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The Financial Case for Solar:
Rate Escalation Factors
Rate escalation plays a big factor in future energy costs, and affects the amount a solar system will save you. Historically, escalation has been around 6.7% on average over the last 30 years, much higher than the CPI (Consumer Price Index) which has increased about 3.5% annually since 1981.
Tiered Pricing:
The tier pricing system is a progressive pricing system whereby the more you consume, the higher the rate becomes. Tier 1 or 'baseline' has the lowest cost at 11.5 per kWh. The top rate you pay for electricity is Tier 5 at 44.1 per kWh. The rate for solar comes in at slightly below Tier 3 pricing (21 per kWh). Because PG&E customers in the top tiers bear a disproportionate amount of price increases, their energy inflation rate tends to exceed the average.
Annual Costs: Solar vs. No Solar
The above chart compares your annual costs before and after going solar. Solar costs include payments on the loan used to purchase the array, maintenance expense, residual PG&E bills, inverter repair cost, panel degradatation, etc. Continuing to buy your power from PG&E increases your energy costs year over year due to the energy inflation factor, whereas with solar, your energy costs remain flat.
Once in place, a solar array will reliably produce power decade after decade with no price hikes. Over time, the cost difference between the two options becomes dramatic, which is why solar is a superb investment.
Total Lifecycle Payback
Payback is often looked at as a measure of financial soundness of an investment. Over the 25-year warranty life of the solar modules, you can expect to enjoy substantial electric bill savings compared to a system cost. Payback for most systems occurs between 7 and 10 years, including maintenance, projected inverter repairs, tax consequences, etc. For large users of electricity, payback periods of 5 years or less are attainable.
The steadily increasing steps reflect each year's savings by avoiding the PG&E energy escalation of electricity rates. The red area in the chart shows the needed accumulation of savings before payback. The green area shows additional savings received after payback.
As you can see, savings after payback are substantial.
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