Wednesday, February 23, 2011

Thought on Solar as an Investment


Thought of a few things, that I think are critical to any analysis of PV.

Primary Thoughts

You pay your electric bill with after tax dollars.
Everything your PV makes offsets those after tax dollars.   PV is thus a way to make income without that income being taxed at all.

Energy rates are likely to go up, as they do your effective tax free income goes up accordingly.

Other thoughts….

Hard to do a “net present value” calculation on PV, or at least in comparison to alternate (traditional) investments since the whole game of traditional investments seems to have been stood on it’s head.   O% return on stocks over 10 years is a lot different than expecting 7% growth year upon year compounding.    Some people say that stocks now have a high PE even though earnings are way up due to job cut efficiencies that will not be sustainable.

Also bond holders of all sorts, may be in for a very cruel awakening, again.   Bond values are high, thus yields are jokingly low.   Seems like higher interest in the next year or two and continuing for quite some time is almost a guarantee.   That will bring existing bond values way down, not even considering default risk or the proverbial 35% “Restructuring” haircut.

Inflation / deflation seems very tough to model, but longer term like 5 years and more seems like all the effective money printing has no choice but to devalue currencies, and thus the value of things that are valued in currencies.   This gets wrapped into overall inflation but also speaks directly to the cost of oil and other energy commodities.

Possible reduction of the USD as a reserve currency could drive the cost of energy commodities up.

Derivatives Armageddon, or just your basic run of the mill deleveraging could have a significant downward impact on the value of all sorts of asset classes and investments, some say 50%.  

Finishing thought:
Some people say, well but PV does compound in income production like a re-invested CD would.    Sure it would, if you took the income from the PV and bought more PV each year, it certainly would compound. 

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Insightful and Useful Comment!