System Cost

You Could Save $50,000 to 100,000 in future Energy Costs by purchasing a solar system today.

Heritage Solar Photovoltaic generating systems cost between $8.50-$10 per watt. The exact system cost will depend upon the ease of installation and roof access. A 3 kilowatt system that will power a typical California residence with good Southern exposure will cost between $27,000 to $30,000 before State and Federal Rebates. For an ballpark estimate that includes State and Federal Rebates, try our Solar Calculator.

California State Cash Rebate

The California Solar Initiative is offering a $2.20 to $2.50 per watt cash rebate for solar electric systems that are connected to the utility grid. This is not a tax credit. It is a cash rebate. SDGE and SCE manage the rebates and the exact rebate can be found at the trigger tracker.

Net Metering

Net metering measures the difference between the electricity you buy from the utility and the electricity you generate with your solar electric system. When you are making more electricity than you are using, like typical summer days, your extra electricity is metered back out (sold) to the utility grid. You receive credit for this power at the same rate they sell it to you. Net Metering allows you to use the electric utility grid as electric storage instead of costly batteries. You can generate electricity when it is most expensive and use it in the evenings and at night when it is least expensive.

California Electricity Penalty Zones

During the California energy crisis, the utility companies adopted a complex tiered electric rate structure. This rate schedule establishes a 'baseline' rate for all usage each month, up to a baseline amount that varies based upon the region in California. Usage up to the baseline amount is charged at one rate and usage above the baseline is charged according to a rapidly ascending tiered rate structure.

Residential customers who exceed their baseline quantities face steep penalty rates. Click Here to see a table of Southern California Edison Rates. What do these rates mean.

If you are in Tier 1, paying 11.8 cents per kWh, the cost of running a 100 watt light bulb, 24 hours a day, 30 days a month will be $8.49 per month.

If you are in Tier 5 because you have a large house or a pool, the cost of running the same light bulb is $34.70

California Grid Price Inflation Rate

The biggest savings from installing a solar electric system will be realized in the future years. Data from the California Public Utility Commission shows that average electric rates have increased from approximately 2 cents per kilowatt hour in 1970 to approximately 20 cents per kilowatt hour now. This is an average rate increase of 7% per year.

The most important fact, however, isn't historical grid price increases but what is going to happen in the future. Global oil shocks will drive the price of oil to $150 - $200 per barrel. Natural Gas prices will rise dramatically causing electricity prices to jump, not slowly, but quickly like a step function. In order to preserve your lifestyle, you will need to invest in solar.

Financing a Solar Energy System

If you are interested in financing a Solar Power System, the following is a cost benefit analysis for a 5 kilowatt system that would power a large California Home.

The monthly payments on a typical 5 kW system that is financed with a tax-deductable home loan are about the same as the payments to the utility company. Furthermore, the homeowner is insulated from rising electric rates for the next 30 to 40 years.

If the homeowner is further over baseline, the cost savings will be even more significant.

Cost Savings Analysis

The monthly payment on a solar electric system is about equal to the monthly electric bill today. In the future, however, energy prices will rise and the savings will be enormous. The total cash flow savings on this system is $87,412 which is many times the initial investment.

Additionally, investing in a Solar System today is an investment in your home. If you sell your home, you will have increased its value significantly

The Bottom Line

For a typical larger home, the homeowner would not spend any cash up front to pay for a system, would save almost $90,000 over the life of the system. Additionally, the $890 ($10,680 per year) electricity bill would require you to save an additional $267,000 for retirement (based on a 4% withdrawal rate from you retirement fund).

Solar is one of the best investments you will ever make.

Federal and State Incentives

There are two major State and Federal incentives:

1. CSI rebate of $2.20 to $2.50 per /watt

This rebate has been dropping rapidly due to high solar demand

2. Federal tax credit of $2000--This tax credit will end on December 31st, 2008.