How to Calculate Solar Savings in the PNW
Solar energy is increasing in popularity for many reasons. It’s a more environmentally responsible way to produce energy compared with traditional electricity generation sources. The number one reason behind the explosion of solar energy is the economics. People are saving money by going solar, and that’s what we’re going to talk about today.
On this page, we’re going to look closely at electricity bills, the current incentives, and how it calculate the ballpark estimate payback period.
Your existing electric bill
Let’s examine your bill. Most people just pay their bill without delving too deeply into the specifics. This is totally understandable. After all, the breakdown within the bill can be fairly technical, and if you’re not well versed in energy cost structures, it can be pretty tough to understand.
Electricity is billed by the kilowatt hour. A Kilowatt hour is a unit that measures the energy used over a period of time. An easy way to think about this is that one kilowatt hour is the amount of electricity it takes to power ten 100 watt light bulbs for a duration of one hour. That’s 1,000 watts over one hour, or one kilowatt hour.
Compared to the rest of the country, electricity rates in the Northwest are fairly simple. Rather than tiered price structures or time of use plans, the most prominent utilities in Washington and Oregon each have a single price per kilowatt hour.
Each utility also has a grid connection charge, which you’ll pay whether or not you have solar panels. Since residential solar systems are still tied to the grid for net metering purposes, this charge helps pay for grid maintenance and infrastructure. Depending on the utility, there may also be additional charges from the transmission and distribution of power.
Below, you’ll find a break down of charges for each utility:
Major Utilities in Oregon
Portland General Electric:
11.42¢ per kilowatt hour
$10.50 / month for grid connection charge
See an example PGE Bill
9.55¢ per kilowatt hour
$9.50/month grid connection charge
Major Utilities in Washington State
Clark Public Utility District:
8.16¢ per kilowatt hour
$12/month grid connection charge
Cowlitz Public Utility District:
7.27¢ per kilowatt hour
$19/month grid connection charge
Don’t see your utility? Contact us and we will happily let you know.
Solar Incentives, rebates and tax credits
Federal Solar Incentives
There is a 30% Investment Tax Credit (ITC) that can be applied to the cost of any solar system. Unfortunately, the ITC is set to decline beginning in 2020. Next year the ITC will be reduced to 26%, then 22% in 2021, before being eliminated for residential systems in 2022.
The ITC is a tax credit, so it’s a reduction in the amount of income tax you’ll have to pay the year you buy the system. We recommend consulting with a tax professional to ensure that you can take advantage of the FTC.
In Washington state, solar systems under 100 kW are exempt from any state or local sales tax. For the average residential system, that amounts to around $2500 in savings on the cost of the system. To see an up-to-date list of WA incentives, see below.
In Oregon, the 2 largest utilities fund rebates through an organization called the Energy Trust of Oregon. The ETO currently offers cash incentives $400 per kW of solar installed. For example, a 5 kW residential solar system would receive a $2,000 rebate ($400 x 5kW = Rebate). Unfortunately, these rebates will decrease as more and more customers install solar. Each utility sets its own rebates, so they may change suddenly depending on utility offerings. For an up-to-date list of WA incentives, see below.
Calculating your solar savings
Now that you understand your utility charges and the solar incentives available, you’re ready to compare your existing bills with solar. Depending on the ownership model you choose for your solar system, they benefit equations will be slightly different.
For all of these options, however, you’ll start by adding up your yearly kWh usage, and your yearly energy costs. These will be your baseline metrics when comparing with solar. For the purposes of this article, we’ll assume that 100% of a customers usage is being offset by solar. If your offset is less than 100%, you’ll just have to blend the utility and solar equations to determine your new payments.
Payback period for a cash purchase
If you buy your system outright, then congratulations! After your solar system is installed, you can apply for any state or federal incentives.
As an example, let’s use a 5 kW system in Pacific Power territory in Oregon. Installation costs can vary depending on the project, but the average installed cost of solar in Oregon is $3.30 per watt.
For a 5 kW system, that comes to $16,500 for total system cost.
(5,000 watts • $3.3 per watt) = $16,500
The ETO will provide a cash incentive of $400 per kW, or $2,000.
($400 • 5) = $2,000
The ITC amounts to 30% of the system, which in this case comes to $4,950.
($16,500 • 0.3) = $4,950
Combined, the incentives are worth $6,950. Now subtract incentives from total.
($16,500 - $6,950) = $9,550 after incentive cost
This brings the cost of the system to $9,550 after rebates. Now divide the after incentive cost by the estimated yearly solar savings using the formula below:
(( system size • sunhours) • ( price of kWh)) • 365 days = yearly estimated savings
The average sunhours in Portland is 3.1 meaning throughout the year, Portland get’s on average 3.1 hours worth of sun per day. This greatly increases in the summer and decreases in the winter. In this case, we are assuming zero shading by trees or other obstructions, such as other homes and we will also use PGE’s kilowatt-hour rate of 11.42¢.
(( 5 kW • 3.2 sunhours) • ( 11.42¢)) • 365 days = $642
Now, to get the estimate payback period, we now divide after incentive cost ($9550) by estimated yearly savings ($642) to get 14.8 years.
($9,550 / $642) = 14.8 years to payback.
It’s worth noting that this equation does not account for the inflation of electricity prices, which typically rise every couple of years if not even more frequently. Odds are that the additional inflation will actually make your payback time even quicker. After the system pays itself off, you’re in the black for the remainder of the life of the system.
As mentioned above, these equations represent your solar savings if utility electricity didn’t increase more than your solar escalation rate (if you have one). Odds are very high that utility prices will increase at a much faster rate than your solar payments, meaning that you’ll save more and more over time as a result of locking in your electricity rate with solar.
Getting you a more accurate and site-specific solar analysis
This article is meant as a guide for those determining how much they can expect to save with solar. With that said, there is really no substitute for sitting down with one of our expert consultants to go over your options.
Our team will do the math and let you know how your household specifically can benefit from going solar. For a free, no-obligation assessment, contact us at Sunbridge today or speak with an estimate today by calling us at (360) 313-7190.
What Solar & Sunbridge can offer you!
0% due upfront. Go solar now, with no money down. With our financing options, you won’t need to pay a single cent upfront.
Lower energy bills. Going solar means you’ll be paying less for solar energy than you’re currently paying for electricity from your utility.
Solar incentives. Take advantage of current incentives to lower the upfront cost of purchasing and installing a brand new solar electric system.
Production Guarantee. Our PV systems come with a guarantee of optimal production for 8 years after installation.