Monday, August 15, 2011

Solar Power versus the Stock Market: A Direct Comparison of Investment Returns

Believe it or not there was a time -- as recent as ten years ago -- when the motivation for going solar was very much different than it is today. Today we look at solar as "an investment," but things have not always been this way.
Despite the fact solar technology has not changed too significantly over the past ten years, the cost of solar not too long ago was actually quite expensive. Even in places like Southern California, New Mexico or Arizona where the sun is often described as "relentless," providing over 300 days of bright sunlight each year, solar was never really a major player in our energy mix. It was not uncommon to pay $20 per watt or more for a solar system, an incredibly high cost considering most installers in California are now offering residential systems for $6 per watt or less. Because of the high cost of solar of decades past, many residents who installed solar knew they would not recoup their investment (if they even referred to it as such) for thirty years or more. Essentially, the cost of installing solar was so high that it wouldn't have been prudent to even call it an investment. According to a couple I spoke with years ago, when asked why they went with solar in the 1990s they simply replied: "even though we knew it was a losing investment, we just did it. We didn't even think about it. We knew it was the right thing to do."

 A Trip Down Memory Lane

Any of you out there remember the payphone? How about the cassette player? Making a call to a corporation and talking with a living, breathing human being? Or how about a gallon of gasoline for under $3? If you answered "yes" to any of these questions, you certainly know how things can change over time.

But enough with the trip down memory lane,
let's see how things have really changed.

Interestingly enough, while it seems everything else has become more expensive, the cost of solar has reduced markedly over the past decade. As I mentioned, it's not uncommon to purchase a residential solar system for $6 a watt or less these days. It's become the norm. Along with this transition comes the inevitable transformation for solar, going from "the right thing to do regardless of cost" to "one of the most amazing investments you'll ever make." Let's dig a little deeper.

See, the difference between solar and other investments is in its reliability. We may "rely" on the stock market to go up in the same way we may "rely" on our pensions and retirement to mature by the time we turn 65. The recent events over the past decade and more specifically the past few months have shed light on the fact the stock market is not always the dream investment vehicle we once thought. Just like other investments, it's purely cyclical and when it's good, it's really good and when it's bad, well, you might find yourself pulling all your hair out.

But herein lies the true beauty of solar by not only means of powering your home but being one of the most steadfast, reliable and remarkable investments you'll ever make. It's all due to the reliable nature of our closest star, the sun. The sun has risen and set every day of your life and I'd bet my entire life savings it'll be around for many more years to come. The stock market may go up, it may go down -- on second thought, maybe even sideways for awhile -- but the sun, that beautiful source of light and energy, will rise and set every day of your life.

But back to the stock market...

A quick look at Google Finance will show you, as of August 15th, 2011, the Dow Jones Industrial Average has returned a whopping 2.25% over the past five years.

Although this figure does not include dividends, it's safe to say you would have been far ahead had you kept your money in cash due to the poor five year return of the Dow. Let's contrast this while taking a look at the average return for a Cosmic Solar customer, "investing" in a 6kW solar system:

Year Over Year Investment Return %:

Year           Solar         Dow Jones
2006         20.00             16.29
2007         20.00              6.43
2008         20.00           -33.84
2009         20.00             18.82
2010          20.00             11.02

Truthfully, I've been looking for an investment to produce these kinds of gains without any risk. In essence, the fact the sun is the most reliable thing in our world would be like our economy promising us our companies would increase revenues and improve the economy each and every year. Unfortunately, as we all know, this is far from the truth. However, on the positive end, we have one investment in which we know with absolute certainty will provide income, stability and profit for many years to come.

In the above investment return scenario, I even failed to mention your Cosmic Solar system would be paid off even before the end of year five meaning you would have free electricity for the next few decades after that. It's truly eye opening and somewhat surprising when you take a hard look at the numbers. I really haven't come across another opportunity as stable and lucrative as solar. If you find one, I would definitely love to hear about it.

A Look to the Future

Now, I know what you're thinking. "If solar has come down so substantially in price over the past decade, why shouldn't I just wait for the price to come down even more?"

In many respects, you're right. The price of solar will continue to come down as more and more competition enters the market and a greater consumer demand sparks. But with a payback of five years, is it really worth waiting five years for the price to come down? Sure, you might save a little money on the materials, but at an unnecessarily high cost as electricity continues to increase and your solar system offsets your utility bill every month. Moreover, you're free to secure a loan which will allow you to save money from day one, lowering your solar loan payment below what you are already paying for electricity.

Long gone are the days of solar being "I did it because it was the right thing to do." Allow me to welcome the future of "I'm going solar because it makes environmental, financial and practical sense for me and my family."

So what are you waiting for?

Pey Shadzi
Operations Manager at Cosmic Solar
Proud owner of a beautiful solar system
(760) 532-9712

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