Investing in solar energy can unlock loads of money you would otherwise send to the utility company each month. Instead, you could use that money to travel, renovate your home, invest in your children’s education, plan for retirement, start a new hobby, or upgrade your vehicle. But how good of an investment is solar energy? What is the return on investment (ROI) of solar panels, and how does it compare to other investment options?
Let’s take a look at the ROI of solar energy and compare the ROI of other investments versus investing in solar panels.
IN THIS ARTICLE:
REASONS TO INVEST IN SOLAR
When asking yourself if solar energy is a good investment, it’s important to look at all the financial benefits solar can provide. The financial benefits of solar include reducing your monthly energy costs, eliminating future energy expenses, freeing up money for other investments, providing price stability, increasing home value, and powering battery backup to prevent loses for power outages.
SOLAR REDUCES ENERGY COSTS
The largest benefit of solar energy is reducing your energy costs. Most of us dread the energy bill that comes every month, always wondering how high it will be this time. It always seems higher than last month, no matter how much you try to conserve energy.
Unfortunately that monthly energy bill adds up quickly. You might not realize it, but that monthly energy bill adds up to tens of thousands of dollars in no time. This problem is only compounded by energy inflation, which averages 5% per year, according to the US Energy Information Administration.
To illustrate this point, let’s calculate how much you would spend on energy (including inflation) over 20 years based on your monthly energy bill.
As you can see, your monthly energy bill adds up to a HUGE expense over time. And this is just over 20 years! Think about how much you will spend over your lifetime! Just imagine what you could do with that money instead of sending it all to the utility company month after month, year after year.
SOLAR FREES UP MONEY FOR OTHER INVESTMENTS
Take another look at the chart above. Look at how much you spend per month on energy and how much that expense accumulates over time.
Imagine if you have invested that money instead of sending it to the utility company. How much could that money have grown if it wasn’t spent on renting your energy instead of owning it?
For example, let’s imagine that instead of wasting your money on energy you invested that amount into the stock market. If you invested $100 per month every month for 20 years, and we assumed a 7% ROI from the stock market, you would have seen your portfolio grow to a whopping $52,000! That’s…insane.
But that’s the amazing thing about solar energy. Instead of being chained to a monthly expense to your utility company, you can instead invest in solar panels and use those savings to grow your wealth and realize huge gains over time.
SOLAR INCREASES HOME VALUE
Another huge benefit of solar that often gets overlooked is its impact on home value. Solar panels have been shown to increase home and property values.
Multiple studies have shown that homes with solar panels sell for more money. These include a study from the real estate website Zillow, as well as a Department of Energy-sponsored study by the Lawrence Berkeley National Laboratory.
The study by Zillow found that homes with solar panels sold for an average of 4% more than homes without solar panels. For a $250,000 home, that’s a $10,000 increase in property value.
The study by the Lawrence Berkeley Laboratory found similar results, with the average solar households selling for $15,000 more than households without solar panels.
There are several reasons why homes and properties with solar panels sell for more money. The largest reason why solar homes and properties sell for more money is because of the savings potential. Homes with solar panels can produce their own electricity, which is a large monthly expense for most households. Being able to save that money each money leads to homebuyers paying a premium for solar panels.
This home value increase is even more prominent in areas with high electricity costs. If a household is being charged more per kilowatt, the potential cost savings from solar panels is even greater.
Another reason home values increase with solar panels is because of an increase in environmental concern. Many individuals and families are increasingly concerned about the future of the planet and environment, as well as the future they will leave for their children and grandchildren.
To these individuals and families, solar is not just about financial benefits, but also the opportunities of future generations. To be able to do their part in creating a better future comes with a price they are willing to pay.
SOLAR POWERS BATTERY BACKUP
So far we have talked about the savings and investment potential of solar energy, but there is one benefit of solar that often gets overlooked: loss prevention.
Power outages cost American businesses over $150 billion per year. That’s $150 BILLION, with a B. That is a massive chunk of our economy that suffers from a situation that can be easily prevented with solar panels and battery backup.
With solar panels and battery backup, you can charge your batteries during the day and use that power overnight to power your home, business, and charge your electric vehicle (EV). And when the power grid goes down, you can rely on your energy storage to keep you warm, safe, and keep business running.
Imagine the huge costs of losing power during a peak hour of business. You could lose your ability to process payments, communicate with clients and employees, lose power to your equipment, and lose valuable products and customers all within a matter of minutes. But with solar and battery backup, you can keep your operations running, your communications connected, and maintain your valuable products and customer relationships.
And for homeowners, solar panels and battery backup can keep your family safe and warm during a power outage. Energy storage can keep your heating and air conditioning going, your refrigerator and freezer on, and security systems up and running until the power grid is fixed. Those costs are hard to calculate, but many homeowners don’t want to find out the true costs of not having backup power during an extended power outage.
To learn more about battery backup, visit our Battery Backup page and read all about how solar and energy storage can help you, your family, and your business.
And to get a free solar battery quote, contact Green Ridge Solar today.
Estimate your total savings, payments, and total energy usage with our FREE solar calculator.
HOW THE ROI OF SOLAR COMPARES TO OTHER INVESTMENTS
Investing in solar panels has a lot of benefits for homeowners and businesses, but it’s vital to understand just how sound that investment is. As with any investment, understanding the opportunity cost is key to making the most of your money.
Let’s take a look at the ROI of other investment options and see how they compare to solar energy.
ROI OF SOLAR PANELS
The ROI of solar panels depends on several factors, including how expensive energy is in your area, how much energy your solar system will produce, and how you plan to pay for your solar.
In short, the more expensive your energy costs, the more you stand to gain with solar energy. And the more energy you can produce on your own with solar panels, the more you can offset those energy costs and increase ROI.
For commercial solar installations, a reasonable ROI is around 12% to 15%. Businesses often consume a lot more energy than the average home and have more space to place solar panels. This means they have a higher energy bill to cover and more area to produce the energy they need to cover those costs. These contribute to a strong solar ROI for businesses.
The average ROI for residential solar installations is 10%. Again, this number varies quite a bit depending on several variables, but the return on investment for most residential solar installs is very favorable.
You can learn more about your solar ROI by getting a free solar analysis. Contact Green Ridge Solar today, and we can provide a free solar quote, along with savings estimates and a 3D solar model of solar panels on your home.
You can also use our Solar Calculator to estimate your solar energy savings.
ROI OF STOCK MARKET
While investing in the stock market can be risky, the ROI of stocks is generally a good long-term bet. On average, the stock market has produced an ROI of 10% per year for the last century. However, most financial advisers will say 7% is a safe estimate for stock market ROI.
However, the stock market is highly volatile. As recent market downturns have shown, gains in the stock market are not guaranteed. And unless you are a keen market observer with economic knowhow, it can be hard to fully realize that 7% ROI in the stock market.
However, the ROI of solar is almost guaranteed to be realized. Unless you go off-grid or install solar, you will always have an energy bill. On top of that, that energy bill will likely continue to increase with energy cost inflation each year.
With solar energy, you can lock in your savings and free yourself of unending and always-increasing energy bills. While the stock market will always have wild swings, you will continue to save thousands each year with your solar panels.
ROI OF BONDS
Bonds are a much less risky investment than the stock market, and this is reflected in their ROI. Over the past 30 years, bonds have yielded an average ROI of 6.1%. This ROI can be higher or lower, depending on your appetite for safer or riskier bonds. However, this is still not nearly as good an ROI as solar panels.
Again, while the ROI of bonds is almost guaranteed, so is the ROI of solar energy. As long as you have a need for energy, you will have to either pay for it through your utility or create your own power. By installing solar panels, you can produce your own power, reduce or eliminate your energy bills, and enjoy the resulting savings.
ROI OF REAL ESTATE
Real estate has had some huge ups and downs in recent decades. With the housing crisis of 2008 and the crazy real estate boom of 2020 that is only just beginning to cool down, investing in real estate has been quite a bumpy ride in recent years.
Despite these ups and downs, real estate is generally considered a good investment. In general, housing and rent prices increase reliably year after year, and owning a part of that market can be financially rewarding for the investor.
Overall, the average ROI of real estate is 10% for residential rental properties and 9.5% for commercial real estate.
But if flipping houses is more your taste, as was the case for many investors during COVID-19, then your ROI might be much higher. In the last few years, the ROI of house flipping has been at high as 50% or higher in some markets. However, as the real estate market has begun to cool, this number has shrunk quickly. The current ROI for house flipping stands at 26% in Q1 of 2022.
But it’s important to keep in mind, real estate isn’t an easy investment or ROI to achieve. The amount of time, money, resources, and know-how to be successful in real estate are huge barriers. It’s not as simple as buying a house or building and renting it out or turning around and selling it. Real estate is tough. Plus, market swings are unpredictable and can wreck the ROI of your real estate investments.
Solar energy, on the other hand, is an easy investment. You don’t even have to turn a screw or get up on the roof yourself. The solar installation company will put the panels up for you, and you can begin to reap the benefits right away. Once you flip the switch and turn on your solar panels, they will begin to produce energy and reduce your energy bills.
IS INVESTING IN SOLAR PANELS WORTH IT?
Looking at the average ROI of various investments, the ROI of solar panels is a strong contender. Compared to other investments that have high ROI, solar energy has much fewer risks and a steady reward and nearly guaranteed ROI. The only thing safer than solar energy might be bonds, but the ROI of bonds is nearly half that of solar panels.
But the question still remains: Is investing in solar panels worth it? Is investing in solar panels right for you?
The answer is different for every person or business. Solar panels can significantly reduce or totally eliminate an ongoing expense that never goes away and constantly increases. But there are a number of factors that determine if solar panels are right for you.
Your local solar installers can provide you with a free solar analysis and calculate how much you could save with solar panels. They can even used advanced solar software to create a 3D model of solar panels on your home.
To learn if solar is right for you, contact Green Ridge Solar. We can provide a free solar analysis, calculate your savings, your environmental impact, and create a 3D model of solar on your roof.
You can also use our nifty Solar Calculator to estimate your solar savings.
Estimate your total savings, payments, and total energy usage with our FREE solar calculator.
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