ROI: Solar vs. S&P 500 – Which Investment Comes Out on Top?

One of the top questions we frequently encounter from homeowners considering solar energy is how this investment stacks up against more traditional options like an IRA or the S&P 500. With the financial landscape being as varied as it is, it's natural to wonder where solar fits in. So, how does an investment in a solar system compare to the S&P 500 when placed side by side? Let’s dive in and see.

Setting the Benchmark: The S&P 500 To begin, let’s establish a data point for the S&P 500. Over the last 30 years, the S&P 500 has averaged around a 10.52% return, assuming you reinvest your dividends. 

Pros of the S&P 500: 

• The S&P 500 is a well-established and time-tested investment method.
• By investing in the S&P 500, you’re essentially investing in the top 500 businesses and corporations in the United States, spreading your risk across a broad market.

 Cons of the S&P 500: 

• The market can be volatile in the short term. Events like the 2007-2008 financial crisis can significantly impact your investment, potentially wiping out substantial value overnight.
• While the S&P 500 is generally stable over the long term, it requires a commitment to the "long game." If the market dips just as you plan to retire, it could affect your financial security.
• Lastly, it’s important to remember that money invested in the stock market won’t provide you with backup power during a prolonged outage—an increasingly important consideration.

 Solar Investment: Hybrid Solar (Solar + Batteries) Now, let’s compare the S&P 500 to investing in a solar system, specifically a Hybrid Solar system that includes both solar panels and battery storage. A typical system we offer includes around 15kW of solar power, a hybrid inverter, and 28.6kWh of battery capacity. Here’s what that translates to: 

• Savings: This system can reduce your electricity bill by an average of $300 per month.
• Backup Power: It provides 6-12 hours of backup power for the average home.
• Cost: The total turnkey cost of this system is typically around $40,000. After applying the 30% federal tax credit, the net cost comes down to $28,000. While there are additional incentives that can cover up to 80-90% of the retail cost, we’ll use the $28,000 figure for this comparison.

 Return on Investment (ROI): 

• With a $28,000 investment, the payback period is approximately 7.8 years.
• Over a 30-year period, this system yields an average ROI of 17.8%. This calculation assumes an average electricity rate of 15 cents per kWh and a 4% annual inflation rate for energy costs.

 Why 17.8% ROI Matters: 

• Not only does this ROI exceed the average 10.52% return of the S&P 500, but it also provides tangible, immediate benefits.
• Unlike the S&P 500, where your investment is a figure on an account statement, a solar system is a physical asset you can see and use every day.
• In addition to financial returns, you gain the peace of mind that comes with backup power during outages, increasing your comfort and security at home.

 Conclusion When comparing the S&P 500 to Hybrid Solar, there’s a clear winner. Hybrid Solar not only provides a higher average ROI, but it also offers a tangible, immediate benefit—energy independence. Energy is one of the most valuable commodities of the century, and investing in solar means investing in your future energy needs. While the S&P 500 can be volatile and subject to market fluctuations, energy costs have consistently risen and are likely to continue doing so. By investing in solar, you’re not only hedging against future electricity price increases but also ensuring that your home is powered, even during grid outages. Ready to learn more about how solar can work for you? Contact SignaTech Solar today! Give us a call at (903) 707-8298, send us an email at info@signatechsolar.com, or visit our website at www.signatechsolar.com.