Energy Saving Tips & Mortgages

A casual acquaintance of mine completed an interesting project several years ago: he covered his roof in solar panels with the goal of generating adequate energy for his home.

At the time, the solar panels were more expensive than they are right now and they were also somewhat less efficient. At the time he invested in the panels, it cost him about $30,000 and the panels contributed somewhere around 7,000 watts. (Today, you can find systems for $20,000 where the panels give you about 13,000 watts.)

His claim is that the solar panels pay for all of his energy bills and, after the extra expenses, earn him about $1,000 per year in excess energy sold back to the electric company. If you assume that his normal energy bill is $125 per month, that means the panels are earning him $2,500 a year, which means the panels are paid off in twelve years.

(Again, with modern panels, they’re both efficient and cheaper, which means that the payoff point is even faster.)

His argument is that his energy bills were a “mortgage” that he would never pay off. Every single month, in order to have energy for his home, he’d have to write a check to the energy company. Why not save for a while and set yourself up so that you never have another energy bill and the excess eventually pays off the panels?

In other words, he took out a $30,000 “mortgage” to eliminate his energy bill for as long as he lived in the home. That “mortgage” is automatically repaid at a rate of $1,000 a year plus he no longer has an energy bill.

Today, according to my best math, a person would do the equivalent of taking out a $20,000 “mortgage” to eliminate the energy bill, but it would be repaid at a rate of about $2,500 per year plus that person would no longer have an energy bill.

This might seem like an automatic thing to do, but before we jump on board, there are a few catches.

First, the slope and direction of your roof can significantly alter the efficiency of the panels. You’ll need a south-facing roof to maximize the efficiency of the panels. If you don’t have a roof that faces south – such as east and west roofs – your panels are going to only receive direct sunlight for a portion of the day, meaning they’re going to be substantially less efficient.

Second, the “sunniness” of your local climate plays a role, too. In an area like Seattle, with 47% sunny days, panels are going to be less efficient than cities like Los Angeles, which has 73% sunny days. Panels aren’t useless on overcast days, but they’re less efficient, which cuts into your returns.

Third, other weather can play a factor. In an area where snowfall is a major issue – particularly if snow stays on your roof – you’re going to lose a lot of efficiency in the winter.

In other words, a home with a south-facing roof in southern California is going to be far more efficient than a east-west roof in Iowa.

That’s why you should consider other forms of a “mortgage” for energy reduction, such as investing in a home wind turbine (makes sense in the windy areas of the country) or in geothermal heating and cooling (where you use the steady temperature of the earth to heat or cool your air depending on the time of year).

Each of those options has various benefits and drawbacks and works best in certain situations, but they all follow the same general structure: you invest money up front to minimize or eliminate your energy bill.

In other words, you transform the “rent” that is your energy bill into a “mortgage” (which, ideally, should be borrowed from personal savings) that you repay over time.

If you’re looking for a way to invest some of your savings, this is a worthwhile approach to consider. Not only does it wipe out your energy bill, it can also add to the resale value of your home (as buyers will appreciate the energy efficiency and the reduction or elimination of energy bills).

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