On New Year's Day 2006, high winds blew down nine trees on our lot – and house – winds no one in the neighborhood had seen in 30 years. Bad news for the greenery, but suddenly there was sun everywhere and creating electricity through a photovoltaic system seemed practical.
Although I consider myself green, I once read that the savings in the electric bill could pay for a solar-panel system within eight to 11 years – not a lucrative incentive at my age. But with rising energy costs, I decided to investigate just how practical a solar-energy system would be for my home in economic terms.
Cash Flow and Debt
After crunching a few numbers, I realized the payoff could come in the first year in terms of simple monthly cash flow. With increasing electricity rates, it would just get better.
Assuming the cost of the system would be paid by a tax-deductible home-equity loan, and the system would meet all our electricity needs, the only monthly cost would be the loan payment. If that first loan payment was less than our monthly electric bills, then our total monthly costs would be less – immediately.
Any remaining home-equity debt for the full cost of the system would be paid upon sale of the house, just as we expect a remodeled kitchen to return most of its cost upon sale. Since the monthly savings in electricity costs can be valued in dollar terms, it should follow that the cost of a photovoltaic system could be recovered much more quickly than any other home improvement. In fact a new, small, solar-powered home development in San Jose reported brisk sales in February amidst declining home sales and prices.
OK, here's how it worked for us. We receive electricity service from a grid of power wires that connect us to a PG&E power station. Instead of going off the grid, which would require buying expensive batteries, we opted to pay the connection costs of remaining on the grid - this allows us to use power from PG&E during rainy days – or weeks.
We send the company excess electricity on long and sunny days averaged through the year – the meter actually spins backward – in return for using power when we need it. We are not billed for any electricity we use that exceeds what we generate until the end of the year.
Given our electric-heated hot tub and the usual array of TVs, computers, appliances and lighting, I wanted to be sure we generated enough power to pay for most or all of our electric needs. I have replaced most incandescent bulbs with compact fluorescent lights – we have 30 in the house.
We opted for a six-kilowatt system – approximately twice the size of the three-kilowatt systems cited for homeowners' needs. A three-kilowatt system might actually be a wise choice for small users, as it reduces electric use by eliminating the highest rates charged by PG&E. These are the four-tiered rates you pay when you use more electricity than the base amount, charged at a low-cost base-rate. In Los Altos, the highest rate may be three times more expensive than the base rate – cutting use to base levels results in sufficient savings.
But I wanted to be protected from rate increases and fuel-scarcity issues that continued reliance on fossil fuels will most likely bring. We also have sunny space on our 0.75-acre lot that gives us a 40- by 27-foot exposure for all 40 panels.
From September 2005 to August 2006, the year before our solar-panels installation, the combined increase for PG&E's top-three tier rates was 33.16 percent, as noted in our billing statements. The lowest of those three rates went from 17.6 cents per kilowatt-hour to 21.9 cents. The top-two rates each went from 21.6 cents to 30.3 cents per kwh. Since the base rate and the one just above it remained the same, and our use was split almost evenly between the first two and the second three rates, the average increase for all rates should have been half of 33.16 percent, or 16.5 percent.
According to the rate history on PG&E's Web page, the average total rate increase between March 2005 and March 2006 was 14.7 percent – 13.6 cents to 15.6 cents per kwh. However, information from the same source notes a 6.7 percent increase in average rates from March 2006 to March 2008.
Gary Hubbard is a Los Altos Hills resident.