Tuesday, March 21, 2006

Oh, Canada! Homeowners can sign 20-yr solar contract

Hey solarDwellers:

Also on Renewable Energy Access: an article giving major props to Ontario for following the German model of solar energy. (Germany pays homeowners many times the retail price of electricity to sell their solar energy to the grid). Basically, instead of getting a rebate up-front for buying solar, your Ontario house becomes a "micro-utility" and you sign a 20-year power production contract, kind of like big wind farms that sell their power to utilities that are seeking to add more clean energy into their mix. The utility will pay solar homeowners in Ontario $.42/kWh for their solar production, 7 times the $.06/kWh retail rate of electricity in Ontario. (To compare, California buys you're solar power at the average retail rate of $.15/kWh, and up to about $.30/kWh during the Summer peak hours if you're on a "time-of-use" bill schedule).

So, which is better . . . this German model where you pay off your solar over the period of the 20-year power production contract, or the traditional rebate model(like most states) where you get between 30-40% rebate/tax credits up-front, and then pay off the rest of the system over the next 15-20 years during which the utility pays you for your "excess solar" energy produced at the going "retail" rate for electricity(currently $.15kWh in California)?

Well, there's no huge difference after all in the long run.

Ontario/Germany model: you would pay the whole $27,000 for a 3kW system up front and it would have a 20-year payback period, with you earning about $1400 back on your investment in the first year, about a 5% return on investment. Each following year you would get that same amount back, plus an extra amount to account for inflation.

California rebate model: you would get about $7,000 back in a rebate and $2,000 back from the federal tax credit in the first year, making your first year up-front cost about $18,000 instead of the $27,000 in Ontario. You would earn about $615 back with power sold back to the utility in the first year in California, about a 3.5% return on your $18,000 net investment. The $18,000 would then take you between 15-17 years to earn back when the utility pays for your excess solar energy at PG&E's retail rate of .15/kWh, which will also increase with inflation over time.

After looking at both models, the traditional California model still looks a little better when compared to the Ontario numbers. I say this because with the rebate, your up-front cost is less, and, in the end, your payback period is even a little shorter. The Ontario program sounds a lot better at first because you see that big $.42/kWh they pay you for solar, but in California the difference is made up by the big rebate you get at the beginning. (The same model in Germany would be much BETTER than California, because they would pay you around $1.00/kWh of solar sold to the utility instead of $.42 in Ontario).

All-in-all, the Ontario program is still ambitious and predictable for homeowners, because it does make that 20-year written contract commitment to buy back a homeowner's solar, whereas, the public utility commission in California could decide at any meeting to increase or decrease the rate at which they pay homeowners for their solar power. Interesting stuff.

--the solarDweller
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