Return on your solar investment

Having had solar for six months or so, three of which my utility has given me credits for excess solar, lets look back and see how the financials are stacking up. Primarily the assumptions we made during the system design phase. They key design numbers are “revenue” per kWh, and if you have the capacity to recoup that in the form of lower power bills. The good news is that thanks to the customer charge portion of the bill, there is ample capacity to achieve a return on your solar investment via reduced power bills.

Some discussion on net-metering solar. Here in Ontario, your utility will allow you to earn credits based on your exports to the grid. For example, last month I had a credit on my power bill, for the 600 or so kWh that my solar system sent to the grid. On the average, I got back 12.83 c/kWh, which is a little higher than the day-time rate of 12.2 c/kWh, perhaps thanks to the peak-rate of 30c/kWh in the evening when there is still some solar around, but also pulled down by weekend production, which only returns 7.6 c/kWh.

With that, what does the return on investment metrics look like? The important numbers here are Cost per W peak (we use $3/W-peak), annualized production kWh/W-peak (we use 1.16 kWh/W-peak source), and of course how much one earns per kWh (we use 12.8 c/kWh). Indeed, we are in the green after about 20 years, having recouped our investment.

Much can change in 20 years. According to recent energy forecasts, here in Ontario, electricity demand is expected to increase by 75% over the next 25 years (source). Thus there is likely to be strain on the grid to deliver all that, solar will be a part of that solution, so investing in solar might not be a bad idea, particularly as rooftop solar is generated very close to where its used, and thus helps solve other problems such as transmission challenges (source).

I need to point out that I ignored interest rates and inflation. Generally high interest rates worsen the case, but if the cost of power increases quickly (inflation in this case), that improves the math.

Much depends on where you live, for example, my friends in California pay close to 50 c/kWh (Canadian dollars), in which case, they see a return on their solar investment in 5 years. Californians pay a far lower customer charge (about $15 CAD, compared to $45 here source and source), so the price per kWh is not overly fair. Solar has been so popular that price per kWh goes negative during certain times of day and year (usually in the spring, source).

In places with a low customer charge, and a high kWh price, a home battery system can help future proof your investment, that was one of the reasons I decided on a home-battery system with my solar system.