Solar Power Offers a New Approach to Financial Planning
Monday, December 19th 2011 1:53 PM
By GetSolar Staff.
Financial planning is rarely a task that people look forward to or enjoy, at least not without some surprising success. Particularly given how complex a prospect it can be, many people turn to professional financial planners to help them sort out the best options between investing in the market, purchasing land or simply paying down debt. Gary Sidder, a financial planner and college professor living in Centennial, Colorado, found himself another type of investment by turning to Colorado solar installer REC Solar and his own rooftop solar installation.
The traditional number for stock market investments has been around 8 percent, and indeed a 2000 report from the Social Security Administration pegged the average annual real returns, that is to say accounting for inflation, in the post-World War II period at 7.8 percent. Gold, meanwhile, left investors with a 0.7 percent drop annual drop in real value.
Yet during the past 10 years, the Standard & Poor's 500 stock index has risen around 8.4 percent and gold prices peaked earlier this year at more than 600 percent growth in the same period. Forbes notes that the return to investors on stocks between 1990 and 2009 has ranged around only 3.2 percent.
Of course, markets can turn around, gold prices can fall and much of the recent poor performance can be attributed to the historic market collapse in 2008. However, the uncertainty of these markets makes it clear that people could benefit from another investment strategy that seems more likely to lead to gains. This can either mean finding an asset that is certain to rise in value or a cost that is likely to remain high or increase.
Traditionally this approach would mean paying down debt, since that entails a fixed cost at a fixed rate of negative return. But more and more people are realizing they have seen another cost in their budgets rise steadily over the years: electricity.
According to the U.S. Energy Information Administration, average retail electricity prices in the U.S. rose steadily over the decade before 2009, growing from 6.64 cents per kilowatt-hour in 1999 to 9.82 cents per kilowatt-hour in 2009 and never once declining from year to year.
Though Colorado, where Gary lives, faced only the 31st-highest electricity rates in the country, it has hardly escaped this steady climb. In 1999, the state's residential customers were paying an average of 7.38 cents per kilowatt-hour. By 2009, that number had risen more than 35 percent to 10 cents per kilowatt-hour. Through the first eight months of 2011, the EIA residential rates in the state had risen another 13.3 percent to hit 11.33 cents per kilowatt-hour.
In 2009, Colorado drew the majority of its power from coal and the majority of the remainder from natural gas, two fossil fuels that both look likely to increase in price as demand surges worldwide. These high electricity prices and a growing number of solar incentives have already led Colorado to become one of the top states for residential solar installations by last year, according to the Solar Energy Industries Association. With the fifth-largest market in the country, Colorado has seen investments from homeowners, businesses and utilities.
After receiving multiple quotes, Gary eventually decided to take advantage of REC Solar and residential solar leasing from SunRun, which allows homeowners to add solar panels at littler or no up-front cost. His 24-panel, 5.28-kilowatt solar system should produce nearly 8,500 kilowatt-hours annually, saving him more than $700 each year, according to the National Renewable Energy Laboratory's PVWATTS calculator.