Lazy Man and Money

Happy Earth Day!

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Earth DayI hope everyone is looking forward to a Happy Earth Weekend.

My wife recently decided that Earth Day is her favorite holiday. She runs a local freecycle. People come and drop off things that they don’t want and pick up other things for free. Last year, we donated a ton of stuff, clearing out much of our garage. We picked up a working 42″ television. It was perfect for our new basement.

It would be great if we could sell some of the things, but we list them, and they never seem to find a home. The freecycle works a lot better. Everyone loves free stuff. Hopefully, everything finds a second home.

It’s a lot of work to run the event. At the end of the day, a bunch of volunteers takes anything left over to a place (Goodwill or the Salvation Army) that accepts all sorts of donations. We generally don’t get stuck with stuff like e-waste that’s hard to get rid of.

Reviewing our Solar Power Purchase

Earth Day is also a perfect time to review our solar power journey. We got our panels back in 2015. At first, I was curious about all the sales calls suggesting we lease solar panels. I didn’t like the terms of those leases. They may not have been bad if you didn’t have any savings, but it seems significantly better if you owned the panels.

At the time, there were a number of government subsidies for solar power. We ended up paying about half of the $33,000 our system would cost. So it was $16,000 out of pocket. I don’t know how to report the size of our system or the specifications, but every year we generate around 9.0 MWh of electricity.

In the beginning, it almost always covered all of our energy needs. However, as the years have gone on, we’re using more electricity, and we fall a little short and have to pay a small electric bill. Perhaps I can blame the kids for growing up – LOL.

If you were to list states where solar power makes sense, I’m sure Rhode Island wouldn’t be at the tip of your tongue. It turns out that solar in Rhode Island makes a lot of sense. Our electricity prices are one of the highest in the country. We recently paid $0.33 per kWh, which breaks down to $0.23 for generation and $0.10 for delivery. It used to be cheaper for generation, but in New England, we use a lot of natural gas to make electricity. The price of natural gas has gone up with the Ukraine/Russia war.

At $0.33 kWh, the 9000 kWh (9.0 MWh) we generate this year would cost us nearly $3,000. With it being the 8th year of generating electricity, we’re a little past the breakeven point. When electricity was cheaper, we may have only saved $2,000 a year, but that’s grown over time. Alternatively, we could have invested the $16,000 in the market and perhaps doubled it to $33,000 by now. However, in that scenario, we would have had to cash out some of the investment each year to pay for our electricity use.

As you can tell, the math on whether it’s breakeven now is complicated, but it’s close to breakeven with whatever calculation you want to use. Our solar panels are guaranteed to be 90% as efficient as they are now until year 25. So we have at least another 16 years of free electricity to enjoy. I suspect that the cost of electricity will only go up from here, but let’s assume it averages the price it is now. At $3,000 a year, we’re looking at $48,000 in savings.

I haven’t looked at the costs of solar panels recently. I think some of the government incentives went away during the Trump administration. However, I think Biden’s Inflation Reduction Act may have helped make solar cheaper. I’m sure that the solar panels that you would buy today are more efficient than what I got eight years ago.

If you haven’t looked at solar power in a while, this is a good time to run the numbers.

Why Homes Should Invest in Solar Energy

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Solar Energy

The following is a guest post from a reader named Greg Petersen. I have been so busy homeschooling kids and going crazy in isolation that I haven’t been able to get into the flow of writing. I also find it very hard to write on personal finance topics when there are so many things that are more important. However, I was so impressed at the research and references to my other solar articles that I felt it was worth running. At a time like this, I doubt too many people are consider solar energy, but if you have some time on your hands to do the research now, maybe it will make sense when things look better.

The news about the polar shift and different natural catastrophes being experienced in different parts of the world has made the idea of going green and going off the grid seem a lot more appealing. With climate change and other man-made destruction identified as the possible reasons for the earth’s outcry, many people are seriously thinking about using clean energy.

The constant earthquakes in different parts of the world, the sudden drop in temperature in Afghanistan, and bushfires in Australia are all indications of how serious the earth’s condition really is. These global catastrophes are not something one person can solve. Instead, these concerns need a more urgent, unified effort from the people of the world.

If you are still not convinced of the urgency of going green and shifting to solar energy, here are some points of contention that might sway you in the right direction.

Solar power is environmentally-friendly

One common but underrated fact about solar energy is that it’s a green and clean energy source. This means that when you shift to solar power, you are significantly reducing your carbon footprint. With solar power, nothing hazardous is being released to the air that might pollute mother nature. And since solar energy does not release greenhouse gases, it does not use other resources. Given these factors, one can say that solar energy is 100% environmentally-friendly and safe.

In addition, solar power is also self-sustaining. If you install solar panels on your roof, you are on a path to contributing to the earth’s sustainable future. Plus, your home will offer proof of your personal commitment to mother nature.

Solar energy paves the way for a cleaner renewable power source that not only benefits homeowners but also the environment. Compared to other alternative sources of energy, solar power reduces the local and global carbon footprint, significantly contributing to the efforts of reducing greenhouse gases. This energy source is known for its favorable impact and advantages to the environment.

In the U.S. electricity is mostly generated from natural gas, coal, and other fossil fuels. The process of extracting and converting fossil fuels into viable energy sources is not only expensive but also detrimental to the environment. Solar energy, on the other hand, is abundant and free. If you could capture all of the sun’s energy for an hour, you could produce power for the entire world that would last for a year.

If you invest in solar energy, you take a proactive stance in reducing the world’s reliance on fossil fuels. In the process, you’re pursuing a more consistent and abundant energy source — the sun.

Solar energy helps limit the emission of greenhouse gases

If you generate electricity using solar power instead of natural gas or coal, you can dramatically decrease the volume of greenhouse gas emissions, especially carbon dioxide. Greenhouse gases are produced through fossil fuel burning, leading to the rise in global temperatures and climate change. The latter contributes largely to public health and environmental issues; including ecosystem changes, rising sea levels, and extreme weather events.

If you go solar, you can help reduce the rising demand for fossil fuels while shrinking your carbon footprint and limiting your greenhouse gas emissions. A single home that opts for a solar energy system can create a measurable impact on the health of the environment. The U.S. Energy Information Administration stated that an average home using solar panels in Connecticut consumes 8,288 kWh of electricity every year. If that home was switched from fossil fuels to solar power, the homeowners could reduce emissions significantly and create a positive effect on the environment equal to planting 150 trees a year.

The average electricity use in New York homes is at 7,248 kWh per year. If these homes switched to a cleaner energy source like solar power, they could reduce the carbon emissions that result from burning more than 5,000 pounds of coal every year.

Solar energy helps decrease cardio and respiratory health issues

One of the most persuasive reasons why one should invest in solar energy is its effects on our health. With such a clean energy source, you can expect that there will be less air pollutants. According to the National Renewable Energy Laboratory (NREL), with more people shifting to a solar power system, there would be lesser emissions of sulfur dioxide, nitrous oxides, and other particulate matter. Aside from this, NREL also found out that solar power helps decrease cardiovascular conditions, respiratory problems, and chronic bronchitis. Worker productivity will also increase as people experience less illness.

With solar power you can go off-the-grid

Compared to electricity, solar panels are less costly. Traditional electricity significantly relies on fossil fuels like natural gas and coal. These substances are all detrimental to the environment. They are also not sustainable energy resources. As a result, the market for energy resources is volatile, with prices fluctuating violently all through the day.

If you choose solar electricity, your independence from electricity will be boosted further. If you invest in a 4KW-size solar system, a common size for domestic use, you can spare yourself from the ever-fluctuating utility prices. With a cheap and clean electricity source, you won’t feel guilty enjoying your appliances all day long. After all, the sun will never increase its consumption rate. The sun will give you the energy security you need.

The moment your solar panels are installed securely on the roof of your house, technically, you already reached the status of a person that’s energy-independent. Plus, the storage systems of your solar battery will allow you to safely store electricity for use during rainy days and nighttime.

Underutilized land can be used with solar power

If after all that has been said you are still not sold on the idea of installing your own solar power, think of the unused lands that have been left unattended. With solar energy, you can transform these untended lands into areas that can be used to generate more solar power.

Energy shortage is a worldwide phenomenon. Especially now that the threats of natural calamities and disasters are almost everywhere, the topic of energy sufficiency is more than timely. And since everyone is using electricity, it is time to join hands in a collective effort to capture more solar power.

People can harvest solar power in large quantities from solar farms. A 45-acre farm is able to provide electricity in more than 2,500 home volume of energy. The amount of solar energy that can be sourced here is more than enough to power a town, city, state, or even country. People and nations will no longer have to suffer from high-priced electricity costs and unclean energy sources that will end up destroying the environment.

Enjoy a lower energy bill

If you don’t want to go completely off the grid, you can still benefit from a solar panel-powered home. The generation of solar power happens primarily in the afternoon when the sun is up. More solar power can also be generated during summertime. This is the perfect answer to the high energy need during this time of the day and season of the year. It’s in the afternoon when it’s so hot that most homeowners turn on their air conditioners.

Solar energy is valuable in the sense that other energy production methods like natural gas plants that are used to meet the highest energy demands end up being overly expensive. Before the new utility pricing scheme was introduced, homeowners were charged with a flat rate for electricity. This means it doesn’t matter what time of the day they used electricity, they pay a fixed monthly rate. If you install and use a solar power system during this time, you can’t really feel the benefit. It’s like the cost of installation of your solar power system offsets the cost of your electricity bill.

Fortunately, a vast majority of the utility companies in the U.S. now adapt a new pricing scheme that charges homeowners different rates for different hours of the day. The ratio behind such a scheme is to reflect the actual electricity production cost at different times of the day. This means that you will be charged higher rates in the afternoon when the demand for electricity is at its peak, and lower rates during the night. The extent of the benefit you enjoy as a solar power system owner depends on when you use your electricity the most. This investment is most beneficial to those living in areas that implement varying pricing schemes over different seasons of the year due to seasonal demand fluctuations. Those who consume more electricity during summer will feel the most benefit from solar power.

Sell solar-generated energy to electrical companies

Apart from a significantly lowered bill, you can also get a credit from the utility company if you sell your extra solar-generated power to utility companies. Net metering plans are common in the U.S. This is where residential consumers are allowed to use the solar power that they put into the grid to offset their use of power at other times. A home is selling power to a utility company when the power that the house puts into the grid is greater than the amount of electricity their household consumed. Your monthly bill will be the basis for your net energy consumption.

As you already know, the net metering mechanism enables utility customers to feed their saved-up and unused solar electricity back to the electricity grid. To fully take advantage of this benefit, you need to educate yourself on the varying net metering policies and regulations across the states. You can also refer to the Database of State Incentives for Renewables & Efficiency (DSIRE) or get in touch with the office’s local utility companies to get more specific and thorough information.

A Portland homeowner, for example, saves about $17,000, on average, if they use solar energy for more than 20 years. If you live in Boston, in the span of over 20 years of solar power usage, you can save around $43,000. If you live in Los Angeles, in the same period, your savings can spike up to more than $50,000. To get an estimate of how much you can save, check with DSIRE.

Added home value

Another benefit of using solar energy is the potential increase in the value of the home. Generally, it’s safe to assume that solar panels will raise the market value of most homes. As already discussed above, the homeowner can forever benefit from lower electricity if they buy a house that’s powered by solar energy. Next, there’s a global trend toward green living and this also means there’s an equally increasing demand for houses that are powered by sustainable and clean energy sources that emit smaller volumes of carbon. Lastly, if you buy a home that is already powered by solar energy, the investment will be financed through the mortgage for the homebuyer. Because it’s possible to finance a mortgage for houses with solar panels already installed, this is easier and possibly more affordable than buying a house run by traditional energy sources and choosing to invest in solar panels later.

Take advantage of tax subsidies and grants

Lastly, another worthwhile advantage of going solar is the tax grants or subsidies offered by the state government. You may have already heard of the campaigns run by federal and state governments encouraging homeowners to switch to solar energy. If you do, the government offers a tax grant or subsidy to assist you in having your solar power system installed. The rationale behind these financial incentives is to encourage more homeowners to use solar panels. The final cost of the system after it is installed can be less than its sticker price. Additionally, tax credits are also given for homeowners who use solar power, which can decrease your tax bill.

One thing you want to do is check with your home insurance (such as Allstate Insurance) to make sure that your solar panels are insured. You want them to be safe from hurricanes, tornadoes, and other acts of nature.

Investing for 2030

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As a personal finance blogger, I should be encouraging you to put your money in index funds with low expenses. It’s one of the few things that nearly all personal finance people agree upon. For example, this Lazy portfolio is built with almost all Vanguard funds.

That’s boring. While boring may be best, let’s pretend that your investing tastes are a little more crazy than the basic bread and water. Let’s say you want to spice it up. After a 10-year bull market, I’m managing stock market risk different nowadays.

I don’t believe that means that you have to sit back in extremely conservative investments and wait for a crash. You could have made to case to do that in 2015 and you would have missed out on years of great growth.

Instead, I’m combining the ideas of managing the risk with some investing ideas that I think will pay off by 2030.

Environmental Trends

We may or may not get a green new deal. Even if we don’t, anyone with any kind of intelligence is delivering warnings about the effects of climate change. For once, it isn’t just landing on deaf ears. Companies are changing how they operate. Microsoft vowed to undo all the carbon emmissions it has ever created by 2050.

Solar stocks would figure to one the big winners of the next 10 years. I recommended investing in solar in 2015 and feel even more strongly about it now. My investing pick is the Invesco Solar ETF (Ticker: TAN) which I’ve personally held for a long time. It’s expense ratio is a little high at 0.7%, but I think it’s worth it. I don’t know much about individual solar companies, so this is one way that I can simply invest in the whole trend.

Over the last few years, I’ve read that a lack of water is going to be the Next Big Trend. We saw a little of this with the Cape Town water crisis a couple of years back. I have to admit, conserving water is an old story. I remember hearing about it more than 35 years ago when I was 7. I don’t think Americans have done a great job of conserving water, and yet here we are, still with water.

Despite that, I’m going to trust the smart people in the room on this. Water management is going to be a very big business over the next 20 years. I’m just starting to look into how to invest in water. From what I’ve found, it seems like Investco’s PIO is the most well-rounded ETF for your investment dollar.

Emerging Markets

I opened the article with the mention of the US market’s decade-long bull run. By now that is common knowledge. During these last ten years, emerging markets haven’t fared quite as well. I’m expecting them to catch up. You likely already have some emerging markets in your portfolio anyway. I think many people could spice it up by increasing their asset allocation to include more emerging markets.

Vanguard’s Health Care ETF

It feels like an unusual time to recommend investing in a health care ETF like Vanguard’s VHT. It’s been up sharply over the last decade. I was on the fence about including VHT, but decided to add it in at the last minute. The nation is getting older and health care keeps marching on with the discoveries. With advances like CRISPR and gene therapy becoming possibilities there’s a lot of room for advancement.

Final Thoughts

I wanted to include a few more trends in this such as ride sharing and social media. Even though I personally invest a little money in these, I don’t feel comfortable suggesting them to others. The ride sharing companies are losing lots of money and it will be a while before they can make significant profits. Social media has a dark cloud of government legislation hanging over it.

What are some of your favorite places to invest in 2030? Let me know in the comments.

Four Years of Solar Power Reviewed

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Funny Solar Panel

Happy Earth Day! It’s hard to believe, but this month is exactly four years since we got solar panels installed and activated.

I was nervous about taking the plunge. We got a $16,000 Home Equity Line of Credit (HELOC) to pay for the panels. That’s a lot of money. And though I thought I understood everything about solar panels, you never truly know what you don’t know. Finally, I never know if I can trust local contractors that I’ll save money – they are interested in getting the job and it would be impossible to hold them accountable if they stretched the truth.

Fortunately, everything went according to plan and we’ve been extremely happy. (Knock on wood.)

One very important thing to note is that government funding via state grants and federal tax credits paid for another $16,000. Obviously state grants are going to depend where you live. I did very quick/rough research and it seems like the 30% federal tax credit is still around for 2019, but then it starts to become less in 2020 and 2021 before disappearing for residences/homes.

In short, if you are thinking about solar power, now may be the last chance to get the best price.

Before I get into our personal financial experience with solar power, the benefits to the environment have to be mentioned. Even if it financially break-even, why not do something that helps the environment? To date, our dashboard says that our panels have accomplished the equivalent of planting 686 trees. Using metrics from the EPA, planting one tree offsets the same amount of CO2 as 55.3 kilowatt-hours of clean energy production.

Put another way, our panels have generated the equivalent of 12,640,541 AA batteries. My math could be off, but I think that’s around 668,822 pounds of batteries. It’s a good thing our house doesn’t run on AA batteries.

Calculating the Value of our Solar Power

You can call it 686 trees or 12.6 million batteries, but scientists would say we’ve generated 37.9 megawatt-hours in 4 years. Thanks to the wonders of the metric system, we can say it’s 37,900 kilowatt-hours or kWh.

The reason why we care about the kilowatt-hours measurement is because that’s the unit your electric bill uses. In Rhode Island it costs 11 cents to create one kWh and 10 cents to deliver it. The costs are broken down into more excruciating detail, but I’ll spare you. So overall, using a kWh costs $0.21.

That’s actually the most expensive electricity in the continental United States. (For some reason their numbers are 22.67 cents, which is different than my bill, but it’s close enough.) The average bill in Rhode Island is $203.35. Ouch!

The 37,900 kWh that we’ve generated in 4 years would have cost us $7,985.53. We can round up that last nearly $15 and call it $8000… exactly half of $16,000 we financed. Roughly speaking we’ll have recouped our $16,000 in 4 more years. However to account for interest and inflation, let’s call it 5 years.

Thus after a total of 9 years, we’ll save roughly $2000 a year. (That’s based on easy math of the $8000 we saved already over 4 years.) It will be more as electricity prices rise over time due to inflation.

Our panels are guaranteed to be ~95% efficient for 25 years. It doesn’t mean that they won’t last longer, but that’s just the guarantee. By the time that guarantee is up we’ll have 16 years of free electricity. With inflation our electricity would likely cost around $3200 by the end. I’ll conservatively estimate that the savings come out to around $2500 a year over those 16 years.

That’s $40,000 in savings! If the system keeps working well, it could be more than $50,000.

For a handful of days of research and another few for doing the work, that’s quite the return on investment. It’s a year’s worth of income for many people. While your state will likely be less of a savings, it doesn’t mean you shouldn’t do it.

If you are thinking about getting solar power yourself, here’s a quick guide I wrote. It’s hard to get too specific because each state has its own tax credits as well as it’s own costs of power. If energy is cheap in your state, it could be a poor financial decision to get solar power. That’s why it can still save us money even though Rhode Island is not known for being sunny.

Have you explored solar power? Let me know what you think in the comments.

Solar Power is Still Awesome (Three Years Later)

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It’s been more than three years since we’ve paid an electric bill… and it feels every bit as good as it sounds.

Yesterday we got our bill for May. It’s amazing to look forward to getting a bill in the mail. This was our best bill yet:

Electric Bill

No, THANK YOU for letting me use your DirectNOPay Program.

For newer readers, I wrote an article here about how and why we transitioned to solar power. Solar power worked out for us based on a confluence of three things: house orientation (facing south), state and federal subsidies, and the price of electricity in general. The last two are Rhode Island related, but it make sense for you in your state. I think the federal subsidies are still in place, but you may want to investigate this quickly. To put it mildly, I don’t think environmental causes are near the top of this administration’s priorities.

We’re currently in the “sweet spot” of solar power. In the spring, the days are long which means a lot of sun. We don’t use much electricity as we don’t need heat or (much) air conditioning. We are starting to get into air conditioning season though, which is when we’ll start drawing down on that negative balance. (Or is it drawing up, because we’re in negatives?)

I think we’ve gotten as close as a -$50 balance, but this recent -$255 bill is the biggest credit I can remember. This June has been cooler than I remember and we were on vacation for part of the month. Maybe we’ll get to -$300.

It’s funny (and weird) to feel as much pride in that number as I do. In the grand scheme of our net worth, $255 is a round off error. Don’t get me wrong, I still run around to several groceries stores to save a couple of dollars, but we’re in a financial place where the difference between $125 and $255 isn’t a big deal… unless you “earn” it in small increments as we have. (I put “earn” in quotes there, because so much of it is passive and has nothing to do our active involvement.)

The best thing about not paying for electricity is just that… eliminating expenses. And as much as I gloat about it here, it’s a little dishonest to say we aren’t paying for electricity. Solar panels are not cheap. We took out a HELOC to cover them. A reasonable person could make the very valid case that we’re just paying someone else (the bank, plus interest) each month and we did not eliminate an expense.

If you want to make that case, at some point, we’ll eliminate the expense. The timeline on that seems to change every few months, but we are making good headway. If not for some other unexpected expenses, we would probably have been down to zero a little back.

Or maybe we won’t truly ever eliminate our monthly electricity bill. We are a couple of months away from paying off both of our SUVs (they were on 5+ years of low/zero interest loans), so in another 8 years maybe we’ll look into an electric SUV. At that point the SUVs will be 13 years old. If we don’t have Uber gPods, we’d likely be looking for an electric SUV with 4-wheel drive (for New England snow), which is a bit of a tall order right now. If it becomes a reality, we’ll shift some of our transportation costs towards our electricity bill. I’m not sure how that will impact things, but we’ve got nothing but time to figure it out.

Have you looked into the cost of solar in your area? Let me know in the comments.