Making Solar Make $ense

The general guiding principal around the decision of whether to or not to invest in solar over the past few years has been tied to the price of one’s electric bill. In general, if your electric bill is $100 or more it’s been argued to make economic sense and if it’s less than perhaps not. The reality however, is less simple.

Future cost vs Current Cost of Electricity

The $100 figure is based on the current cost of electricity. What about the future cost? Looking at the EIA provided chart below, we can see that the trend for the price of electricity is upwards. By all accounts this will continue to increase in future years.chart

It’s likely that the cost of green house gas emissions will be added in whole or part in the future which will increase the amount we pay for our electricity. Consider that some of our relatively cheap electricity, in particular that from nuclear reactors is waning as reactors are being retired while new ones are not being built to replace them.

Efficiency of Electric vs Gas

While people tend to think of gas as being better for heating than electricity, the truth is that gas is actually less efficient even though it is currently cheaper at least when comparing traditional heating of air and water. The optimal use of electricity is in the form of a heat pump. A heat pump takes heat from one place and moves it to another. This isĀ  more efficient than directly heating the water. The mechanism is similar to an air conditioner but uses less energy. For example, a hybrid heat pump water heater such as the A.O. Smith Voltex can provide an abundance of hot water for less than the cost of a traditional gas or electric hot water heater. Add this to a home powered by solar photovoltaic and you can really benefit from the savings.

We recently had such a water heater installed and are experiencing more hot water at a lower cost than we paid with our traditional gas-fired hot water heater.

Hybrid Heatpump Water Heater

A.O. Smith Voltex Hybrid Electric Water Heater

We installed our new water heater as part of an overall energy efficiency upgrade and were able to get the majority of the cost including installation back as a rebate making this a phenomenal deal for us. This was thanks to the program offered by “Energy Upgrade California” and other options are available in other states. See the database to see what incentives are located in your area. Now in the interest of full disclosure our water heater went into operation before our new solar array was activated. The increase in our electric use cost more than our decrease in gas use saved due to it moving us up to a higher tiered rate. Once our solar array is online the little electric that we will use from the grid will definitely be at the lowest tier. So if you are considering a heat pump water heater instead of gas, it may not save you money unless you have a lower kWh rate than we do in California and/or have a solar array you are using to generate power.

We will also be switching to a time of use plan which will lower our rate in the morning and overnight while charging us higher rates in the afternoon through 7pm. This will lower our bill significantly as most of our use occurs outside of the higher rate window and our water heater only runs during and shortly after use of hot water which is generally first thing in the morning and later in the evening.

Savings through Tax Benefits

Solar would not make sense financially for most of us without the huge incentives that exist. The tax rebates are only the tip of the iceberg. With a leased solar system, the legal owner of the system (either the solar provider or a bank) is currently able to not only receive all of the federal and local rebates, they also can depreciate 50% of the cost of the system in the first year of the lease! The rest of the depreciation can occur during an accelerated schedule of just a few more years despite the fact that system will generally last in excess of 25 years! Better yet, after the most common, twenty year lease term expires, the system will be worth less than the cost of labor to remove it and return the roof to pre-installed condition. This means that one can expect to keep the system without additional charge after the lease expires. The other benefit of a lease is that most companies include inverter replacement after ten years without additional charge and performance monitoring and warranties throughout the duration of the lease.

The very best prices are on pre-paid leases in which the full set of payments is made at the beginning of the lease. The price is generally much lower than a cash purchase would be even when considering rebates.

In our case we purchased premium American designed and manufactured Suniva panels which inflated our system cost. Even with that additional cost our price for the system we leased came to just $2.50/watt from Sungevity. At that price we should have a full payback of our investment in just a few short years with immunity to future increases in the price of electricity for many years to come!


2 thoughts on “Making Solar Make $ense

  1. I just realized the inflated electricity price was in large part due to my use of an air conditioner in my home office during several days during that time period. Unfortunately, there is no way to isolate that cost from that of the water heater. I’ll know more about the real cost differential later this month. Based on my A/C use last month I anticipate that the additional cost of electricity from the water heater will be close if not less than the cost of using gas with my old hot water heater.

  2. I just stumbled across a research paper published by NREL, the National Renewable Energy Laboratory which assess the efficiency and performance of heat pump water heaters including the A.O. Smith Voltex in great detail. Overall it got high marks for its performance! Here’s the link.

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