Anyone considering solar power probably has a green outlook. If the deal you do is good for the planet yet not so good for your pocket book, will that slow the spread of green homepower?
Companies like solar-installation organizer One Block Off the Grid (1BoG), aggregates the buying power of consumers to get the best deal, but that is not necessarily the cheapest deal. 1BoG arrives in an area and offers to install a minimumof 100 solar households, at a cost 10-20% below the rate you would pay on your own, and it makes sure you are hooked up with a reputable supplier.
At the moment the business is active in Arizona,Colorado and California, from where the example prices below are sourced. A house with a power bill of $150 per month that installs a 3 kilowatt system (a common size) will spend $9,639 –says 1BoG – after state and federal subsidies are subtracted — to install it, and save $97 a month under current pricing.
Using those savings, and assuming a 2 percent annual increase in the utility price of electricity, the system will be paid for in eight years. But if the $9,639 would have been in a savings account with a 2.5 percent interest rate, the system would pay off in 10 years.
Of course, the path to those numbers is a little twistier than that. The average San Diego Gas & Electric winter bill for electricity is $85, and for Southern California Edison the annual average is $90.
But the way professionals evaluate solar power is the cost per kilowatt. 1BOG and its installer, HelioPower, now offer to install a system for $5.29 a watt, not the lowest price but “each market is very nuanced,” says 1Bog founder Dave Llorens who cites numerous code differences,as well as different state and county subsidies, making it hard for non-experts to evaluate deals.
In any case, analysts, advocates and utilities all agree that by far the cheapest way to lower that bill is to become more energy-efficient: Install better windows, unplug appliances on standby, and add weatherstripping to doors to generate savings at far lower cost than solar panels.
Setting efficiency aside, the timing is good for solar purchases. Installers say that several major panel factories worldwide ramped up production just before the economy crashed, leaving a glut on the market
Calculating the break-even point for home power generation relies on making some crucial bets against rising power prices.
But the price of solar panels is just one side of the equation.The other is the cost of the electricity you would have consumed if you did not have solar.
Electricity prices in California rise the more a user consumes. The first 320 kilowatt-hours cost 12.4 cents apiece. The next batch costs a little more. But the 416th kwh jumps to 31 cents per kwh. Thus, heavy users of electricity have the best chance to save with solar.
Dave Llorens said he assumes a 6 percent annual increase in electricity rates for calculating the break-even point, and 5 or 6 percent is a common assumption among installers.
But the California Energy Commission projects no increase in 2010, then 1 percent a year for the next 15 years. Using a model developed by the University of San Diego, the consumer advocacy group Utility Consumers’ Action Network argued there will be no increase next year, and a growth rate of 2 percent a year after that.
Complicating matters, recent legislation allows the utilities to raise the rates on the bottom two tiers and lower them at the top tiers. And in 2010, the utilities are hoping to lower the baseline by about 8 percent, which will push more users into higher tiers.
Severin Borenstein, director of the Energy Institute at UC Berkeley, thinks the shift in tier pricing bodes poorly for the finances of solar power.
“You’re betting on something that public policy is already moving away from,” he said.
Also, no one really knows whether solar panels will make houses more valuable. Llorens said there just haven’t been enough sales of homes with solar power to make any comparisons.
Residents in unincorporated San Diego County and the city of San Diego have another option: They can apply to finance their solar installations through the government, with the repayment plan becoming an add-on to property taxes. In this way, the debt for the solar system transfers with the property, rather than staying with the original installer.
Still, rough calculations suggest that at today’s prices — plus hefty government subsidies — a solar system pays off eventually. It’s just a question of how long it will take, and whether homeowners will have the patience to wait.
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