A Technical Discussion of Utah Electrical Rates — Solar Reaches Grid Parity for Residential Customers

Announcing an Energy Cost Breakthrough – It now costs less to generate your own power using Solar PV than to buy it from Rocky Mountain Power! 

Savvy homeowners pay attention to the money they spend to run their home every month. With energy costs increasing constantly, more and more people are asking, “Could ‘Going Solar’ save us money?”

If you are a Rocky Mountain Power (“RMP”) customer living in Utah, the answer is “Yes.” Owning a solar system and generating your own electricity is less expensive than buying it from the utility every month. Over the years, Solar Power Plant Owners will save thousands and thousands of dollars.

This breakthrough occurred as the result of the fact that RMP’s October 12, 2012 rate increase raised monthly bills while the cost of solar installations continued to decrease. The result? Solar has achieved “Grid Parity” in Utah, the state with America’s fourth lowest per kilowatt hour rates. In other words, buying a solar system and generating your own electricity costs less than purchasing power every month from RMP. Even more startling, this grid parity is achieved without taking the Federal or State tax credits. With the tax credits, solar homeowners are locking in rates that are approximately half of the current RMP rate; since solar panels have a twenty five year production warranty, the rate stays the same for decades! Note: On January 28, 2011, a RMP spokesman promised that RMP would seek 8%-10% rate increases of 8% to 10% every year for the next decade. The savings go up and up.

The following table shows the current costs of buying 800 Kilowatt hours per month in winter and 1200 KWh in summer from Rocky Mountain Power and compares those rates with the 25 year per KWh costs of the two most common solar system configurations, grid-tie and battery backup. Solar rates are shown both without and with Federal (30% of system cost) and Utah State (25% of system cost up to $2,000) tax credits. In every scenario but one, solar is less than Rocky Mountain Power without the tax credits. If you use the tax credits, even the most expensive solar system is now a better long term buy than RMP!

Rocky Mountain Power per KWh rates,  as of  10-12-12

Solar System Type

Average Solar KWh Rate WITHOUT Tax Incentives

Average Solar KWh Rate WITH Tax Incentives

$0.115131

Grid Tie

$0.100846

$0.057955

 Not Available

Battery Backup – Includes  “Interruption of Service” guarantee

$0.149278

$0.090278

The following pages contain:

ü  Details regarding Rocky Mountain Power’s October 2012 rate increase.

ü  An explanation of how much electricity a solar system will generate.

ü  How the costs associated with installing a solar system compares with the costs of continuing to buy electricity from Rocky Mountain Power.

Rocky Mountain Power’s October 2012 Residential Rate Increase

On October 12, 2012, Rocky Mountain Power raised their rates to residential (and all other) customers. In the table below, the new rates are compared with the rates that were in place on June 3, 2010. This will give you an idea of how much they have gone up in two short years, and the increases are also shown as a percentage. You can decide for yourself if you think RMP will continue to raise your rates.

 

June 3, 2010

October 12, 2012

% of Increase

Customer Charge

$3.75

$5.00

33%

May – September

 

 

 

  • First 400 KWh

7.5292¢

8.604¢

14.28%

  • Next 600 KWh

9.2749¢

11.2115¢

25.39%

  • All addt’l KWh

11.5361¢

14.027¢

26.12%

October – April

 

 

 

  • First 400

7.8009¢

8.604¢

10.29%

  • All addt’l KWh

7.8009¢

9.6095¢

23.18%

Total Taxes & Surcharges

12.24%

12.79%

4.49%

Assume that an average family consumes an average of 800 KWh (“Kilowatt hours”) per month in the period from October through April, and 1,200 KWh each month for the period from May through September. How much more will it cost and what is the effective per KWh rate? Note: if you find that you consume more than our average family, your cost per KWh will be higher than that shown below.

June 3, 2010

October 12, 2012

June 3, 2010, Annual Costs

October 12, 2012, Annual Costs

Winter – Total Average Monthly Bill

$70.05

$82.17

$490.32

$575.20

Summer – Total Average Monthly Bill

$123.90

$152.06

$619.51

$760.31

Total Annual Costs  for Electricity

$1,109.83

$1,335.52

Average Cost Per Kilowatt Hour

$0.09675

$0.115131

How much electricity will a solar photovoltaic system produce?

Now that you know what it will costs per KWh to buy electricity from Rocky Mountain Power (and remember, they will probably continue to ask for rate increases), let’s look at what a Solar system can do for you. There are three variables that determine the how much electricity a Solar PV System generates.

  • System Size – Multiply the number of panels by the size of the panels.
  • Insolation – On average, how much sun does your area receive every day?
  • System Efficiency – The two types of solar PV systems operate at different efficiencies.
    • Grid Tie Systems operate at an efficiency of approximately 90%.
    • Battery Backup Systems operate at an efficiency of approximately 80%.

Provided a Solar PV system is installed properly, multiplying these variables together will provide an accurate estimate of the system’s daily electrical production as measured in Kilowatt Hours. The following table compares the production of a 4 kilowatt system (4,000 watts comprised of sixteen 250 watt panels) installed in Northern Utah where there is an average of 5.3 hours of sunlight each day.

Solar System Production Calculations and Comparison of System Types

  Grid Tie   (90% Efficiency) Battery Backup  (80% Efficiency)
Calculations 4,000 watts x 5.3 x 90% 4,000 watts x 5.3 x 80%
Daily Production 19,080 Watts or 19.08 Kilowatt Hours 16,960 Watts or 16.96 Kilowatt Hours
Monthly (30 day) Production 572.4 Kilowatt Hours 508.8 Kilowatt Hours
Annual (365 day) Production 6,964.2 Kilowatt Hours 6,190.4 Kilowatt Hours
25 Year Production[1] 158,261Kilowatt Hours 140,677 Kilowatt Hours
What are the benefits of the two kinds of solar system configurations? Decrease monthly utility costs, and stabilize long term cost of electricity.Note—if the grid goes down, you do not have backup power. Personal Power Plant — if the grid goes down, power is still available.Decrease monthly utility costs and stabilize long term costs of electricity.

OK, so now we know that, depending on the kind of system you choose, over just the twenty five year warranty period, Solar will produce 158,621 KWh if you get a Grid-Tie System and 140,677 KWh if you decide on a Battery Backup System. These systems will continue to produce electricity for a lot longer than twenty five years, so these estimates are conservative. The next step in our analysis will enable us to see how much we are actually paying per KWh when we “Go Solar.”

How much does a solar system cost, and how do I translate that into a cost per Kilowatt Hour (KWh)?

At today’s prices, a Grid Tie system from Progressive Power, Utah’s oldest solar PV provider, will cost $3.99 per installed Watt. A Battery Backup System will cost $5.25 per installed watt. Based on these costs, and using the information shown in the table above, it is easy to figure out what it will cost, per installed watt, to generate your own power.

 

Grid Tie

Battery Backup

System Size 4,000 Watts 4,000 Watts 4,000 Watts 4,000 Watts
Cost Per Installed Watt $3.99 $3.99 $5.25 $5.25
Total System Cost $15,960 $15,960 $21,000 $21,000
Less Tax Credits No Tax Credits $6,788 No Tax Credits $8,300
Effective Cost $15,960 $9,172 $21,000 $12,700
25 Yr KWh Production 158,261 158,261 140,677 140,677
Effective Cost per KWh $.090278 $.057955 S.149278 $.100846

Remember, today’s Rocky Mountain Power effective per KWH rate is $0.115131 – that’s eleven and one half cents per kilowatt hour. Also remember that RMP has promised to seek rate hikes of 8% – 10% per year every year for the next decade. That doesn’t mean they will always get that much, but it is worth keeping in mind.

It is up to you. You can see that owning a renewable energy power plant and generating your own electricity is less expensive, in the long run, than buying electricity from Rocky Mountain Power.

Conclusion — Solar is a Family Value

  • For Dad, it is a good investment, and a sensible economic decision. After all, electricity is the “life’s blood of our modern lifestyles,” and especially if you invest in a battery backup system, you are providing your family with an unprecedented level of security in an emergency.
  • For Mom, it is a matter of peace of mind. No matter what happens, the “nest” has power. There is no reason to worry about the food in the freezer and the refrigerator; the inconvenience of power outages are gone – if the grid goes down in the winter, your home stays warm and well-lit. It’s one less thing to worry about!
  • For The Rising Generation – going solar is the right thing to do. It is the right way to live—it’s a whole new lifestyle decision – of course, it’s always nice to know that your family is cool!

Going solar is like buying a cell phone – pretty soon, everybody had one. The same will hold true with going solar – it is a technology, and a lifestyle, whose time has come.  Don’t be the last one on your block to get the message!



[1] 25 Year Production calculations incorporate an annual .7% deterioration in system production. At the end of 25 years of use, system manufacturers warrant panels to produce at 80% of rated output, e.g., a 250 watt panel will produce 200 watts.

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