Another solar shenanigan is best illustrated by a true story: An old friend called me up one day and told me that he and his wife had been researching and shopping for solar for some time. At the time, I was more focused in the commercial market, but I knew residential rates quite well. He told me that he was paying for the system, and I asked how many panels there were and what the wattage of those panels was. Simple math led me to see that he was paying quite a bit more per watt for his system than I considered to be wise or even remotely good. It was REALLY expensive. He said that he felt good about the decision because the system would pay itself off in 5 years. Having vetted, developed, built, bought and/or sold multiple gigawatts of solar projects all around the world at that point in my career, I knew immediately that his system wouldn’t come close to the number he suggested. I asked him to send me a copy of his proposal, to see what the company was using for its assumptions as it tried to calculate anticipated savings and things of that nature.
Something jumped out at me almost immediately: The company told my friend that he should expect for power rates to increase by 10% per year for the life of the system. I told him that this wasn’t even close to realistic. In our projects we always assumed that the utility rates would increase by 2-3% per year and 3-4% on residential. This was backed by massive amounts of data held by the Energy Information Agency (www.eia.gov). The difference between 3 and 4% when extrapolated over the 25 year warranted life of a solar panel is massive, let alone the difference between 4% and 10%. Apparently this company had found an article wherein the CEO of an electric utility said that they would be requesting 10% rate increases for the next 10 years. Anybody that has followed rate cases for regulated utilities knows that the utility always asks for more than they end up getting. Even assuming that the utility were going to get a 10% rate increase each year for the next 10 years, it is highly unlikely that it would go beyond that and the utility didn’t seem to indicate that they were interested in pursuing beyond that time.
The difference between a 4% and a 10% rate increase is massive. If a customer experienced 4% rate increases for each of the next 25 years, a customer currently paying 8 cents per kilowatt hour would be paying 20 cents per kilowatt hour at the end of 25 years. With a 10% annual increase the customer would be paying approximately 79 cents per kilowatt hour. Since solar levelness out the rate increases, you can see why trying to show a 10% rate increase would make the decision to buy solar an incredibly smart decision. Unfortunately, it is not likely to happen. Could it happen? I suppose anything could happen. But remember that rate increases impact all people equally, and if they go up by that insane number, all solar customers would benefit from that increase equally. I do feel confident that rates will continue to increase at rates similar to the historical increases, but anything above that is wishful thinking by people that are trying to justify charging too much for their solar equipment.
Unfortunately, this friend was locked into his contract. I tried to make him feel better, and once I realized that he was stuck I withheld my full opinion, but I still wish he would have contacted me sooner. Oh well.