Is Solar Power a Better Investment Than the Stock Market?
Steady Solar Energy Achieves Near Parity with Inflationary Utility Power
There are lots of reasons for your farm or rural small business to go solar. It’s clean. It’s quiet. It gives you ownership over your energy.
But now, more than ever before in all of history, investing in solar is becoming a smart financial move as well. There is now enough data to compare investing in solar with the stock market. And you might be surprised at what they’re finding. Solar energy is an inflation-breaker.
A study by NC State University unearthed some startling discoveries about the financial viability of investing in solar compared to investing in an S&P 500 index stock fund. Here’s what it found.
Solar energy beats stock market in 46 out of 50 largest U.S. cities
Over the 25-year minimum lifespan of solar panels (25 years is the warranty — the actual lifespan therefore should be longer), the study found that in 46 out of 50 American cities, you would actually earn greater returns from a fully financed solar energy system than the stock market.
It also found that 9.1 million American households, farms, and rural small businesses could buy a PV solar system with cash today, and over 25 years they’d pay far less for their energy than through the utility.
Are you one of those farms? Ask an Ag Solar consultant to come out to your rural or agricultural business.
Why solar power is a better investment than the stock market
If you’re expecting to operate your farm or rural small business for a while, you should take a fresh look at solar power as a financially smart move, in addition to all the other reasons to do it.
There are two reasons solar power pencils out ahead of stocks over a 25-year time period:
1. History Repeats Itself — Volatility
2008 was a bad year. So were the first few years after it. It took years before the stock market recovered. The market also suffered huge setbacks in 2000 and in 2020. These kinds of collapses will happen again. It’s simply a question of when, and how bad. Stocks have shown themselves to be volatile and unsteady.
While it’s true that over the long run, the stock market increases in value, what matters more for the question today is the timing.
If the next stock market collapse arrives right before a key moment in your life, such as retirement, or right before you send your kids off to college, you can be in serious trouble. You might have to alter your plans for a few years until things recover again.
Unlike stocks, the long term financial prospects of solar energy are virtually guaranteed. Why? Because every month, you save money on power, and there’s nothing that can prevent it. Even if stocks go down to zero, you still have to turn on the lights and keep the chickens comfortable if you have a poultry farm. That means you need energy, and solar power saves you from having to pay for it.
Your investment returns on solar power add up every month, no matter what, and keep getting larger.
2. The cat keeps getting fatter
Inflation. It happens in energy, just like everywhere else. And it’s going to rise even faster in the coming years in the energy sector.
Go find your power bills from ten years ago and look at the price you were paying then, per kilowatt-hour. Actually, don’t do that. First, get a fan, some ice water, and a comfortable place to sit. Then look at your bills from ten years ago. You don’t want to faint from shock.
In just ten years, prices have nearly doubled in some parts of the country. And they aren’t going to stop going up. So the investment returns on solar power aren’t linear. Like any good compounding interest, the returns from solar energy accelerate over time.
Why your savings from solar power multiply over time
Your farm or rural business might use the same amount of power in ten years as it’s using today, but the cost of that power will be much higher from the utility. In other words, using 1000 kWh today costs less than the same 1000 kWh will cost in ten years. That means, with solar energy, your savings increase each year that energy inflation rises, even if you use the same amount of power.
And that’s why, the sooner you can go solar, the sooner you’ll start stomping on inflation. You’ll profit from solar for more than 25 years. How much will energy inflation go up in that amount of time?
The study estimates a 33-83% rise in utility rates over a 25-year period. Quite a wide range. But with predictably rising costs due to EV mandates, data centers, and climate change legislation that’s probably on the horizon, it’s a safe bet the inflation will be closer to the upper end of that range.
The more they raise the power rates, the more you’ll save from solar energy. It’s that simple.
NC State study analysis: Why solar investments pay off
Many people misunderstand how much investing in solar power can benefit them financially. One common belief is that solar only pays off in “good weather” places like Arizona and California. But the data disagrees. The NC State study ranked the 50 largest US cities. Guess who’s number one and number two? New York and Boston. Apparently, they compete in solar viability as feverishly as in baseball.
So how did New York and Boston outrank LA and Phoenix for solar financial viability (though they too ranked well at #7 and #11)?
The study looked at three factors as part of their rankings:
- First year average monthly savings from solar, assuming a 5kW residential system
- Long term investment value compared to the S&P 500 index
- Levelized cost of energy — comparing the per-kWh cost of solar with the utility over 25 years
How New York ranked #1 for solar viability
So how did New York reach the top? No pricey free agents this time. Here’s how they scored in these three factors:
First, their average first month savings were $91. That’s very good, almost $1100 a year. With zero inflation, that comes to $27,500 over 25 years. (Remember, these are homeowners. Ag operations and commercial-level solar installations will save dramatically more).
Next, the comparison to stock investments came out ahead whether the solar panels were financed or owned — with financed ones actually performing better compared to the stock market. This is because paying cash up front puts you a bit farther behind in terms of an investment. With financed solar panels, you keep your cash from the start.
Finally, their levelized cost of energy was 10.9 cents per kWh, one of the lowest in the rankings. This figure performs better when you pay for solar panels in full up front.
New York’s utility rates are higher than 10.9 cents. So not only does the solar system pay for itself from the monthly savings, but the 25-year cost is less than just paying for power the old-fashioned way. In New York (and many other cities in the study), solar is actually cheaper!
This is called “energy parity.” It means previous arguments that solar power is more expensive than other forms of energy are approaching the point of being obsolete. It’s already true in places like New York.
Click here to view the complete study (PDF)
The number that matters – Energy bill offset
Another reason weather doesn’t matter as much as people think is because it’s the wrong question. The question isn’t how much solar energy your farm or rural business can produce. The question is, how much of your bill does it offset? Those are your real savings, in dollars.
Comparing Boston to Phoenix
Because of weather and latitude, a 5kW system in Boston averages 567 kWh of energy production per month. In Phoenix, a similar solar array will produce 735 kWh. That’s almost 30% more than Beantown.
But what’s the other side of the coin? Phoenix homes use an average of 1077 kWh per month, but Boston uses only 761. All that Arizona heat demands lots of air conditioning. See what we’re getting at?
Boston may produce just 567 in solar energy, but if their total bill only charges for 761, solar is eliminating 75% of their energy bill. Whereas in Phoenix, producing 735 is great, but that’s only 68% of 1077.
Boston doesn’t need to produce as much to offset a greater percentage of their bill.
The point of this isn’t to say Phoenix isn’t a good market for solar. Not at all. They’ll save on average $105 their first month, over $1200 a year. The point is simply that the weather isn’t as important as you might think when it comes to profiting off an investment in solar energy.
The financial rewards of investing in solar
When you add in the other benefits and incentives offered by many cities, states, and utilities, such as net metering and ‘value of solar’ tariffs (which the study explains), there’s a lot working in your financial favor depending on where you live (or where you move next!).
So is solar power a good investment for your agriculture business?
You don’t live in one of the 50 largest cities. You own a farm, or have a small rural business. You have a different utility provider. Different incentives. Different power needs. Statistics and studies aside, solar viability comes down to a case by case analysis. All this NC State study shows is that solar power is a better investment for more people today than ever before, and the numbers are getting better and better.
But to find out for your farm or business, ask an Ag Solar consultant to come out and do an assessment. Get more USDA REAP grant and loan information here.
Ag Solar does these at no charge. Why wouldn’t you want to know if solar power is a good investment for your agricultural business, like it has proven to be for so many others? Invite us out, see your numbers, and then make an informed decision. Have an Ag Solar consultant pay you a visit!
