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 hours 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 hours 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 hours 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 hours 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 hours 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 hours 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 hours hour times 25 years.

The Reliant system produces up to 3.58 PTC adjusted kilowatt hourss 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 hours hour equals an electric bill savings of $1,136.83 per year.

The Reliant system's list price is $28,703.00. After SolarHome'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:

To find the amount of time that it will take to recover your investment at a 17.4 cent per Kwh rate, first consider that according to a recent study by ICF Consulting (funded by the Housing and Urban Development Department (HUD) and the Environmental protection Agency (EPA) ) energy saving measures such as solar can add $20 of home value for every $1 of yearly energy cost savings.

So even if you were to be extremely 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 hours 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 hours 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 hours 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:

• Increases the value of your home. In fact a recent study by the National Appraisal Institute determined that your home's value actually increases by $20.00 for every $1.00 reduction in your annual utility bill ! 
   
• Counties within the state of California are prohibited from increasing your property tax assessment because of the added value of installing solar equipment.
   
• A $2,600.00 per kilowatt hours cash rebate in the state of California !
   
• A 30% Federal tax credit for businesses and up to a $2,000.00 Federal tax credit for residences !
   
• Help protect the environment by dramatically reducing the amount of CO2, NOX and SO4 that is pumped in to our atmosphere every year !
   
• Time of use metering, sell your power for more, buy it back for less !
   
• Net metering laws protect your budget against rate increases because the more that the utility raises their rates, the more that they will have to credit you !
   
• By purchasing one of our grid intertie/power backup systems, you can not only reduce or eliminate your electric bill but you'll be able to protect your home in the event of a power failure ! That type of piece of mind is priceless  !

Click Here To Download An Excellent Article Regarding Solar Electric Systems And They Impact Your Home's Value.
Written By Wells Fargo Bank !
 

The previous calculations were based on ideal conditions using peak efficiency values using a electrical cost of 17.4 cents per kilowatt hours 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.