Solar PV and the Credit Crunch

For many around the country, the sub-prime housing crisis that began last summer now means one of two things. One: since early this spring, adjustable-rate mortgages have been resetting at higher rates, making it difficult for many individuals to keep up with their payments. In fact, foreclosures in May were up an unprecedented 48% from a year earlier. Two: even if you’re able to keep up with your mortgage, chances are you’re probably not in the mood to be borrowing large sums of money. Simply put, loan rates are relatively high, house prices are falling, and the economy is most likely in recession.

So, in light of the preceding, how does one go about buying a solar PV system? Moreover, does it make sense to make the purchase right now? I’ll try to take each of these in turn.

To the first question, PV manufacturers naturally have an interest in encouraging demand for their product - even when lending is tight. Accordingly, many of them team up with banks to co-sponsor lending programs. This ensures that funds are reasonably available to qualifying homeowners for the purchase of PV panels. (Check out this previous post on financing and leasing options.) What’s more, since PV panels add value to your property and represent real cash flows - in terms of reduced future energy bills - lenders are likely to look relatively favorably upon solar vis-a-vis other investment options.

To the second question, it’s important to put things in perspective. PV systems reduce your exposure to electricity price inflation, which stands at about 5% per year, nationwide, and may accelerate in the near to medium term. Solar panels thus represent a long-term investment, one that will save you a considerable amount of money over the course of 20 or 25 years. A couple recessionary quarters now are unlikely to drastically alter your bottom line in the grand scheme of things. Provided you can reasonably finance the purchase, there’s no reason to delay.