A friend said he was considering solar and batteries for his home, but the economics just didn't pencil out. The payback time would be more than a decade and that didn't seem worth it. He is looking at getting a 14 kW system. He then asked how much we saved with our 12 kW system (with 40kWh of batteries).
As you can see in the chart above, we generated $2193 worth of electricity in 2021.
The dollar amount is important, but it is far from the complete story. Before I jump into the complexity, here are some more easily digestible graphs from our solar app:
We're on a Time-of-Use (TOU) electricity schedule. This means that we pay more during peak hours and less during off-peak. TOU is optional from our utility. We're on this program because it saves us money. The solar panels and batteries reduce our peak and partial-peak usage; while charging our EVs overnight shifts a major load to off-peak. As you can see above, our Powerwall home battery packs handle a majority of our home load during peak hours. The batteries allow us to time-shift our solar (primarily generated during partial-peak) to peak hours. So now the sun can power our home when it's best for us, rather than when the sun happens to be shining.
The partial peak usage is higher than I'd like it to be, but this is just the "normal" rate (as if we were not on TOU), so the solar is primarily charging up the batteries during this time, rather than powering our home, so the batteries can then discharge during the peak hours. That's why we're primarily grid powered (58%) during this time.
And finally off-peak. This is generally overnight, so we are not going to have any solar during these hours. The exception to this is Sunday (and some holidays). The Tesla solar app currently does not handle this very well. They only have a "weekend rate" and it does not allow Saturday and Sunday to be on different billing schedules. So this is not accurate since there should be 52 Sundays and 6 holidays worth of off-peak solar generation. They have made several TOU improvements in the solar portion of the Tesla recently; I hope this is improved soon too.
And the last item before we jump into the exciting math of electricity bills: backup power. You can see in the list above that we had several minor outages and one big one in 2021. Having solar and batteries allowed us to keep the lights and the heat on during a cold night in February when our neighborhood lost power.
Electricity Bills
Call it your power bill, light bill (Eastern/Southern US), or hydro bill (parts of Canada); a lot of modern living is electrically powered. This is an essential utility that most of us pay (too much) for. Let's deep-dive into an electricity bill and see how much we really save with solar.
It would be nice if electricity bills were easy to understand. A simple charge per kWh and perhaps a monthly connection fee, but the reality is far more complicated. As you can see, my monthly bill below has 23 line items.
Let's make this bill understandable. First, we'll split things into fixed charges (items that will be there every month regardless of our use) and variable charges (items that change with use). And, just because nothing can ever be simple, a couple of the fees are a percentage, so they are variable, but not per kWh, applying to both fixed and variable fees.
Fixed charges:
| Charge | Amount |
|---|---|
| Basic Charge | $11.00 |
| First Block Adjustment | -$7.22 |
| Smart Battery Reward | -$20.00 |
| Low-Income Assistance | $1.04 |
| Oregon Commercial Activities Tax Recovery (portion applied to fixed charges) |
$0.015 |
| Public Purpose Charge (portion applied to fixed charges) |
$0.055 |
| Fixed Cost Subtotal | -$15.11 (credit) |
You can see that we're starting out each month with a negative $15 electricity bill. This is generally driven by the $20 credit that we're receiving for being in PGE's virtual power plant program.
For the variable charges, we're going to collapse a few things. If a given kWh has a base rate, a transmission cost, a distribution cost, a regulation adjustment, ... and some are fees and some are credits, the waters get muddy quickly. To avoid this, we're going to bottom-line it; all of these will be rolled together for one per kWh rate for each TOU rate. Here are the fully adjusted rates:
| Off-peak | Partial-peak | Peak | |
|---|---|---|---|
| Basic Rate | 4.128¢ | 7.051¢ | 12.38¢ |
| Fully Adjusted Rate | 5.336¢ | 16.536¢ | 21.966¢ |
Looking at the table above, you can see that the off-peak price does not change much when adding in all of the adjustments. For partial-peak and peak, it's another story; each is about 10¢ more (per kWh) than their unadjusted starting rate. For Partial-peak that more than doubles the price.
Now let's apply these prices and compare the "with solar and batteries" to the "without solar and batteries" versions of our house for all of last year's electricity usage.
Is It Worth It?
In 2021, we used a total of 25,400 kWh. If we didn't have solar, we'd have had to pay $3377 for this energy. As you can see in the first graph (repeated below), our solar panels generated $2193 worth of energy in 2021.
Additionally, because we have home storage batteries, we were able to join the PGE virtual power plant program. PGE pays the participants in this program. This further reduced our annual electricity cost by another $240 in 2021. So, rather than paying $3377 in 2021, we only had to pay $944. We also had some discounts for allowing the utility to control our smart thermostat, but that's not relevant to this discussion.
If you pay twenty thousand dollars for a solar-plus-battery system and only earn $2000 in payback each year, it is going to be a decade before you break even (longer if you include opportunity cost or interest on a loan).
You might end up selling your home before you recoup the out-of-pocket costs. However, the panels on your home also increase the resell value. So, I can see why my friend said this does not pencil-out as a no-brainer, but that does not necessarily mean it's not worth it.
There are many more factors to consider (listed below), but before we go there, I want to finish the economic portion of this. I know that the price for energy from these panels will be fixed at zero going forward (assuming no out-of-warrantee failures). Yes, you pay upfront, but 5 years from now, when the electricity prices have gone up and up again, you'll be (somewhat) isolated from these price swings. My friend that started this discussion recently retired. Having a predictable expense is valuable, especially on a fixed income. You don't want to be deciding on buying groceries or paying for utilities that have significantly inflated in price while your retirement income has not kept pace.
More Than Just Money
For us, solar with batteries provides a level of independence. It means if the grid goes down during a heatwave, our AC can keep running. It means if the grid goes down during a winter storm, we can keep our furnace running. It means that we have little-to-no grid usage during peak hours when they're most likely to be using peaker plants (some of the dirtiest sources). Participating in our utility's virtual power plant program means that they can call on us to power our neighbors, rather than turning on a peaker plant. Having solar means that our (local monopoly) utility is not our only source of energy.
If you want solar on your home (with or without batteries), you can use my referral code to get $300 off a system from Tesla.
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