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I am thinking about buying solar panels for my roof.

Solar technology has not really matured yet and every newer generation is more effective and less expensive.

In April, for example, Tesla will start selling its brand new solar tiles, Elon Musk is quoted as saying "It's looking quite promising that a solar roof will actually cost less than a normal roof before you even take the value of electricity into account".

Suppose I buy these solar tiles in April. It will still be quite an investment. The next generation of this technology will most likely be even cheaper and more efficient, so do I wait for that one? How about the one after that? Or the one after that?

How do I decide when to buy into an emerging technology? Do I just guess when the best time is or is there an actual theory behind this sort of decision?

  • I think it comes down to personal preference. For example, I buy the new iPhone every year, without hesitation. But, I've had my computer for the past 6 years, my car is from 2011, and my TV is from 2010 - even though I really want a new 4K TV, it's just not a priority for me. – Michael Mar 27 '17 at 19:59
  • How much sun does your house get? – Superbest Mar 28 '17 at 0:43
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    When the value you get from playing with it is worth the price premium. Which is why I bought a hybrid car in '03 (which I still have), have decent GPU cards in my compute machine, but only upgraded my phone (to another $25 dumb phone) when my provider phased out 2g. – jamesqf Mar 28 '17 at 4:46
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If you're looking for a purely financial answer (ignoring the social/environmental aspects) there are a few different ways you can look at it.

For these types of improvements the simplest is a payback calculation. How long would it take you to recoup the initial costs?

For example, if the entire installation cost $5,000 (including any tax credits), and you save $100 per month (I'm making both numbers up), you'll pay back your investment in 50 months, or about 4 years.

(Note that if you borrow money to do the improvement, then your payback period is longer because you're reducing the amount that you're saving each month by paying interest.)

If you're deciding between different uses for the money (like investing, or paying down other debt) then you can look at the return that you're getting. Using the same example, you are spending $5,000 and getting $100 per month back, for a 24% annual return ($1,200 / $5,000), which is better than you can get on almost anything but a 401(k) match (meaning don't stop your 401(k) contributions to do this either).

The decision on whether or wait or not then becomes - will the price drop faster than the amount of savings you will realize. So if you will save $100 per month in your electric bill, is the price of the complete installation going down by more than $100 each month? If not, you'd be better off buying now and start paying back the investment sooner.

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The short answer is that it's never the right time to buy an emerging technology. As long as the technology is emerging, you should expect that newer revisions will be both better and less expensive.

With solar, specifically, there are some tax credits to help the early adopters that may help you on the cost/benefit analysis, but in the end, you still have to decide whether the benefits outweigh the costs now, and if not, whether that will change in the near future. For me, part of the solar benefit is the ability to generate electricity when the power goes out. That option does require local battery storage, however.

One of the benefits of using Musk's solar tiles instead of actual slate is the weight of the quartz tiles which is much lower than the weight of real slate. In many cases a slate roof is heavy enough to require major reinforcement of the roof trusses before installation. The lower weight also saves significantly on shipping costs. This is where Musk can lower costs enough to be competitive to some of the materials he hope to compete with.

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When is the right time to buy a new/emerging technology?

When it's trading at a discount that allows you to make your money back and then some.

The way you presented it, it is of course impossible to say. You have to look at exactly how much cheaper and efficient it will be, and how long that will take. Time too has a cost, and being invested has opportunity cost, so the returns must not only arrive in expected quantity but also arrive on time.

Since you tagged this investing, you should look at the financial forecasts of the business, likely future price trajectories, growth opportunity and so on, and buy if you expect a return commensurate with the risk, and if the risk is tolerable to you. If you are new to investment, I would say avoid Musk, there's too much hype and speculation and their valuations are off the charts. You can't make any sensible analysis with so much emotion running wild. Find a more obscure, boring company that has a sound business plan and a good product you think is worth a try. If you read about it on mainstream news every day you can be sure it's sucker bait.

Also, my impression that these panels are actually really expensive and have a snowball's chance in Arizona (heh) in a free market. Recently the market has been manipulated through green energy subsidies of a government with a strong environmentalist voter base. This has recently changed, in case you haven't heard. So the future of solar panels is looking a bit uncertain.

I am thinking about buying solar panels for my roof.

That's not an investment question, it's a shopping question.

Do you actually need a new roof? If no, I'd say don't bother. Last I checked the payoff is very small and it takes over a decade to break even, unless you live in a desert next to the Mexican border. Many places never break even. Electricity is cheap in the United States.

If you need a new roof anyway, I suppose look at the difference. If it's about the same you might as well, although it's guaranteed to be more hassle for you with the panels. Waiting makes no sense if you need a new roof, because who knows how long that will take and you need a roof now.

If a solar roof appeals to you and you would enjoy having one for the price available, go ahead and get one. Don't do it for the money because there's just too much uncertainty there, and it doesn't scale at all. If you do end up making money, good for you, but that's just a small, unexpected bonus on top of the utility of the product itself.

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As you said, the next generation will be cheaper and more efficient. Same for the generation after that.

From a financial standpoint, there isn't a steadfast theory that supports when to buy the technology. It comes down to primarily personal issues.

  • Do you want to have the latest and greatest?
  • Do you want a tech that's been properly "road-tested"?
  • Do you need to replace what you currently have soon, or can you wait?
  • Are there enough financial incentives to making an investment now? (i.e. will your current situation improve enough?)

As far as I know, Musk's claims about the cost were relating to a traditional slate roof, not a traditional asphalt shingle roof. I can't recall if he explicitly said one way or the other, but I have yet to see any math that supports a comparison to asphalt shingles. If you look at all of the demos and marketing material, it's comparisons to various styles of tile roofing, which is already more expensive than asphalt shingles.

Do you feel it's worth it to invest now, or do you think it would be more worth it to invest later when the costs are lower? A new roof will last 10-20 years (if not longer...I'm not a roof expert). Do you need a new roof yet? Are your electricity bills high enough that the cost of going solar will offset it enough? Can you sell unused power back to your power company? I could go on, but I think you get the point.

It's entirely a personal decision, and not one that will have a definitive answer. If you keep waiting to make a purchase because you're worried that the next generation will be cheaper and more efficient, then you're never going to make the purchase.

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    And of course the so-far unanswered (indeed, AFAIK unasked) question is whether Musk's solar tiles will blow off in a decent breeze, the way asphalt shingles do. – jamesqf Mar 28 '17 at 4:42

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