Is Utah the Canary in America’s Solar Mine?

The Small Businesses Benefits of “Going Solar”

Note: This article discusses the impact solar has on “meter spin” costs only, but does not address the costs associated with demand.

In days of old, miners took a canary into the depths of a coal mine. If the canary was singing (or at least not laying on the bottom of the cage with its feet in the air), they knew they were safe. Today, the solar industry is likewise watching what is happening in Utah.

According to data acquired from the United States Energy Information Administration, Warren Buffet’s Rocky Mountain Power small business customers pay the fourth lowest per kWh rates in the USA. Since there are sound, dollars and cents reasons for Utah’s small businesses to “Go Solar,” what we have learned will prove useful for other solar providers elsewhere.

This article discusses solar economics for Utah small businesses on Rocky Mountain Power’s Schedule No. 23—those which have “a power requirement not greater than 30 kW during seven (7) of the continuous twelve (12) month period and never exceeding 35 kW.”[1]

The following table is summarizes the effective per kWh cost for businesses that consume an average of 5,000 kilowatt hours per month. The numbers speak for themselves.

 

Tax Credits Plus Depreciation

No Tax Credits, Depreciation Only

Rocky Mountain Power

$3.50 per installed watt

$4.00 per installed watt

$3.50 per installed watt

$4.00 per installed watt

$0.0855

$0.0279

$0.0319

$0.0585

$0.0669

Even without the tax credits, distributed generation of power via a solar grid tie system is a sound, forward-looking investment. With the tax credits? Judge for yourself (uh, duh).

In arriving at these estimates, we begin by reviewing RMP Schedule 23 ‘meter spin’ rates effective today, and contextualize them by documenting recent rate increases.

 

Jan 2011

October 2012

% of Increase

Summer: May – September

 

 

 

  • First 1,500 kWh

9.8214¢

11.3509¢

15.57%

  • All addt’l KWh

5.5603¢

6.3782¢

14.71%

Winter:   October – April

 

 

 

  • First 1,500 kWh

9.0400¢

10.4504¢

15.60%

  • All addt’l KWh

5.0688¢

5.8738¢

15.88%

Naturally, taxes and surcharges must be paid as well. As of today (April 2013), this amounts to an additional 13.91%.  Hence, total charges (meter spin + taxes and surcharges) for an average of 5000 kWh per month is as follows:

 

First 1500 Kilowatts

Additional Kilowatts

Average Monthly Cost

Blended Rate per kWh

Summer (5 months)

$193.95

$254.29

$448.24

$.08965

Winter (7 months)

$178.56

$234.18

$412.74

$.08255

Solar beats these numbers, and soundly.  We start with the three key variables that determine how much electricity our customer can reasonably expect from a 30 KW Solar PV System. We get 5.3 hours of sun per day, and rate the system at 90% efficiency.

Estimated Production of Electricity from Solar Grid Tie

Daily

143.1 Kilowatt Hours

Monthly

4,353 Kilowatt Hours

Annual

52,232 Kilowatt Hours

25 Year[2]

1,201,768 Kilowatt Hours

Over the twenty five year warranty period, a grid-tie system in our area generates approximately 1,201,768 kWh. Naturally, we explain that the system produces for longer than twenty five years so these estimates are conservative. Knowing the production, we estimate the per kilowatt hour costs for solar-generated power amortized over the 25 year warranted life of the system. Internally, we’ll run the numbers at $3.50 and – $4.00 per installed watt.

 

With Incentives

Without Incentives

Cost per installed watt

$3.50

$4.00

$3.50

$4.00

System Size in Watts

30,000

30,000

30,000

30,000

Total System Cost

$105,000.00

$120,000.00

$105,000.00

$120,000.00

Less Federal Tax Credit (30%)

$31,500.00

$36,000.00

$0.00

$0.00

Less State Tax Credit (10%)

$10,500.00

$12,000.00

$0.00

$0.00

Less Five Year Depreciation

$29,452.50

$33,660.00

$34,650.00

$39,600.00

System Cost after Credits

$33,547.50

$38,340.00

$70,350.00

$80,400.00

Effective Cost per kWh

$0.0279

$0.0319

$0.0585

$0.0669

Obviously, there are factors which must be considered and discussed.

  • Maintenance – We charge $150 to $250 per annually for service. If the customer prefers, we’ll teach their maintenance team what to do.
  • Depreciation – The Depreciation estimate as shown above is calculated with the help of the SunMath template, and presume the system owner is in a 33% tax bracket.
  • Rate Hikes — RMP has promised to seek 8% – 10% annual rate hikes for the next decade. Year over year, they get at least 7%.
  • Cost of Capital — Most businesses will elect to finance their purchase. Interest adds up, but it is deductible.

Conclusion – “Going Solar” is a Sound Business Decision

Going solar makes good business sense, and more.

Note: For an excellent discussion of the benefits associated with being energy conscious, you may wish to read and even give to your clients a white paper written by Schneider Corporation’s Brandi McManus. Titled “Growing a Green Corporation,” it presents a compelling case for being energy conscious.

The bottom line? There are greenbacks in being green.

Editor’s Note — here is a link to the article in which a Rocky Mountain Power spokesperson is quotes as saying that RMP will seek an 8-10% rate increase every year for the next decade.
RMP Submits Biggest Rate Hike Ever, Jan 2011


[1] This article is based on Rates described in Utah PUC Dockets No. 09-035-23 and 11-035-200, as well Rocky Mountain Power – State of Utah Price Summaries, in effect January 1, 2011, June 1, 2012, and October 12, 2012.

[2] 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.

3 Comments on "Is Utah the Canary in America’s Solar Mine?"

  1. Great posts! But the “sample page” should be removed 🙂

    • Thanks Joia — perhaps I could respond to your good-natured comment

      I am old, I am bent
      I am cheated of all that youth urged me to win.
      But count me not among the defeated,
      For tomorrow again, I begin!

  2. Where can I find where Rocky Mountain Power promises an 8%- 10% increase a year for the next decade?

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