Going Green as an Investment Strategy

There are many environmental benefits to a housing model of on-site power generation, energy conservation, and alternative water use.  And it turns out, it’s not such a bad investment!

For the Earthship Biotecture model of green building, the only utilities needed are rainwater and sunshine, provided for free by nature.  These extreme-green buildings are totally off-grid, for energy, water, and wastewater.  The utility bills are essentially $0.  For growing families, retirees, or anyone else on a limited budget, that’s a big plus!  For those considering doing green retrofits, it’s an interesting challenge to incorporate similar “green” elements into an existing house, both for the environmental benefits and the financial ones.

No utilitiy bills for earthship biotecture building in Taos NM

Look Ma, no utility bills! Earthship Biotecture building in Taos, NM

For typical houses, utility costs vary quite a bit, of course, by the house, the residents, the region, and the utility company.  But let’s assume that between water, sewer, gas, and electric utilities for a house, the average cost is more than $165 a month — more than $2000 year.  And let’s assume it’s possible to either completely unplug from all these utilities, or at least reduce the annual bill by $2000 a year through a green retrofit.  While that type of retrofit might be an interesting science project, would it be an extravagant waste of money?  How much could one spend on the retrofit and get a good financial return?

To earn a perpetual annual income of $2,000 from an investment getting 5% return, that requires an investment of $40,000.  But saving money is a better investment than earning money, because you don’t have to pay taxes on money saved! A penny saved is more like a penny-plus-a-third earned — depending on your tax bracket.  To pay that $2,000 a year utility bill from taxable income, you need to earn around $2,500, which at 5% would require a $50,000 investment.  So if you think 5% is a good rate of return for an investment, then you could justify spending up to $50,000.

But wait, it gets better!  There are rebates, tax credits, and tax deductions available for many of these green investments.  That $50,000 investment might only end up costing $40,000.  So that 5% rate of return, just became 6.25%.

And what about utility rate increases?  Most likely, utility rates will increase faster than the rate of monetary inflation. To meet new regulations, catch up on deferred maintenance, accommodate development, and encourage conservation, inflation-adjusted utility rates could easily double just over the next decade.  So 10 years from now, that $40,000 investment would be earning the equivalent of $5000 a year — or a 12.5% return on investment.  Not too bad for a low-risk investment with a high-yield for a sustainable future!

Today’s Solar PV Economics: Buy 1, Get 2 Free!

… and maybe get another 2 or more for free after that!

Once upon a time, it took at least 20 years to get your investment back on the purchase of a solar photovoltaic (PV) system.  The cost of the solar PV systems has been coming down, and state and federal incentives have been increasing to the point that at least in the state of Washington the cost can be as low as an 8-year return on investment.  That makes it a buy-1-get-2-free deal!  In other words: Buy 8 years of electricity, and get 16 years of electricity for FREE!  And that’s just during the 25-year warranty period.  There’s every reason to beleive the equipment should last another 16 years or more after that with minimal maintenance.  So that would mean getting another 16 years of electricity (or more) for free after that!

Solar panels on west-facing roof

Solar panels on west-facing roof

After talking with several different solar electric installers, and carefully considering the options, we chose Oregon-manufactured SolarWorld solar panels with microinverters by California-based Enphase Energy, installed by West Seattle Natural Energy.  While this grid-tied system combination does not take full advantage of the made-in-Washington renewable energy production incentives, it more than makes up for it in low initial cost, length of equipment warranty, and elegance of the installation.  A big selling feature was not requiring any equipment to be installed inside the house — which might constrain future remodel possibilities.  But we especially love the technology which constantly monitors and reports on the production of the system.  We can take a peak at how our PV system is doing through the internet from anywhere in the world.

See for yourself!  Click here to view the Solar PV system performance for the “Green My Bungalow” house.  There are 6 solar panels on the south side of the roof, and 10 panels on the west side.  (Apparently west-facing roofs are almost as good as south-facing roofs for solar electric production, because the vast majority of sunshine in northern areas is during the summer when the sun is high in the sky and the long days mean lots of western sunshine in the afternoon and evening.)  The Enphase Enlighten website shows graphs from daily to lifetime electricity production, and sends email notices to us when there is a problem with the functioning of the system.  I’ll be watching carefully, as I learn more about the day-to-day practical realities of owning a solar-electic system.