Many consumers
make the mistake of simply multiplying the amount of kilowatt hours that a solar
system produces by the baseline rate that the electric company is charging them
to determine how long the system will take to pay for itself.
In reality there are many more factors involved that make your payback time much
much shorter than you would expect !
Take a look at the following Southern California Edison Bill and you'll soon realize that there are many more fees involved in paying your electric bill than just the baseline per kilowatt hour rate
First note that the charges are broken down into two main categories.
1. Delivery related charges.
2. Generation related charges.
Under delivery related charges you'll note the following fees and where the money is going:
a. DWR Bond Charge $10.40
b. Transmission Charges $11.34
c. Distribution Charges $43.09
d. Nuclear Decommissioning Charges $1.22
e. Public Purpose Program Charges $12.73
f. Trust Transfer Amount $19.10
e. Taxes And Other Charges $0.52
Grand total for delivery related charges is $97.90
Next take a look at the Generation related charges.
Although the baseline rate is between 7.98 cents to 8.81 cents per kilowatt hour, look how dramatically the the rate rises once the consumption rises over the baseline rate. Varying from 10.5 cents all the way to 17.8 cents per kilowatt hour applied to a major portion of the bill.
You can see how meaningless the baseline rate is when calculating the actual cost per kilowatt for buying your electricity from the utility company !
In light of all the charges and fees, a more accurate method for determining your actual cost per kilowatt hour would be to simply divide the total amount paid for the month by the number of kilowatt hours used for the month.
By doing that in the case of this bill, you'll soon see that a baseline rate that started at 7.98 to 8.81 actually resulted in an actual bottom line cost of 17.4 cents per kilowatt hour ! Actual cost for electricity can vary between 15 cents to 25 cents throughout California. Check your bill to determine what your actual cost is.
Take a look at how much you could save. The following example is based on one of our mid sized solar panel kits called the "Reliant System" using only 5 hours of sunshine per day, calculated at average 17.4 cents per Kilowatt hour times 25 years.
The Reliant system produces up to 3.58 PTC adjusted Kilowatts per hour. 3.58 KW times only 5 hours of sunshine per day equals 17.9 Kilowatt hours per day. 17.9 Kwh times 365 days per year equals 6,533.50 Kilowatt hours per year.
6,533.50 Kilowatt hours per year times 17.4 cents per Kilowatt hour equals an electric bill savings of $1,136.83 per year.
The Reliant system's list price is $28,703.00. After Best Buy Solar's discount, the price is brought down to $23,296.00 plus tax equals $25,101.44. Typical installation cost is up to $4,080.00 which bring the total system cost to $29,181.44
Now subtract the State's current cash rebate of $9,684.36 and you get a final system cost of up to $19,497.08
Next subtract the $2,000.00 Federal tax credit and you're left with a final cost of $17,497.08
System payback time:
Please Note: In reference to the following study which was performed by ICF consulting concerning the increase of a homes value following the installation of a solar electric system, we want to make it clear that we are not in the business of appraising property values, we are experts in the business of solar, not real estate. We are presenting the ICF study findings to you for informational purposes only. The decision to include these finding when calculating the return on investment or payback time is solely up to the consumer. The increase in your property's value may vary significantly from the below example, so we suggest that you consult a licensed appraiser to determine what increase if any, your home may subject to following the installation of a solar electric system.
First, if you were to consider the recent study by ICF Consulting (funded by the Housing and Urban Development Department (HUD) and the Environmental protection Agency (EPA) that concluded that energy saving measures such as solar can add $20 of home value for every $1 of yearly energy cost savings, then your investment in a solar system has the potential of having a dramatically reduced payback time.
Even if you were to be conservative and cut ICF's results in half and only consider a $10.00 increase in home value for every $1 of yearly energy cost savings. Then a $1,136.83 annual savings in your electric bill would result in a $11,368.29 increase in your home's resale value.
So by subtracting the $11,368.29 increase in your homes value from the $17,497.08 final system cost, your actual system cost is now reduced to only $6,128.79. And that's only using 50% of ICF's projected increase of your homes resale value !!!
Next take the above $6,128.79 net system cost and divide it by the $1,136.83 that you'll save on your electric bill per year and you will find that it will take up to 5.39 years for the system to pay for itself. Now remember that's only 5.39 years, solar modules have a life expectancy of 40 plus years !
Add in "Time Of Use Metering" where
you can sell the electricity that's
produced by your solar system to the utility between 12pm and 6pm for as much as
$0.29 a kilowatt hours and then turn around and buy the same power back at a
rate as low as $0.09 per kilowatt hour and your system's pay back time is reduced
even further !
***If you were to
use ICF's actual projection of a $20.00 increase in your home's
value for every $1 of yearly energy cost savings,
then that would mean an increase in your home's value of $22,736.60.
Subtract the $22,736.60 increase in your home resale value
from this system's $17,497.08 final system cost and you would actually be
ahead by $5,239.52 from day one !!! ***
Electric bill savings over a 25 year period:
(Now here's where it gets good !) By multiplying the annual savings amount of $1,136.83 per year times 25 years you'll get up to $28,420.75 in gross savings
Next take the $28,420.75 gross savings on your electric bill and subtract the $6,128.79 final cost of your system (Again that's only using 50% of ICF's projected increase of your homes resale value) and you will have saved $22,291.96 in electricity cost over the 25 year period. That's money that will be kept in your pocket not the utility company's pocket !
And that's only using 25 years and 17.4 cents per Kwh as a factor. Solar modules have an estimated life expectancy of 40 plus years, and do you believe for a moment that the cost of electricity will be below 17.4 cents per kilowatt hour for the next 25 years ?
The next time you get ready to pay $19,000 to $30,000 plus for a new car, imagine that the bulk of it came with a 25 year warranty and that it could last 40 plus years and had no maintenance other than an occasional rinsing off with a garden hose. Imagine that it helped to clean the air instead of pollute it. Also imagine that it actually produced energy rather than consumed it.
Next imagine that the longer you used it, the less it would cost you. And that after about 5.39 years it would actually pay for itself, and after 25 years of its 40 year plus life expectancy, imagine that you could actually walk away with an extra $22,291.96 in your pocket.
Now stop imagining, solar electricity is real, it works, and it makes sense for the environment and your wallet. The above example was calculated at 17.4 cents per kilowatt hour and only 5 hours of full sunshine per day, you may not be paying 17.4 cents per Kwh after taxes and fees today, but with energy rates rising like they are, it may not be long before we all wished for the days when electricity cost only 17.4 cents per Kwh.
You own your home why not own the ability to produce your own electricity. By effectively renting your electricity from the power company, you are at their mercy when it comes to rate increases. The beauty of solar energy is that the fuel that powers your solar system is free.
Think of buying a solar system as an investment, kind of like stocks or bonds. Once your system pays for itself, it will continue to return a dividend for the next 30 to 40 years, all without the risks associated with stocks or bonds. Here's just a few of the benefits:
The previous calculations were based on ideal conditions using peak efficiency values using a electrical cost of 17.4 cents per kilowatt hour. It does not consider the possible cost of money if you were to finance the purchase, nor does it consider rate increases by the the utility companies that will further improve the payback time. It is meant to be used as an fictitious example only. Your results may vary depending on factors such as the system size, degree of annual cloud cover, pollutants in the air, dirt and guano (bird droppings) build up on the solar modules, time of day, obstacles to sunlight such as trees and buildings, and the direction that the solar modules are pointed at.
The estimated increase in home value indicated above was derived from ICF Consulting's recent study which indicated a $20 increase per $1 savings in annual electric bills and used a per kilowatt hour cost of 15 cents. Your home value increase results may vary significantly from this example. To determine the actual amount that your home might appreciate after installing this solar electric system, please consult a licensed appraiser. Information concerning ICF's findings is being presented for informational purposes only. Best Buy Solar Inc. is not in the business of accessing home values and hereby makes no claim whatsoever regarding the accuracy or validity of the ICF report.