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Comment by didgetmaster | Hacker News Reader

People often do this calculation without considering the time value of money. If you took that same $8K you spent on your system and put it in a bank CD; you would earn about $420 each year in interest. That means your real savings for the solar system is only $580 a year, not $1000. That makes the payoff time expand from 8 years to nearly 14. Still might be worth it to you, but also might not.

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I find your comment misleadingly pessimistic. It makes more sense to compare ROIs directly (or equivalently, payoff periods) rather than subtracting them and finding a residual payoff period. Just annualize everything (depreciation, inflation) and see which one has a higher ROI.

1. You need to take into account depreciation of the value of the panels. They degrade in performance and eventually will be worthless after about 30 years.

2. You need to take into account inflation against the CD roi (or conversely the /appreciating/ value of the dollar value of the energy produced by the panels). The post-inflation value of the bank CD is going to be about 2% per year. Inflation does not need to be corrected for the solar power option because it produces energy instead of dollars.

(1000/y-8000/30y)/$8000 = 733/8000 = 9.1% depreciation-adjusted ROI from solar panels

5.5% - 3.3% inflation = 2.2% inflation-adjusted ROI from bank CDs.

So solar panels are about a 4x better investment than bank CDs, contrary to your comment where they are somewhat comparable.

they won't be worthless, they'll be producing about 25% less power, and after that degrade very slowly indeed. but that doesn't matter much because 30 years is basically forever at any reasonable discount rate

bank cds do not pay a reasonable discount rate, it's true, but there are investments that do. maybe a nice index fund balanced with a money market fund?

you should also take into account the precipitous drop in electricity prices starting 10 years from now

You’re born short power, just like you’re born short housing (assuming no inheritance). Buying panels and buying a house makes you net zero on your exposure to power and housing prices. It is not fair to compare a hedge (solar) which reduces your exposure to risk (covering a short position on power) to a risky investment like stocks, which does not cover a position and increases your correlated risk.

Just comparing expected value is fine as a stopping point in your thought process if you are risk neutral — in that case, you should buy leveraged stock funds to maximize your expected value.

If you are like most people and assign some internal cost to risk, then covering your innate short position on power while also getting 9% return on investment after inflation is a no-brainer.

agreed, but it's probably less than 9%, because energy will get much cheaper

True, but consider grid electricity prices increasing over those decades too.

they won't increase; they'll drop like a stone

Huh, my city has already approved rate increases for the next 5 years! (it has increased every year forever...)

yeah, it'll take a while for the new technology to trickle down to the more backward regions

> real savings for the solar system is only $580 a year

> Still might be worth it to you, but also might not.

Are you trying to be intentionally obtuse?

With your numbers you're talking about putting $580 a year into my bank account for 14 years, and then me having free electricity for at a minimum another decade.

In what possible world could that be "not worth it" ?

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