Originally Published: May 9, 2013 9:57 p.m.
Question: Utility companies are raising energy prices again, charging environmental benefit surcharges and reducing renewable energy rebates. What's going on and is solar an attractive alternative?
There are two ways to reduce your energy bills. The first is to add renewable energy such as wind or solar and generate the energy you need independently; the second is to reduce the energy you use. The second option has the most benefit as it not only reduces the energy you use, but it also solves many other problems including home comfort and home health. By sealing and insulating your home against the outside elements you also reduce the size of any renewable energy system needed.
Either way, the best initial solution is to obtain an energy audit from you local energy provider such as APS, SRS or Unisource. The $99 audit they offer is funded by a charge on your utility bill, so you are paying for it whether you use it or not. Unfortunately very few in Arizona have taken up this opportunity. Of the 2.75 million homes in Arizona, only about 10,000 a year are receiving energy audits and less are acting upon them.
Another simple energy analysis can be achieved by going to the APS website and log in into their energy analyzer. APS inserts your electricity usage into the analyzer automatically and there is a table to enter your natural gas bills.
The analyzer then calculates your annual energy cost and compares it to the average energy cost of homes in your area and of the same size. The result tells you just how efficient or inefficient your home is compared to the average. You still need to calculate the cost of your energy from your actual bills as APS only uses the raw energy cost and not total fixed and tax costs, which are more than twice the raw energy cost. As an example, my APS analyzer showed electrical use for 2012 at $425 but my actual bills showed $1,151, a 271 percent difference.
Damon Gross of APS stated in a previous Courier article that "the average APS customer pays $132 per month based on 1,100KWh of electrical use" or 12 cents a KWh. Assuming this average is average for the 2.75 million homes in Arizona, the environmental benefit surcharge from customer bills would be approximately $220 million per year. The 10,000 audits cost around $3 million and residential rebates in 2010 approximately $110 million using APS ratios. The remaining surcharge money must be supporting utility renewable programs.
An issue today is that as solar panel prices have dropped, rebates have been significantly reduced. As an example: In 2010 APS rebates were $3,000 per KW of solar power; in 2013 they are $100 per KW, a drop of 97 percent. In 2010 an average 6KW solar installation cost around $35,000 (6KW at $5.83 per watt) the APS rebate was $18,000 ($3,000/KW), the federal rebate was 30 perceent of $17,000 ($11,900) and the state rebate was $1,000, for a homeowner cost of $10,900.
In 2013 the same system costs around $25,800 (6KW at $4.3 per watt (system prices vary with vendor), the APS rebate is $600 ($100/KW), the federal rebate is still 30 percent of the $25,200 ($17,640) and the state $1,000 for a total of $16,640, a 53 percent increase over the cost in 2010.
The utility companies were subsidizing the average solar system in 2010 at $18,000 and now only $600. Are there really 30 times as many systems per year being installed in 2013 over that in 2010? If not, where is the $220 million customer environmental benefit surcharge money going?
There have been a number of solar configurations, but to date the most popular configuration is the grid-based version. The solar installation generates electricity during daylight hours and passes excess energy onto the utility grid through a reversible smart meter. It then takes back the energy from the grid during darkness. The secret to this balanced system is calculating the amount of energy the home uses during a complete year and sizing the solar system to generate that amount of energy during daylight hours so that the grid will provide your stored energy at night.
Therefore, in theory, the utilities electrical energy cost should be zero. I say in theory because we have just seen that APS is raising prices because they need the same revenue to support their infrastructure even though they encourage their customers to reduce energy use to meet government mandates. Energy conservation was designed to remove the need for utility companies to increase capacity by building additional power plants and keep up with demand, but it doesn't remove the need for maintenance and upgrading existing infrastructure.
APS does pay back to the solar customer at the end of each year any excess generated energy at 6.187 cents per KWh, up to 25 percent of the energy level used before solar. This allows you to select a slightly larger system than needed, safeguarding any system efficiency loss and guaranteeing a payment for any excess energy generated; however, do not go beyond 125 percent of none solar use.
You also have to consider payback time and resale value. I used the APS calculator showing enough supply for 100 percent of my usage and the payback return on investment (ROI) was 22 years. I also used an energy rater program and it returned an ROI of 23 years.
Leasing programs can be adjusted to fit your financial goals but most are between 15 and 25 years, but some will tell you ROI is only seven years. As with all these programs, you have to consider what happens when you sell your home; the average home ownership is around eight years, so can you get your solar investment back if you purchased it, and what the options are when leasing.
The bottom line is that the utility companies are just facilitators; it is the general public via their energy bills that pays for all the audit and rebate programs. The utilities are seeing energy use drop as these programs take effect and are looking to shore up their revenues and profits. In the past utility bills went up because raw energy costs rose, but now it's because the fixed overhead costs are becoming a bigger part of the cost increase.
This is why it is very important to perform an in-depth financial analysis considering all the parameters before embarking on any solar based installation. The payback may not be as efficient as you think. The more people you have in the supply chain, the more likely that all their profits add up to a lot of your money. If you consider your current utility bills, whether electric or natural gas, the lower the energy you use the higher the utility unit cost. It's a non-linear cost usage model, or in layman's terms, the less energy you use the more you pay for it.
Lease programs provide a solution with no upfront costs; you just pay your monthly utility bill and part of the bill pays for the equipment lease program. The objective is to pay less than your current bill; however, you are paying interest payments on the equipment over a large number of years. One advantage of leasing is that the leasing company maintains and guarantees the performance over those years.
On average there are 277 sunny days a year in Prescott and the average daylight hours throughout the year is 12 and the sunlight hours 9.6. However, the parabolic nature of the suns energy during the day limits the solar radiation intensity efficiency to about half, or 4 to 5 hours a day.
Be careful when sizing and pricing a solar system. If you use one of the many solar calculators or your contractor does, you may find they are biased toward much higher energy generation than you need and are, of course, more expensive and have a much longer payback period. Don't forget the APS 125 percent rule.
That is why solution number two, reducing your need for energy, makes a lot of sense - utility energy supplies will not get cheaper and on average increase around 4 percent a year. Currently, APS shows about $20 a month for a grid-based connection; however, what do you think will happen if a large number of people adopt grid-based solar; do you think the utility companies will lose money and the state lose tax revenues - I don't think so!
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