Where to Invest During an Economic Downturn: Home Solar

By - Alex Hay
14.11.22 04:24 PM

The best place for your money right now

One of my favorite quarterly reads is Bloomberg’s ‘Where to Invest $10,000 Right Now.’  If you haven’t heard of it before, it is a feature that is published and updated quarterly, where selected professionals give their two cents on how they would spend $10,000 based on the market and best opportunities for the following quarter.  I rarely have $10,000 laying around but it’s always an insightful and fun read, and if I’m feeling really crazy I’ll read ‘Where to Invest $100,000 Right Now.’ 

One of the investment vehicles that I’m always surprised isn’t on this list, especially during an economic downturn like we’re experiencing right now, is solar.  Especially home solar. 

As a disclaimer, not everyone qualifies financially for solar and not every home is suitable for solar.  But if you and your home do qualify for solar it’s usually a financial homerun that reaps benefits for decades to come. 

If you haven’t already gone through the frightening investment landscape we’re living in right now, let’s take a look under the hood.  All of the below data is as of the day I write this, Oct 13, 2022 with links to sources provided.

The stock market:  The S&P 500 started off the year at $4,796.56 and as of 1:13PM EST it has dropped all the way down to $3,644.90.  That’s a whopping 24.01% decline year-to-date.  This marks one of the worst years in the history of the S&P 500!  On top of that, it’s a unanimous consensus that the stock market has further to go down before it makes its way back up. 

The real estate market:  There’s a few massive deterrents in the housing market right now and if you’ve looked into buying a house anytime recently you know what I’m talking about.  Sky high housing prices that we’ve become accustomed to post-COVID-19 are now being matched by sky high interest rates.  As of August home prices were up 6.7% from last year and on top of that buyers are being crushed by interest rates nearing 6.92% which is a 20 year high!

Holding cash:  Alright, so the stock market and housing market are performing historically horrible, no problem I will just hold onto my cash.  As Lee Corso would say; “Not so fast!”  US inflation rates for the month of September are up 8.2% compared to the year prior.  This means your $100 bill you forgot to take out of your coat pocket last September has lost significant purchasing power. 

What about investing in a car?  Well, new and used car prices are at an all time high and that combined with high interest rates doesn’t look too appealing.  Bitcoin?  Maybe?  It is down 60% year-to-date.  Buy low, sell high… right?

Enough of the Bad News Bears, let's get to the good stuff that you came here for, home solar.

Why would anyone invest in home solar during a recession?  Low risk, high return. 

There’s typically two ways a homeowner will pay for solar, either buying outright with cash or financing over a longer term at a low interest rate.  Let’s take a look at both options and see how they compare as an alternative investment and to keep things transparent, I am using the numbers from a customer of ours that we just signed up in Lancaster, SC.

Cash purchase: 

Total Price:$17,331.00

30% federal tax credit:$5,199.30

25% South Carolina tax credit:$4,332.75

Net Cost:$7,798.95

Estimated Annual Savings Year 1:$1,164.00

Payback (4% utility rate increase):5.9 years, 6.7 years if you don’t believe in rate hikes (🤔)

25 Year IRR:18.33% 🤯

Did you know tier 1 solar equipment comes with 25 year warranties?  That means for this homeowner they will have 19 years of free, guaranteed electricity!  But how does this compare to the stock market, even though we’re in an economic downturn over the long run the S&P 500 is usually 7-10% return.  For this customer the return is 18.33%.  Even if you didn’t account for rising utility rates which are inevitable the IRR is 14.41%.  That my friends is a low risk, high return investment!

Lets keep it real, not everyone has tens of thousands of dollars to buy solar outright.  Luckily the industry has lucrative financing options to the point that roughly 90% of our customers choose to finance. 

Finance purchase:

Total Price:$23,108.00

30% federal tax credit:$6,932.40

25% South Carolina tax credit:$5,777.00

Net Cost:$10,398.60

Monthly bill savings:$97

Monthly solar payment:$92 (this assumes the homeowner will put 30% ITC towards loan within the first 16 months)

Payback:Immediate, $0 down payment and the monthly payment is less than their monthly bill savings

25 Year IRR:Not calculable since the homeowner never goes cash flow negative 🤯🤯

This is why nearly all of our customers choose to finance! 

You can switch to renewable energy that you OWN without paying a dollar out of pocket.  For this homeowner that means immediately saving money on their electricity bill, never having to worry about rising electricity rates, and collecting $5,777 in state solar tax incentives.  Oh and by the way their home value increases (source 1, source 2, source 3) and the solar energy they will produce over the warranty period is equivalent to 140,000 lbs of coal, not bad!

Think it’s too good to be true?  We get that a lot, and the numbers may not shake out the same way for your home.  Give us a call or fill out our online form to see if your home is a good fit for solar.

Read a solar horror story online?  It’s true, there are a lot of bad actors out there that have given the industry a black eye.  Choosing the right company to work with is equally as important as getting a competitive and fair price.

Think my numbers are off?  Give me a call at 864-740-8640 and I can walk you through it step-by-step.

Think this deserves to be on Bloomberg’s Where to Invest $10,000 Right Now?  I agree!  I don’t think they’re taking submissions but if you have a connection there feel free to put in a good word!

Jake Trubiano

Co-Founder  I  Gold Path Solar

864-740-8640  I  jake@goldpathsolar.com

Alex Hay