The Value of Rooftop Solar
The ultimate value of rooftop solar today is the money you save from not buying electricity from the grid. If your rate of electricity (the price per kilowatt-hour (kWh)) is $0.10 per kWh and you can buy electricity from someone for $0.08, you save 20% of your electric bill. It gets a little more complex when it comes to owning your system and a bit more when you finance through a loan. I’m here to simplify it for you.
How Much You Pay VS How Much You Save
In 2017, according to the EIA, the average American home consumed 10,399 kWh of electricity in a year. The average rate per kWh was $0.13. This average house would be paying $1,351.87 a year just for the electricity (not including additional utility costs). So if your rooftop solar system produces 100% of the electricity you consume, it saves you $1,351.87 a year.
To know whether it’s worth it, you need to know how much the system will cost to install and how much it will cost per month to borrow the money. To know how much the system will cost, you need to know how large of a system to install to produce what you consume, which depends on the amount of sun arriving in your location. You also need to know how much the installer charges for every Watt of capacity. To know how much it will cost to finance the install, you need to know what the interest rate is and how long the loan will be for.
Factors affecting savings:
- Consumption of building
- Price per kilowatt-hour from the utility
Factors affecting costs:
- Price per Watt installed
- Amount of installed Watts needed
Factors affecting financing:
- Interest rate based on risk and the finance market
- Loan term based on market and payback period of the solar installation
For the rest of this article, let’s assume an installer price of $2.00 per Watt and local ability to produce solar electricity of 1,200 kWh per year per kW installed on the roof.
To produce the 10,399 kWh per year, a 8.67kW system is necessary. At $2.00 per Watt, this system will cost $17,340 in total.
Financing Your Solar
To show the difference finance can make, let’s compare a financed install in Florida versus one in Puerto Rico. Floridians have much easier access to finance than Puerto Ricans, mostly due to more developed banking infrastructure in Florida. Therefore, the two scenarios are:
- Floridian: 5.5% interest, 10 year debt term
- Puerto Rican: 9% interest, 7 year debt term
Ready, SAVE!
In Florida, your monthly loan bill will come out to $293.82, which is actually higher than your old bill when you’re paying $0.13 per kWh! You are actually paying 113% more per month for your loan bill than your old utility bill. The major factors for this are:
- Very high cost of installation per Watt- $3.40 in the state of Florida
- Fairly low cost of electricity from the utility- $0.13 is just the average rate in the United States; Hawaiians pay $0.29 per kWh
[Graphs show the first 2 years of payments but continue off the image until the last of the 120 months of loan payments.] Here is the accounting document on our cloud drive:
https://drive.google.com/file/d/1mLBHvCmgQGd0Q_Orw3PtKyOnWtxQRKIT/view?usp=sharing
Meanwhile in Puerto Rico, we need to account for much higher electricity prices- $0.28 per kWh, lower installation costs- $3.00 per Watt, and higher interest rates- about 8 to 9% per year. The savings at these rates are not very much at all but what’s worth considering is:
- Electricity rates in Puerto Rico are continuing to climb all the time
- At the end of the loan, you now own your own system and no longer have any more monthly payments for power. Solar PV systems are usually guaranteed for up to 30 years except for the inverters, which only come out to around 10% of the system’s cost.
Meanwhile, in WattWatt’s primary market of Mexico, we see much more attractive opportunities for homeowners and businesses. At the residential escalated rate, called DAC (high consumption electric rate), home owners are paying $0.245 per kWh. Installers, in the meantime, only need to charge $1.50 per Watt installed, and solar generation per Watt comes out very similar to Florida or Puerto Rico. Therefore, even with 11% interest rates, homeowners can see monthly savings of over one third, 36.7%, on their power consumption.
Savings become even more magnified at the commercial level. With similar interest rates, solar generation efficiency, and tariff rate, the scaled systems are installed at a much lower cost of $1.00 per Watt. At a 11% interest rate, business owners can save around 57% on their monthly power. At a 12% interest rate, 55%.
I’m simplifying commercial solar in Mexico by quite a lot. The tariff system in Mexico is a system of hourly kWh rates, with the times changing throughout the year, and maximum kW capacity rates that multiply the maximum kW of capacity of electricity used by the business multiplied by not only the capacity but also the cost of transmission and distribution. The calculation for savings is complex when accounting for electricity consumption offset by solar PV generation but becomes more intricate if batteries are installed on-site to offset peak capacity consumption and consumption at expensive kWh rate hours. Therefore, we simply assumed the same rate as high rate residential and called it a day for this article. Each project will differ when it comes to savings, though.
