What Is The Financial Return On Solar?
A lot of people ask us about the economics of putting together their own solar array. There are two ways to look at financial returns from solar arrays.
The first involves using an industry-wide approach called levellized cost. All utility companies use this model when making decisions about investing in a generating asset, and given the long life of solar arrays (likely more than 30 years), the logic makes sense here too.
Levellized cost is the cost per unit of electricity (kWh) produced over the lifetime of the asset. It is calculated by taking the total cost of the asset (including maintenance and financing, if required) and dividing it by the power produced over a 25 or 30 year period.
For example, a 10 kW array will produce at this latitude around 12,000 kWh/year and could be installed for $30,000 or less depending on how much work the client does.
For 25 year calculation: 12,000 kWh X 25 years = 300,000 kWh. $30,000/300,000 = electricity locked in at 10 cents/kWh
For 30 year calculation: 12,000 kWh X 30 years = 360,000 kWh. $30,0000/360,000 = electricity locked in at 8.3 cents/kWh
This does not include financing, but a lot of people on their term investments etc are only generating 1% per year return or less yet continue to pay high electricity bills. Increases in rates will not affect people with arrays, and in fact as rates increase the financials of your array get better every year! You'll be screaming... bring on the rate increases.
The second approach involves looking at projected rate increases to calculate money saved on bills each year. This can be extrapolated (even assuming a modest 1% rate increase by BC Hydro). At current rates, a 10 kW array for a client using 12,000 kWh/hour (BC average) will save this year $1200.00. It goes up every year with rate increases, and when time of day pricing is eventually introduced (which will happen sooner than most realize), the savings will build. We have put together cost-effective arrays that can pay for themselves completely in 12-15 years.
We don't like the second approach since it doesn't really work for these kinds of assets. We never ask how much our car will return on investment. In fact, we know that it simply depreciates.
To learn more and to get a free site assessment/quote from Sweet Spot Solar, contact us at email@example.com