial winner with a grand total of $23,907 earned through his solar, plus his home's added value of $13,500, AND an additional $10,917 from the interest gained in his index fund. Joe’s total value ends him with $48,324. That’s a 12.41% return!


I’d like to end this paper with some side notes, because we have all heard the expression: “If it sounds too good to be true, then it probably is.” The above numbers are all averages from people who: (1.) Have $15,000 of available cash to spend. (2.) Have a house with an area that isn’t too shady with room for solar panels. And (3.) are within the Xcel utility service area. Most people in Minnesota do not fall into these categories. Although if you have made it to this point and you think you are eligible, then feel free to contact Sisu Solar for a free solar estimate to determine exactly how much a solar investment will make you by emailing Rickey at sisusolar@gmail.com


Thank you!

-Rickey Sipila, owner of Sisu Solar LLC



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