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Solar Power: Sunny Days Ahead?
Question: We are within two years of retirement, plan to have our mortgage paid off within three years, and we see ourselves moving within the next five to eight years. Our home has 16 acres and is worth $160,000 or more. We are thinking of installing a ground-mounted solar panel array for $51,000. The solar company says the system will generate 110 percent of our needed usage so we will be able to sell some power back to the local power company. They estimate that with the state rebate and tax credits the electric savings will pay for the system in 13 years. Is this a good deal for us?
Answer: It seems that every year solar systems are getting both cheaper and more efficient. They increasingly are an attractive option for homeowners, but your situation raises some concerns. Here’s why:
The system will pay for itself in 13 years. That’s great, but you say you expect to move well before then, so you would never realize the full benefits.
The bigger issue is this: The real estate economics likely don’t work in your situation.
You say your property now is worth about $160,000. Let’s say that price is fairly typical for like properties in your community. If you add a $51,000 improvement will the value of the home go up enough to cover such an expense when you sell?
The usual rule in real estate is that buyers seek the least expensive home in the most expensive neighborhood they can afford. If you add a $51,000 upgrade to your property you will need a much higher sale price to recapture your investment. Would you pay $210,000 for your home with the solar system?
You are now moving toward both a mortgage-free home and retirement. Retirement typically is the time when incomes decline, so it’s very nice to not have a mortgage. How will you finance a $51,000 upgrade? What will those payments do to your retirement planning? What other ways could you use the money?
Maybe it’s just cheaper to pay the power company. Or, shop around to see if a suitable solar system is available at less cost. Or, maybe, another alternative is to consider solar leasing, systems where you pay little or nothing up front for a residential installation.
According to the U.S. Energy Information Administration most of our electric generation comes from power stations fueled with coal, petroleum liquids, natural gas and other gases. As more and more homes switch to solar systems we will have less demand for power generated with fossil fuels, and that potentially means reduced mining, fracking and pollution.
In 2005 we imported more than 10.1 million barrels of crude oil per day according to EIA, a number that fell to 7.73 million barrels in 2013. This is one case where less is better and zero would be really good.
Having more solar-powered homes is very much in the national interest because it means less need to build massive generating stations that rely on fossil fuels and less dependence on high-cost foreign crude oil. However, in your particular situation, the economics of a $51,000 system need to be reviewed with care.
For details, speak with your local power company, the state utility commission and individual solar vendors.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to email@example.com.View Foreclosure Article Archives
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