Sunshine on a Cloudy Day

Dear Rich Lifer,

Clean, cost-effective, sustainable, efficient, mysterious… these are only a few words one could use to describe solar energy.

You may be thinking, “Nilus. It is winter. It’s dark and it’s wet. Why are you bringing this up now?”

Despite the dark and chilly weather you may be experiencing this December, it is actually primetime to start considering whether solar panels are the right fit for your home.

A common misconception about solar panels is that they are new technology. In reality, solar panels have been around for about 100 years. However it is just within the last several years that they have been popping up on the roofs of residential neighborhoods and local businesses.

The big question is why people are bothering to take the time, effort, and expense to switch their homes from their current electrical source to electricity through solar panels?

It turns out there is more that goes into a decision than meets the eye. I’ll cover several pros and cons in order to assist you in making an informed and educated decision.

The Options: Lease or Buy

If you are interested in moving from your regular electric bill to a solar setup, most solar energy companies will offer you two options for installing solar panels.

You can lease the panels, much like you would a car, or you can purchase the panels outright.

There are benefits and drawbacks to both options: it simply depends on your financial situation and how much time you are willing to commit to this change.

Generally, if you lease the panels, you will make smaller monthly payments for a longer time period. Whereas if you purchase the panels outright, your up front cost will be significantly higher, but much cheaper in the long run.

There are other advantages to purchasing the panels that I’ll go into for now…

PRO: Better for the Environment

About 80% of our country’s electricity comes from burning fossil fuels. Burning fossil fuels for power is an unsustainable practice long term. Eventually the coal and natural gas in the earth will be depleted.

So sooner or later we are going to have to move toward other methods of generating power. It is estimated that we have less than one hundred years worth of fossil fuels left. Once these resources are depleted, they are gone and there is no getting them back.

Many scientists believe that the consumption of fossil fuels is also damaging our earth. Switching to solar energy is a much safer alternative, and is completely sustainable, meaning that we can never run out so long as the sun continues to exist.

If the sun’s rays are going to shine down upon your roof anyway, it only makes sense to use them for electricity and better our earth for it.

PRO: Prolongs the Life of Your Roof

Having solar panels installed on your rooftop provides a protective barrier against the weather. Its would if you placed a giant umbrella over your roof. Solar panels act as an added layer between the elements and the top of your home.

The portion of your roof covered by solar panels will be protected from snow, rain, the sun’s radiation (which is what powers the panels) and other weather elements, which can extend the life of your roof up to 70%.

PRO: Budget Friendly

If you live in a warmer climate, you’re familiar with the spike in cost of your electric bill during the months in which your air conditioning is cranked up.

Using solar energy allows you the opportunity to pay a fixed monthly fee, so long as you are not using more energy than your panels are producing.

If you live in an energy efficient home, or if you are conscious about your electricity usage, you can actually end up saving money and paying a lot less than you currently pay for electricity.

PRO: Solar Renewable Energy Certificates – SREC

Remember I said that there were additional benefits to purchasing the panels outright? This is one of those incentives.

If you purchase your panels outright instead of leasing the panels, you may earn solar renewable energy certificates (SREC). If you lease the panels the company that you are leasing the panels from would earn the SRECs.

The way SRECs work is similar to a rewards program. For every 1000 kWh of electricity that a solar system generates, you earn an SREC. In some states, you can sell your SRECs for additional revenue.

If your state isn’t on the list, don’t be alarmed. Many states are working on legislation to offer SRECs, so it’s likely just a matter of time before more states offer SREC incentives as well.

Currently, these are the states offering SRECs:

  • Illinois
  • Delaware
  • Maryland
  • New Jersey
  • Pennsylvania
  • Ohio
  • Washington, DC

Each of these state’s SRECs vary in worth, ranging from $40 an SREC to over $400. The number of SRECs that you earn is only limited by the amount of energy that your system produces.

So, if you have a system that generates 10,000 kiloWatts over the course of a year, you would earn 10 SRECS, which could be worth over $4,000. This can be a very nice source of additional income, that requires little effort.

PRO: Freedom From Annual Electricity Adjustments

Each year, your electric company has the freedom to adjust their rates, up to a certain percentage per state. Collectively, over the last decade, rates have risen 15%, while individual states (such as Oregon) have raised their rates 40% in that time frame!

Electrical companies tend to increase their prices with little warning. Using solar electricity can provides an additional layer protection from these uncontrollable price increases.

CON: Time Consuming

The main reason to begin the process of switching from standard to solar in the winter is the time it takes to get the system up and running.

The switch to solar involves several in-depth steps, hopefully beginning with your own research. You can expect several consultations, inspections, and whatever permit waiting period your township requires.

All in all, it is typically a 4-6 month period between considering solar panels and getting them up and running. Therefore, if you book a consultation in January, your panels should be functional by July at the latest: just in time for peak air conditioning season.

CON: New Industry, Old Problems.

With the popularity of residential solar energy just recently building momentum, you may struggle to find a company you find experienced and trustworthy.

Unfortunately, there have been a few bad apples in the bunch, and consumers who didn’t do the proper research into the solar company that they hired have been scammed.

If going solar is something you are interested in, make sure you research the company you are considering hiring to do the job thoroughly.

CON: Still Working Out the Kinks

As solar panels sit on your roof converting radiation into electricity, they begin to deteriorate. That means that over time they bring in less energy than when they are brand new. As of writing this, the rate of decay is around .5%/ year. So a system that is 15-20 years old will produce about 90% of the power that it was able to generate when it was brand new. Fortunately, as technology continues to improve, the rate of decay is getting lower.

On that note, if you use more energy than your panels are pulling in, you will still have to pay your electric company for the surplus. So if your panels produce 1000kWh of electricity, and you use 1100kWh, you would have to pay your electric company for the additional 100kWh that you used.

The Bottom Line

At the end of the day, I am simply here to provide you with the facts to allow you to make an informed decision. Fortunately, most solar energy companies offer consultations and quotes completely free of charge.

If you think solar panels may be the right move for you, consider reaching out to a few of your local companies to explore your options and get some more information tailored specifically to your personal energy needs.

If you have friends, family, or neighbors whom are already utilizing energy through solar panels, talk with them and get information from people you know and trust. Take the time, do the research, and make an educated decision for your home.

To a richer life,

Nilus Mattive

Nilus Mattive

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Nilus Mattive

Nilus is the editor for the daily e-letter The Rich Life Roadmap and a Paradigm Press analyst.

Nilus began his professional career at Jono Steinberg’s Individual Investor Group, where he published his original research through a regular investment column. Later, he worked for a private equity business and spent five years editing Standard and Poor’s...

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