The official inflation numbers for September were just released and the numbers are a bit worse than what economists were expecting.
September's annual inflation rate clocked in at 8.2%, 0.1% higher than what a recent survey of economists had predicted.
Though the official pace of inflation in September decreased from August's 8.3% rate, we're still stuck in the middle of the worst bout of inflation we've experienced in 40 years.
As the Federal Reserve noted in the minutes from their last meeting, the precipitous price hikes that have become a daily fact of life “show little sign of abating." So, sky-high inflation looks like it's going to be the new normal for a while.
Rising electric rates
Of course, electric rates won't be immune from the general upsurge in prices.
Far from it.
Even in the previous low-inflation decade, the cost of residential electricity rose an average of 13% in the US
But the good news is that one of the best possible hedges against the inevitable rise in the cost of electricity down the road is investing in a solar energy system.
Or maybe we ought to say two ways since solar power provides a couple of options for locking in a low electric rate.
Owning Your Solar Installation
Most homeowners choose to own their solar system, either by paying for it outright or with financing.
Since solar power requires no moving parts, maintenance costs are non-existent or negligible. Hence, owning a solar system means free electricity for the life of your panels.
Today’s solar panels last 25 years or more. So, from an economic perspective, paying for a solar system outright is equivalent to buying 25 years' worth of electricity for a lump sum.
Financing your system, on the other hand, is the same as paying a fixed monthly fee for 25 years of energy to power your home.
Thanks to the remarkable increases in efficiency over the past decade, the vast majority of homeowners who install a solar system wind up paying less for electricity over the course of that 25 years than they would have even at the current rate their utility is charging.
So as electricity prices inevitably rise, the rate you’ve effectively locked in by owning or financing your solar system provides the best possible hedge.
But not all the solar installations you see popping up on roofs belong to the homeowner.
Signing a PPA
Many homeowners choose another option called a solar
power purchasing agreement or PPA.
When you go solar with a PPA, there are no upfront costs at all. Instead of owning the system yourself, the installer owns and finances it but agrees to sell you electricity at a fixed rate for a certain period of time—typically between 10 and 25 years.
Of course, you'll wind up paying a little more for electricity with a PPA than you would have if you'd, instead, paid for and owned your solar system yourself—that’s how the installer makes their profit.
But solar panels are so efficient these days that even the price of electricity effectively locked in by a PPA is typically less than the current rate. I mean, if PPA's weren't money-savers, who in their right mind would agree to sign one?
The upshot is that, whether you decide to own your own system or buy your solar energy through a PPA, you'll be hard-pressed to find a better hedge against inflation than solar power.