It’s Your Money (Part One)

This site is about the economics of using renewable energy, specifically generating electricity from the sun rather than buying it from the local utility. There are advantages to doing this, including:

  • Stabilize what you pay for electricity for twenty five years or more. This is a good idea unless you think your local utility will keep the rates down for the next decade.  Perhaps a quick view of what has happened in the last since 2003 might be useful. The following table  shows how much money, in total, the US Utility Industry has taken in, broken down by sector.

Period

Residential

Commercial

Industrial

Transportation

All Sectors

Annual Totals — In Millions of Dollars
2003 $111,249 $96,263 $51,741 $514 $259,767
2004 $115,577 $100,546 $53,477 $519 $270,119
2005 $128,393 $110,522 $58,445 $643 $298,003
2006 $140,582 $122,914 $62,308 $702 $326,506
2007 $148,295 $128,903 $65,712 $792 $343,703
2008 $155,433 $138,469 $68,920 $827 $363,650
2009 $157,008 $132,940 $62,504 $828 $353,280
2010 $166,782 $135,559 $65,750 $815 $368,906
2011 $166,714 $135,926 $67,606 $803 $371,049
2012 $163,352 $133,908 $65,691 $754 $363,705

Source: U.S. Energy Information Administration —  http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_2

As you can see, the gross revenue for the utility industry has increased slightly more than $100,000,000,000 (that’s one hundred billion dollars) in nine years. The next question is, “Did the amount of electricity they delivered during that period of time increase accordingly?” See for yourself. Once again, from the U.S. EIA:

Period

Residential

Commercial

Industrial

Transportation

All Sectors

Annual Totals — In millions of kilowatt hours
2003 1,275,824 1,198,728 1,012,373 6,810 3,493,734
2004 1,291,982 1,230,425 1,017,850 7,224 3,547,479
2005 1,359,227 1,275,079 1,019,156 7,506 3,660,969
2006 1,351,520 1,299,744 1,011,298 7,358 3,669,919
2007 1,392,241 1,336,315 1,027,832 8,173 3,764,561
2008 1,379,981 1,335,981 1,009,300 7,700 3,732,962
2009 1,364,474 1,307,168 917,442 7,781 3,596,865
2010 1,445,708 1,330,199 970,873 7,712 3,754,493
2011 1,422,801 1,328,057 991,316 7,672 3,749,846
2012 1,374,594 1,323,844 980,837 7,504 3,686,780

 

The short answer is, “No.” By comparing the two tables, you can see (for yourself) what has happened between 2003 and 2012.

  • Gross revenue increased by more than one hundred billion dollars or 40%.
  • Total product delivered (measured in millions of kilowatt hours) increased by 5.53%

This is NOT a “let’s throw rocks at the utility industry” ploy. The reasons behind increased utility costs are many. This is a colossal and very complex industry, and few of us have a direct influence on what is done.

Regardless of “Why,” the important thing is that this data supports the idea that generating your own power makes economic sense. The next question you should be asking is, “If I were to buy a solar system and generate my own power, how long would the system last?”

Solar PV System Life Expectancy

In order to understand just how ‘bulletproof’ solar panels are, consider the following scenario. Your favorite lawyer (if you have one) and your favorite engineer decide to go into business together to manufacture a product. They have to decide “How long should our warranty be?” Remember, both are conservative and cautious by training. Get it?

OK, solar panel manufacturers have engineers and lawyers, and they provide a warranty on their product. As a general rule, solar PV panels come with a twenty five year production guarantee. What does that mean?

Let’s say you buy a 250 watt solar panel. The question is “In twenty five years, how much power will it produce?” The answer? The manufacturers warrant that the panel will produce 80% (or more) of rated output after it has been in use for 25 years. It looks like this:

250 Watt Panel * 80% = 200 Watts

Not only will a solar panel produce this much in twenty five years, it will continue to produce for decades thereafter.

Conclusion – Return on Investment

In conclusion …

  1. It is likely that the cost of electricity will continue to increase.
  2. Solar panels last a long time.

Hence … buying a solar system is not like buying a new car and watching the value drop by 15+% when you drive it off the lot. As a matter of fact, within the context of Return on Investment, buying a solar power plant for your home and generating your own electricity is an investment that appreciates in value. The power that you generate (look at the tables above) are going to get more and more valuable. In other words, if you are going to buy kilowatt hours from your utility company, plan on paying more and more every year. 

warren-buffettMake a smart investment. Follow in the footsteps of the acknowledged big hitters, like Warren Buffet or Google or CitiBank or Goldman Sachs. They are making renewable energy investments right now. You don’t need megabucks. A small business or home owner can follow in the Oracle of Omaha’s footsteps, albeit on a smaller scale.

MTC (more to come).

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