Record Utility Rates Make Solar Even More Cost Effective

Did anyone notice the juxtaposition of two utility news blurbs in the August 8th, 2007 Mercury News? Are we really that naive that we can’t follow a simple money trail?

The first article pointed out that California’s largest electrical utility saw a profit boost of 16 percent due to higher electricity rates.

The next article right below quoted the same utility’s CEO as saying that the California Solar Initiative (CSI) is behind in its goal of 3,000 megawatts of distributed (on customer rooftop) solar power. This CEO continued to say that the issue is that solar power is too expensive.

Huh?

A typical 3kw residential system costs $24,000 without incentives, and will produce 4,300 kwh per year virtually maintenance-free for 30 years. That works out to costs for solar – on a residential or commercial customer’s rooftop – at 19 cents per kwh. With incentives (both from the CSI and a small federal tax credit) costs for solar are 11 cents per kwh. I don’t know how many of you live in California, but pretty much anyone with an air conditioner and a few electronic toys pays closer to 25 or 30 cents per kwh. And these prices -- as this utility’s stockholders will be happy to say – will continue to rise.

Because of these high electric rates customer demand for solar power systems is an all-time high in California. Unfortunately, the new California Solar Initiative is now administered by this exact same utility – and delays to get customers connected and paid for their rebates have stretched from one month to well over six months.

And these delays are profitable! Let’s see, for a $300 monthly electric saving, that five month delay means an extra $1,500 in profit for each stalled solar customer. Multiply that by thousands of customers and you can see how much more profit a utility can generate by poorly administering the best solar program in the country.

Distributed solar power is cost effective today when it’s on a customer’s rooftop. Maybe that’s what this CEO meant – that solar power is not cost effective for him since it’s so good for his customers.

Comments

[clicclic]

Are you Cali folks really paying .25-.30 per KWH? Here in Indiana we're paying .07!

I guess solar will never be cost effective here (insert pic of Indian crying)...

[Clee]

That 19 cents/KWH cost depends on having the money to pay for it all up front. Most people I know, myself included, put the cost of PV on a loan. A $24,000 mortgage at 6% interest, 30 years fixed rate, would give you a monthly mortgage payment of $143.89, or $1726.71 a year. Divide that by 4300 KWH per year and you get a cost of 40 cents/KWH. If your mortgage interest on the loan is tax deductible and you're in the 25% tax rate bracket, it would be about 33 cents/KWH. This is actually cheaper than the 37 cents/KWH I saved on my electricity bills last year from the PV you installed on my roof.

So while I agree with your conclusion that unsubsidized PV can be cheaper than retail electricity rates in California, I think the 19 cents/KWH number is misleading.

[spice girl]

Solar is doubtfully maintenance free for over 30 years. Inverters will need replacement, so will the roof, and the cost to remove and re-install the solar panels will cost at least $2,500. In the meantime Akeena loses about 1 million $ a month, while the CEO pockets over 5 million $ so far this year (2008) cashing in stock options. Hmmm, I wonder why a California solar installation company became incorporated in the state of Delaware, likely to shelter the CEO from liability when he closes the doors the day the solar rebates end. Shenanigans like this will speed the end of the rebates, and the money will instead flow to the utilities to build solar farms, which in reality allows all ratepayers to receive solar energy in the mix, and benefits all citizens.

spice girl