TD announced today a “green mortgage” for installing solar panels (or other projects). There’s no rate discount for going variable (and I’m pretty sure you can get more than 1% off the posted 5-year fixed just by asking), and if you’re just installing solar panels, the 1.5% rebate is not huge, but it’s nothing to sneeze at, either…
The Ontario incentives for putting solar panels on your home/cottage are quite lucrative — they’ll buy your power at 80.2 cents/kWh, about 10 times higher than what you pay to buy power from Ontario Hydro. Even with the fairly high cost of buying and installing panels at retail prices (and without squeezing some of the extra efficiency from having setups like sun trackers) you can probably expect to make money by installing panels, and those prices are contracted for 20 years out.
It’s hard to find solid information on what exactly the costs are — the installers I Googled wanted my address and contact information to get back to me with a quote, rather than having a ballpark figure. I started with a back-of-the-envelope calculation, figuring that the solar panel manufacturers are close to $1/W for their costs, so the panels probably retail around $2/W, plus installation is probably the same as panel costs (i.e., $2/W), so that would put a 2 kW roof system at around $8k. More Google searching indicates I hit the order of magnitude, but am a little too optimistic: one site said ~$15k (Arise says anywhere$12-32k), several others said the payback would be ~8-10 years. So, working backwards: southern Ontario gets ~13 MJ/m2 averagedthrough the year, with a 2 kW system taking up something like 7 m2 — so that would be 13 MJ/m2 * 7 m2 * 0.15 efficiency *365 days = 4982 MJ generated in a year, or roughly 1384 kWh. At 80 cents per, that’s a yearly revenue of $1110, so if the talking head on TV is right and it pays back in 9 years we’re talking a ballpark cost of $10k.
So the gross yield is somewhere between 4 and 12% — a pretty big range of uncertainty, but without having a roof of my own to get an estimate on, it’s tough to be more accurate. 10% with next to no risk sounds fantastic, but remember that it’s not like a bond: you don’t get your capital back at the end of the panel’s life. Taking a straight-line depreciation of the 10% case (out 20 years), we still get a 5% net yield — little low to make a good case with 100% financing, but not too shabby for a home improvement.
Since the revenue is guaranteed for 20 years, the only real risks are weather (amount of sunlight you actually receive), trees (could your neighbour’s shrub grow to shadow your roof in 20 year’s time), and financing (you can lock in your interest rate for 5-years, but after that…). There’s also the issue of selling your house: if you move, the contract transfers to the new owner of the house. In that case there’s the risk of not realizing good value for the panels when you sell before the end of their lifetime. After the 20 years, even if the panels die, you’ll probably be happy with the investment; if they don’t (and their lifetime should be more like 30+ years) then even without the subsidy you’ll probably enjoy reduced electricity costs or even self-sufficiency (important as you’ll likely be in retirement by then!).
Considering that the risk is low, it’s a fairly attractive investment, actually. There are also some other factors to consider, such as improving the cooling of your home in the summer (this is hard to quantify, but a few days ago someone on TV said that Wal-mart found nearly as much benefit from reduced cooling loads after putting solar cells on the roofs of some of its stores as from the electricity the panels generated in the first place — sorry, can’t find the source). And, of course, that warm green feeling of being all sustainable and helping promote the technology of the future.
From a practical standpoint, you also need to have a suitable roof space: facing south ideally, without trees (or recently-built condo towers) blocking your sun. There are some negatives: some people don’t like the look of the panels (who looks at their roof, anyway?), and there is some effort on your part needed to get permits, quotes from builders, etc., that you don’t get from a hands-off investment like a bond or stock with similar yields. And there’s the question of how good your inverters are. Solar cells output DC power, which has to be converted to 60 Hz A/C to join the grid or be used in your house. Those inverters (especially the cheap ones) produce “dirty” 60 Hz, which you may-or-may not care about.