After meeting with installers and trading emails with a friend who has an EV (electric vehicle) and a PV array, I’m now an expert on three of the crucial concepts of solar electricity generation: time-of-use metering, net metering, and rate hikes. If that doesn’t sound interesting, read it this way: over the next 30 years, I’ll pay $65,000 less for electrical power than my neighbors. And, I’ll be preventing 130 tons of carbon dioxide from being created to power my home.
The vast majority of ratepayers in California pay a flat fee for each kilowatt-hour consumed. Of course, fees and fines apply to anyone using more than PG&E’s arbitrary “baseline” quantity, but regardless, each consumer pays the same for power whether it’s at noon (when demand is high) or midnight (when demand is low).
In contrast, time-of-use customers pay a lot less for power outside peak times, and a lot more (three times more, in the summer) for power used during peak times. For our purposes, “peak” means noon to 6PM, weekdays. The benefit of TOU metering to PG&E is that TOU customers consciously avoid drawing power during the times PG&E has the least available to sell.
A reasonable person might wonder why any of this matters: if you’re installing a solar energy system, one might ask, why do you care about electricity rates? After all, you’ll be generating your own power, especially from noon to 6PM. The short answer: because PV arrays don’t generate power at night. When the sun isn’t shining, PV users rely on the utility’s electrical grid for power. And so it makes sense to find a way to pay the least amount possible for electricity during these times.
Therefore, PV users are great candidates for TOU metering, because on most days the PV array fills 100% of the household’s energy needs during the TOU peak periods. Homeowners then pay only the much-lower off-peak rates when they do consume power.
But the deal is even better than that. If the PV array generates surplus energy, PG&E pays market rate — the inflated peak rate — for it. At night, PV users buy back power at the lower off-peak rate.
In other words, because of the pricing, 1 kwh fed into the grid between noon and 6pm is worth three drawn from the grid between 6pm and noon the next day. This is the key to PV array sizing: generate enough surplus power during peak hours to cover the cost of the household’s power needs for the rest of the week. Even though there are only 30 peak hours in the week, the 3:1 price differential makes this an attainable goal.
In basic, practical terms, it means most folks can get by with a smaller PV array than a straight usage analysis would indicate.
There is a seasonal component to this analysis. PV arrays generate more power during the summer, because days are longer and skies are clearer. Most PV households end the summer with a net energy credit — meaning, the PV array has generated more power than the house has consumed over six months’ time.
In the winter, solar energy generation drops, and consumption rises. Interior lights are used for more hours than in summer. People spend more hours indoors, running the heater. And so the household burns more power than the PV array creates.
The ideally-sized PV system will balance the estimated summer surplus against the winter deficit, and end a 12-month cycle with a net of 0 kwh. In a move that is surprisingly beneficial to the PV user, PG&E allows PV users to settle their accounts annually. The utility charges the customer only for the net amount of grid energy consumed for the previous year.
With a correctly-sized system, a typical household can expect to break even on a PV investment in 10-12 years. This calculation can be only an estimate, because we cannot predict how fast utility rates will climb.
The best we can do is look at the history: since 1970, electrical rates in California have climbed, on average, 6% per year. Project today’s $80 electrical bill 15 years into the future: at 6% per year, it doubles. In 30 years, my monthly electrical bill would probably be over $500.
The numbers surprise me: solar energy really does make financial sense, at least in California. The only downside is the large initial investment. But even then, the state pays for half of it, and I’ll get it all back in about 10 years (plus free power for another 20-30 years!).
It’s like the rent-vs-buy argument: paying rent is like throwing money away, because at the end of the year, renters have no equity to show for their expenditure. Most homeowners, as smart as they were to buy a house, continue to rent their power. It’s not necessary, and there are great benefits to those who choose to buy it instead.