Solar panels on a hotel in Freiburg, in southwestern Germany, pictured on 10 June 2012. Photo: Christian M. M. Brady (CC BY-NC-ND 2.0)
Should you install solar panels on your home? Here’s one way to calculate potential returns
If you are a homeowner, here is one way to make money and help slow climate change.
Interest rates are close to zero, and other investment options are limited. Meanwhile, the climate is changing in front of our eyes. State aid for solar power could help with both. How does this work?
The government wants to help you turn your house into a solar power production plant: generating electricity and injecting it into the grid. Not only can you receive a 20% subsidy for the investment cost of installing solar panels on your house, but the state will guarantee you a price for the electricity you generate for 15 years.
If all goes to plan, this would be sufficient time to recoup the cost of the investment and make a financial return over the 15-year period. Given that most of the solar panels are fully guaranteed for a minimum of 10 years, with a performance guarantee of 80% efficiency for 25 years, in normal circumstances, you would probably continue to benefit from selling electricity after the total investment cost has been fully paid off.
One downside is that organising this work is quite fiddly, with contractors to be hired, equipment to be purchased, reimbursement forms to be completed, insurance contracts taken out to cover potential material damage, maintenance to be organised, and performance monitored. As well as the solar panels and an inverter, you would need a metre to measure the electricity you are injecting into the grid. You can pay companies to take care of coordinating this work. One example is the Enosolar package offered by the energy firm Enovos. This product includes the equipment and the installation, five-year supervision, insurance, and an output guarantee.
The amount of electricity you can generate and the return you can expect depends on several factors. As the chart shows (with figures taken from Enovos’ website) it is better if your roof is large with few windows, and faces south in the sunniest part of the country. The nearly 7% return that would result from a favourable configuration compares very well to bank interest rates which are currently tending toward zero or even lower. A projected 2% return from a less favourable configuration suggests the investment would probably keep pace with inflation.
As with any investment, there is a chance that things will not go exactly as planned. Enovos help here by guaranteeing a five-year output minimum based on their initial estimation assessment. They also supervise the installation remotely to make sure it is working efficiently. Nevertheless, for some investors there would be a substantial outlay and potential that the returns would disappoint. On the other hand, if this investment was part of a wider portfolio, and in these uncertain times, the prospect of just preserving your savings over the medium term is not to be sniffed at.
In short, this is a relatively low-risk investment. You would also have the satisfaction of knowing you would be helping to generate the green energy we need to combat climate change.