Steadfast FinancesInstalling Solar Panels as a Hedge Against Energy Cost Inflation

Installing Solar Panels as a Hedge Against Energy Cost Inflation

Filed in Energy Conservation , Frugal Living , Green Living 6 comments

I’ve been considering installing solar panels on my roof for several years now. The number one reason I haven’t is cost, where I fear the upfront cost won’t justify the long term savings. But to be more specific, it’s that I’m a bit wary of being an early adopter in any new technology too soon because as the technology improves (e.g. the difference between a laptop made 2001 vs. a laptop made in 2011), the upfront costs will be lowered and panels made ten years from now will probably yield more energy than today’s existing technology.

But it would seem a small business by the name of SunRun has, at least partially, solved my dilemma: use solar power as a hedge against future energy prices (e.g. energy inflation).

How much money will you save?

In other words, by using solar power, you can effectively lock in future energy costs by harvesting our sun’s photons instead of relying on King Coal. As the video discloses, and like anyone who has purchased a home on a 30 year fixed rate mortgage will confirm, having a fixed rate or rate lower than the rate of inflation will add up to substantial savings over time.

How much does it cost to install?

If you’re a finance savvy person or looking for a means of reducing your home energy costs, such an alternative energy source means you won’t be held hostage to the average energy inflation rate — around 6% per year — and will pay a fixed rate or drastically reduced inflation rate by harvesting free photons.

(FYI: companies like SunRun offer the option of installing solar panels on your roof, or allow you to pre-purchase electricity generated from solar panels from an offsite location. Therefore, you have the option of “testing out” the cost savings before spending $20,000+ on solar panels, don’t have to worry about maintenance, applying for tax credits, etc.)

If you’re a green living advocate, it means you’re harvesting renewable energy while cutting your carbon footprint, lowering the amount of steam/smoke belching from the smokestacks, etc., etc. While the amount of carbon reduction is miniscule for a single person, the savings start adding up when we’re talking large numbers on the scale of neighborhoods, towns, industrial parks, etc.

So regardless if you’re motivated by saving money or saving the planet, it would appear once again that frugal living and green living go hand in hand.

It also brings up a second, and perhaps even more interesting dilemma… if you had the option of choosing your electricity provider based on how they generate their electricity (coal, natural gas, wind, solar, etc.), would you choose one option over the other?

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Posted by CJ   @   1 March 2011 6 comments
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Mar 1, 2011
2:10 pm

Interesting. It’s funny, but I grew up in Silicon Valley and, in the early ’80s, my town got interested in solar to the point that they installed it for free if you volunteered your house for testing. We did.

Back then it wasn’t very efficient, and we could only use it to heat our pool, but we could get that 19,000 gallon pool up to 110 degrees some days. All for free. I’ve been interested in solar ever since.

Being a boat guy, I’ve seen solar technology advance by leaps and bounds, to the point where you can run the entire electrical system of a 50′ sailboat almost entirely on solar power (you might have to run the engine for an hour every couple days in addition).

I’m definitely going green when I move back to the States (whenever THAT happens), and I expect solar to be a big part of my strategy. Looks like Sun Run might figure into that equation.

Mar 1, 2011
3:16 pm
#2 Matt SF :

Good stuff EB. I’d be happy if I could use solar just to negate the costs of air conditioning in the summer (I’m a bit of a polar bear) and keeping the water heater toasty. Anything beyond that would be gravy.

As far as the 50 foot sailboat… now you’re making me envious.

But if you head back to northern California, might want to give geothermal a quick look. I’ve seen a few articles that say the San Francisco area has serious potential in this area.

Mar 3, 2011
4:42 pm
#3 Emily :

ITA that solar panels are a great investment. If you can’t afford the commercial variety, you can build your own for much cheaper. There are several websites that give pretty specific instructions how. DH and I are planning to try one and see how it works out.

Mar 4, 2011
10:32 am
#4 nan :

I put solar hot water on my house in 2007. In another couple of years, it will have paid for itself. I love that I am generating my own power, and that natural gas is my back-up fuel source.

My electric bill is rarely above $35 (even that has almost doubled over the last four years), so PV is not cost effective, like you say. Installing it would be a matter of wanting to produce your own power, be more energy independent, regardless of price or payback time. I love that this company you mention will let you buy power from a solar array to test drive it. I haven’t heard of that before.

Anything that saves energy at home (renewables or greening it up) is definitely a buffer against fuel price increases.

Mar 4, 2011
10:43 am
#5 Matt SF :

I hear ya. I’m not sold on the technology yet, but what I find interesting is hedging against the near certain guarantee that energy in 2021 will be more expensive than energy in 2011.

So if you lock in prices today, much like an airlines company buying future fuel contracts to power their fleet, solar panels or prepaid solar power might be a way to counteract a weakening dollar, Fed’s QE policies, or Middle East turmoil.

There are no guarantees, but like you, I like the idea of being sustainable, lowering my carbon footprint, as well as supporting my cheapo habit. : )

Mar 4, 2011
10:48 am
#6 nan :

I was in real estate specializing in green homes, and I could not get people to understand that fuel prices would rise and that an energy efficient home would be a hedge against that. Even determining the payback of my solar, we took into consideration the cost of gas for the next ten years. How can people not think like that?!

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