Energy: Do Solar Panels Provide Value? A 1-2 Punch.

Solar Panels have been something I've noticed for some time now. I am currently not a homeowner but have always admired the prospect of being more self-reliant and cost-conscious. Not the self-reliant where I have my own garden and live off of nothing else but vegan gourmet, but where my fixed expenses are kept very low and my variable expenses are raised and lowered to my discretion. Part of this reduction in fixed expenses could very well be my electricity consumption and the source of that consumption. A Photo voltaic (PV) System which supplies over 100% of my energy consumption needs would help achieve my goal of cost-consciousness.

Now for those of us that have already taken REAE 5311 (Real Estate Analysis) or any other Finance centered curriculum we understand  the role of Financial Analysis in any Investment decision. We could argue that generally most people want to pay less for more. Our question posed in the title is "Do Solar Panels Provide Value?" Financially, this comes down to the payback period of the investment. Disregarding the Discounting of future cash flows the pay back would essentially be the length of time it takes for us to recoup our money dollar for dollar. If our PV system cost $5K and we received an annual cost savings of $1000 per year, our payback would be 5 years ($5K divided by $1k/year equals 5 years).

Our financial investment feasibility will actually vary based on a variety of factors. For one, we disregarded the time value of money which we can not do since we are subject to inflation and at a minimum, we must discount based on the inflation rate. There are ways that we can create obtain a greater benefit of the PV system in regards to financial feasibility. We can increase the future cash flow benefit by decreasing our monthly electric bill by substituting the costly grid electricity variety for the self-reliant solar energy variety. This is a monthly added benefit and cost savings. Depending on the output from your potential PV system, more energy can be produced than is actually needed for regular consumption. At this point, an individual may have the opportunity to sell the "left-overs" back into the "grid". This is sticking it to the man! Now the question is whether you can sell back this your excess to the man. Incentives can be found on the State Energy Conservation Office website at http://www.seco.cpa.state.tx.us/re_solar_incentives.htm. You can also find other incentives for your local area at http://www.solar-estimate.org/?page=solar-incentives&state=TX. There is no all inclusive list of incentives. A little research will be required to determine what benefits can be derived from an investment in a PV system. Some Texas specific benefits can be found at http://www.dsireusa.org/library/includes/map2.cfm?CurrentPageID=1&State=TX, Utility Rebate Programs can be found specifically under the Utility Rebate Program section. The list can go on and on but digging is required to find the more hidden and creative benefits.

Back to our question of whether solar panels are valuable. Id like to finish my blog with different look at the determination of value. Value is determined by the supply/demand relationship of economics. Economic value goes deeper than just the physical and material properties of said object of valuation. Value is perceived by the individual by other judgments of value such as aesthetic quality. No matter how beneficial something is, if it doesn't taste good, doesn't look good, people are less likely to consume it. I believe that we can come to the conclusion that solar panels aren't the sexiest addition to a house. They actually can be very akward looking and stick out like a sore thumb.

HOA's have even expressed their disinterest in solar panels for their lack of aesthetically pleasing qualities, which is completely understandable and subjective (insert sarcasm here). In an article (http://green.blogs.nytimes.com/2009/05/15/homeowners-associationsthe-enemy-of-solar/ ) the HOA turned down an application to install Solar Panels because "The feeling of the board was that what was proposed wasn't aesthetically pleasing in keeping with the standards of the community". Value is determined by the benefit received by an individual. This benefit is not always financial. They later on state how they are open to other alternatives such as solar shingles, which I have found much more pleasing to the eye than the popular panels variety.




So what do you think about how solar panels look on a house? Would you use them no matter the cost savings, assuming they provide a positive benefit?