Solar Panels as an Investment | Searching for Green

Let me stress from the beginning that I’m not a financial adviser and as such, this post is only for your entertainment and thought stimulation :-). I may be as well totally wrong in what I’m writing today, so ask your accountant or financial adviser for professional help. This is not financial advice!

microFIT installations are touted to be a good investment for regular Ontario people. But I think that they are not! At least not for small 3kW systems. Even for a 10 kW solar system, there are better investments with the same or lower degree of risk. I know that what I’ve just written may seem like heresy. I may even end burned by the Grand Inquisitor of the Green Church :-). But I have some numbers on my side.

In the previous post we saw that detailed calculations show a 2.97% ROI for my small 3kW solar system. That’s just 1% over the average long-term inflation rate. So much for the “double your money in 20 years” claim! And, sadly, there’s not much room to improve the ROI once the panels are on your roof: the utility account fee it’s already a nominal amount, the insurance is unlikely to drop, and the taxes are a certainty! On the other side, if you are unlucky small maintenance may be needed over 20 years, and will quickly erode the profit. So, why should I bother for such a minuscule return?

Here is where I will take aim at most of the solar contractors. After trying to fool us with superficial calculations showing higher than real ROI using the “simplified” method, they usually go on and compare those returns with the current short-term GIC rates, usually around 1%. Never mind that we are currently in a time of historical low interest rates! It doesn’t matter that the 5 year GICs  are around 3% today (pre-tax, I admit!) and you get better liquidity in case you need the money! And it doesn’t matter to them either that it’s a lot  easier to just go online and buy some 4.25% 10 year Ontario Saving Bonds. Yes, those are not after-tax money, but I can keep them in my never-used TFSA. Or, even better, I can apply the novel idea of prepaying my mortgage and get a 5.59% (yes, it hurts!) tax-free return. But if you knew this,  you would quickly become an ex-potential-customer.

What I really don’t understand is how come nobody until now realized that small roof solar panels are such a bad investment. Or maybe they silently did and voted with their money? That could explain why the average application under microFIT is 9.19 kW. And since there are not many roofs properly oriented and large enough to install 10 kW systems, I bet most of them are ground-mounted.

Anyway, I don’t think I’m the brightest person around, by all means! So please, if you find a flaw in my math, in the Switch Kingston spreadsheet or in the assumptions, let me know in the comments. I will be forever grateful.


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