I’m considering investing in a solar project where roofs are rented out for 20 year periods (with 5 year options to extend after that) and solar panels are installed.
There is a 30% federal tax credit for solar panels installed this year and Massachusetts offers additional tax credits plus incentives under a program called the SMART program which offers these incentives for 20 years after install. The numbers are fixed based on the energy produced and the panels themselves have 25 year warranties with 90% production guarantees after 20 years so the assumptions for production and smart incentives should be fairly safe.
Here are the numbers for this particular project:
100,000 kWh project $175,000 build cost
+60,000 tax credit (one time) +160,000 incentive (over 20 yrs) +29,000 behind meter annual
Annual numbers: -10,000 rent annual -2,000 management fee 1.5% -2,500 insurance -3,500 replacement / loss cost
So you’re looking at at about an $11k return (~6.3% of the original investment) year over year on top of the ~$220k return you get back over 20 years from all the incentives.
Over the past 10 years in Massachusetts energy prices have increased 4% on average. The $29k is based on current energy prices so there is plenty of potential upside on that 6.3%.
Even if energy somehow became free it would still be pretty safe to say you’re looking at getting about ~126% back after 20 years. To put that into perspective $100k 20 years ago is worth ~$153k today so you’re not keeping up with inflation, but that seems like it would be considered fairly low risk. If energy prices continue to remain constant or rise you’re looking at at least a 6.3%+ ROI year over year if you consider you’ll be getting back your initial costs through the incentive programs.
Would it be crazy to invest 30% of my investment money in this project? I’m not rich, but I am comfortable. This “investment money” is outside of my retirement money and I’d be fine if I were to lose it all.
I haven’t heard of many folks investing in solar so curious if anyone else has had experience with similar clean energy investments. Beyond fusion reactors what are some other threats to energy prices? Granted if we solved the world’s energy problems that wouldn’t be so bad.
Submitted June 09, 2019 at 09:02PM by ManicAkrasiac http://bit.ly/2WyfUry
