Solar Yields High Returns for Homeowners in Many States

08/06/2013

Clean Edge News

Connecticut, New York and Massachusetts now outrank California, Arizona and New Mexico in the amount of money each ray of sunlight can generate for homeowners, according to the Geostellar Solar Index, a new scientific and economic analysis of Americans’ savings through rooftop solar. 

The new quarterly index, released by Geostellar, shows the Northeast and Mid-Atlantic states offer the highest Internal Rate of Return on residential solar energy, an economic analysis that measures and compares the profitability of investments, with profits as high as 24 percent per year over the 25-year life of the solar array. By comparison, the S&P 500 has shown an 9.9 percent Compounded Annual Growth Rate over the last 50 years, 30-year U.S. Treasuries have a current yield of 3.7 percent, and five-year certificates of deposit (CDs) typically return just 0.75 percent annually. 

Surprisingly, California, Arizona and New Jersey, 2012’s top three solar states by installed capacity, are not among the top five states in the index. Tax credits and other incentives in New York and Connecticut have helped propel those states toward the top of the Geostellar Solar Index, which is calculated using sophisticated economics, energy and environmental factors to rank all 50 states and the District of Columbia, and more than 3,000 counties nationwide, in order of profitability for residential solar installments.

Conversely, only Mississippi residents would pay more for solar energy than they would for the conventional electricity provided by the power grid, according to the index.

The index criteria includes a detailed analysis of individual rooftops and their solar intensity, county-by-county tax credits, rebates, renewable energy credits and other incentives, local utility rates, installed costs of solar, and other variables.

The factors that determine the profitability of solar energy at a particular location include the cost to generate solar electricity -- a function of the intensity of sunlight, the efficiency of the solar array, and its installed cost -- and the available incentives and local rates for conventional electricity.

One of the key insights the Geostellar Solar Index provides is the fact that local, state and federal tax credits and other incentives are the largest factors in determining the individual profitability of solar for the homeowner. Because incentives change rapidly, the profitability of solar energy across the country can fluctuate, Levine said.

Here are the annual yield rankings of all 50 states and the District of Columbia, averaged over the 25-year life of a solar array:

1.      Hawaii                    24%

2.      Washington D.C.   20%

3.      New York               17%

4.      Connecticut          16%

5.      Colorado                15%

6.      Massachusetts      15%

7.      New Mexico          13%

8.      California               12%

9.      South Carolina      12%

10.   Delaware               12%

11.   New Jersey            11%

12.   Iowa                        11%

13.   Minnesota             10%

14.   Louisiana               9.4%

15.   North Carolina      9.2%

16.   Florida                    9.2%

17.   Maryland               6.8%

18.   Wisconsin              6.6%

19.   New Hampshire    6.0%

20.   Michigan                5.9%

21.   Missouri                 5.7%

22.   Arizona                  5.6%

23.   Vermont                5.1%

24.   Texas                      4.8%

25.   Kentucky               4.7%

26.   Rhode Island         4.5%

27.   Nevada                   4.4%

28.   Montana                4.4%

29.   Alabama                 4.3%

30.   Maine                     4.0%

31.   Kansas                    3.9%

32.   Tennessee             3.9%

33.   Virginia                   3.7%

34.   Wyoming               3.6%

35.   Pennsylvania         3.0%

36.   Oregon                  2.8%

37.   Ohio                       2.5%

38.   Illinois                     2.2%

39.   Georgia                  1.8%

40.   West Virginia        1.7%

41.   Utah                        1.6%

42.   Alaska                     1.5%

43.   Washington           1.3%

44.   Oklahoma              0.3%

45.   Nebraska               0.3%

46.   South Dakota            0%

47.   Idaho                          0%

48.   Arkansas                    0%

49.   Indiana                       0%

50.   North Dakota            0%

51.   Mississippi             -0.1%

“Residents of the top states in the index can see their investment would be completely paid back in four to six years, and then receive free energy worth another five times’ that amount,” said Mark Wirt, Geostellar’s senior analyst. “The wide spread between solar and conventional electricity in some markets has created broader opportunities for third-party financing and zero-money down offers, where institutions become co-investors with the homeowner, providing upfront money and participating in the yields.”

Last year, more than 82,000 homeowners across the country installed solar panels on their homes, according to the Solar Energy Industry Association, which said it was a record year. The SEIA also is projecting 2013 as another record year for residential solar deployments.

 

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