Utility Costs Make Solar Energy An Ever-Improving Investment

For every 5 cents per kilowatt hour (kWh) a utility increases its cost to end users, solar panels gain 4.2 percent on their annual return on investment (ROI).

No one likes utility price hikes, but they’re undoubtedly giving a boost to solar installations nationwide. Utilities around the U.S. have dramatically raised their rates: Based on the data from the U.S. Energy Information Administration, here are the average electricity rate increases by region in the United States since 2020:

These electricity hikes mean that residential solar arrays pay for themselves in a shorter time period in every region of the United States. Let’s look at it another way. Here’s the relative impact of higher grid-supplied electricity costs on the value of rooftop solar energy:

The data is based on an average household usage of 12,000 kWh per year and a solar system cost of $14,400 after tax credits, which typically corresponds to a system size of around 6-8 kW, depending on the location and the efficiency of the panels. As the cost of electricity per kilowatt-hour (kWh) increases from $0.10 to $0.25, the annual electricity cost rises from $1,200 to $3,000. Correspondingly, the ROI for the solar system increases from 8.3% to 20.8%.

Given this formula, New England’s ROI on solar since 2020 has improved by 20 percent. Boosting the financial performance of solar power may not be what the utilities had in mind when they raised rates, but c’est la vie. 

courtesy Sunnova

Beyond the Basic Install

This positive backlash, coupled with Climate-Change accelerated threats to the power grid, have expanded the role of solar energy in residential planning.

In fact, you’re much more likely to hear about solar packages from builders and resellers. This conceptual shift mimics what the building industry did about 20 years ago, when they started talking about homes as “systems.” Solar energy is being re-positioned as a connected suite of products, not a “one-off” choice of panels or batteries.

For example, Houston-based Sunnova offers a soup-to-nuts list of solar services, extending well beyond simply installing panels and an inverter (although that’s in their wheelhouse too). Among their many energy-related offerings, they install just pv panels or panels with batteries, but they can also go “above and beyond” with other services such as servicing and EV charging.

What I especially like about their approach is that they’re not precious about controlling the whole job. If someone else installed your panels, for instance, they’ll still service or upgrade you with battery storage. Their offerings tend to follow a “good-better-best” path:

• Add a Battery: For those who already have solar panels installed, Sunnova offers the option to add a battery storage system to their existing setup. 
• Install an EV Charger: They can install 240V, Level 2 EV chargers, enabling homeowners to charge vehicles at home using solar power. 
• Add Solar + Battery + EV Charging: This trifecta solution combines solar power generation, battery storage and EV charging, and the house can also be tied in to use the EV battery as a dual-duty backup in an outage.
• Home Solar Protection: Sunnova also provides protection and monitoring services for new and pre-existing home solar systems.

Even Better Solar ROI to Come?

The utility industry is in flux, in part because of their propensity to raise rates suddenly and dramatically. In the State of Maine, for example, a major political tussle is underway, as citizens try to wrest ownership of the power grid away from multinational utilities. 

What this most likely means (according to the experts) is that over the short term, utility rates will keep rising over the next few years, meaning that every kilowatt of solar power you produce will become increasingly valuable. There’s a lot of costly new infrastructure that has to be built before renewables cause the cost-per-kilowatt hour to come down.

This Housing 2.0 article is sponsored by:  Jinko Solar, LP Building Solutions,  Mitsubishi Electric , Panasonic, Schneider Electric  and Sunnova.