Free Electricity with that Townhome

This sounded great until I ran the numbers.

An ambitious Valley developer is putting his money where his ideals are with plans for an innovative townhome project he hopes will run almost entirely on solar energy. Industry leaders are hoping the development — likely the first of its kind in Arizona — will spur more builders to jump into the solar game...

Each of the 36 townhomes in Gifford’s Phoenix project, called Aura at Camelback, will have a rooftop solar photovoltaic system, which converts sunlight into electricity.

The builder is so certain the solar units will meet most, if not all, of the homes’ energy needs, he’s picking up the tab for the owners’ electricity bills for the first five years.

Apparently the builder has a lot of confidence in solar power and the energy efficiency of his townhomes. Then we get to the details.

With Catalyst’s guarantee, homeowners will receive a credit for five years of electricity costs when they purchase a home.

If they produce more energy than they use, “then they just pocket the money,” Gifford said. If they go over, the developer will pay the difference at the end of the five year-period...

Gifford is confident, however, that with more efficiently designed homes, the right-sized systems and conservative users, the solar units will produce between 75 percent and 100 percent of needed electricity.

And finally:

The homes will have elevators and range in price from $900,000 to $1.3 million.

So let's calculate his risk.

For those townhomes electricity could run about $2,500 a year, probably less. Over 5 years that's $12,500. He expects to pay no more than 25% of that but just to be conservative and look at the worst case let's suppose it's 50%. That's $6,250 of exposure on a unit selling for an average of $1.1 million or a risk of about one half of one percent of the selling price.

In my estimate, Gifford is a typical enterpreneur. He is taking a risk, but a very caluculated one that he'll profit from. The free advertising is worth a whole lot more than one half of one percent of the selling price - which he may not even have to pay.