Solar economics

Now that my solar system is making its way through the licensing process, its a good chance to look back and see how the economics of solar worked out. I like to think of rooftop solar as a nice hedging strategy, as is often the case, what is a so-so deal right now, might turn out to be a wonderful deal as there are some storm-clouds on the horizon which may result in higher Electricity prices, making the economics more interesting.

A common industry bench-mark is “cost-per-watt of installed solar”. Briefly, we take the quote we got from my installer, and divide it by the amount of peak-wattage the system is rated for. In my case, that winds up being $3.24/W. Towards the upper range of $2.4-$3.5/W in Ontario Canada (source, source), which is understandable, as I live in Downtown Toronto, and I opted for slightly shinier equipment than necessary.

Over the course of a year, that one watt can be expected to produce 1.163 kWh of electricity (source), then over a 15 year system life the cost per kWh works out to be 19c/kWh, and 30 year life gets us to about 9c/kWh. Compared to Toronto Hydro, these figures fall in the middle, the lowest overnight rate is about 5.3 c/kWh (including the transmission charge), and the peak rate of 30.9 c/kWh. Most solar production would probably happen during the mid-peak rate of 14.7 c/kWh (source).

Then there is how to deal with some financial details. For example, as I am spending a fair bit of money up-front, a 10 kW system, at $3.24/W works out to be $32,000.00, not a small chump of change. Presumably I could do other things with that money, and we need to account for that somehow, usually by assuming some “interest-rate” (although given the latest market news, perhaps rooftop solar is a better bet, source). Then there is increasing cost of electricity. Historically, power prices in Ontario have been stable since 2017, but doubled between 2007 and 2016 (source). I suspect that power prices might start to increase again, in paricular as power demand is increasing as more people discover the wonders of heat-pumps and electric cars. The Ontario grid operator projects a 75% increase in power demand over the next two and a half decades (source), while some increase in capacity is in the works (source), it may only just replace power generation that is being retired through Pickering Nuclear (source). These pressures, plus likely increase in Ontario’s population, might make for pricier electrons.

Overall, I feel that Ill probably “break-even” on my solar system, the power-savings I am expecting should over time, just about pay for the system, if for nothing else, there is some security in knowing that I generate enough clean power to power our house.