The Bull Case For Solar

My partner Albert blogged about solar yesterday and posted this chart:

solar cost trends

I’d like to add another chart to this conversation, mortgage rates over the past thirty years:

mortgage rates 1980-2013

The bear case for solar has been that the payback times are too long. But with cost declines (Albert’s chart) and carrying cost declines (my chart), solar makes more sense today than ever.

The other chart worth looking at is home energy prices over time. Your payback on solar depends a lot on how much you are paying for alternative sources of energy.

This part of the analysis is not as easy. It depends on what kind of energy you are consuming (coal, natural gas, oil) and where you live.

But my view is that the long term price of carbon energy will not decline as fast as the long term price of solar. Particularly if carrying costs (which are dominated by interest rates) continue to be low.

Cap rates (the yield an investor gets in real estate) are in the 5-6% range around the US these days. That means an investor is willing to wait for 15-20 years to get their money back on a real estate investment.

Solar payback times are half of that and going down fast.

The Gotham Gal and I are putting solar onto every building and home we construct these days. We are believers and bullish on solar.