The combination of a high electricity usage residence, low lending rates, and public incentives allow a household in San Jose's Almaden Valley to show a positive cash flow in the first year after implementing a solar photovoltaic energy system.
Annual electric usage: 20,000 KWH
Pre-install electric bill: $400. mo.
Net savings / 10 yrs: $15,000.
System Size: 4.8 KW
Installer: Solar Technologies
Silicon Valley Sales Manager: Matt Ledna
Situation
The household for this case study is located in the Almaden Valley neighborhood of San Jose California. The residence originally had a very high electric bill - over $400/month - due to a combination of factors including a swimming pool, air conditioning load in a relatively large house, and the normal array of electronic gadgets and high-definition televisions found in a typical Silicon Valley household. The yearly electricity usage was over
20,000 KWH.
There were several complicating factors in designing a solution.
The first was a relative lack of usable roof space due to the presence of a solar pool heating system.
In addition to taking up valuable real estate on the roof, the solar water heater also required that the pool pump be run in the afternoons - during peak hours - in order to circulate the warm water.
The third major factor was that the array would be oriented at 165 degrees, skewing system production towards the morning hours rather than peak afternoon hours.
Solution
Due to the lack of roof space, the final system was limited to 4.8 KW in size. Annual solar energy production was projected to be approximately 35% of prior year's usage. Due to the factors noted above, the decision was made to stay on a tiered usage rate structure rather than moving to a time-of-use program as the system would not be capable of offsetting sufficient peak usage to make time-of-use cost effective. In this case, the customer was using over 6,000 KWH of power in the Tier-5 rate, accounting for almost half of their monthly bill in dollar terms.
In spite of the inability to use the time-of-use rates, the system had tremendous financial benefit to
the customer.
By taking out the majority of their Tier-5 electricity usage their projected first-year savings due to solar was approximately $2,400.
After factoring in the California Solar Initiative rebate, the customer was able to finance $31,800 on their home equity line of credit (HELOC) at an interest rate of 3.5% amortized over 15 years. This resulted in a first year loan payment of $2728.
The $2400 first-year electricity savings combined with the tax benefit of writing off the interest from the HELOC amounted to $2740, for a first-year cash-flow savings of $12.
Though not a stunning amount, considering that the system was 100% financed with no out-of-pocket expenses this meant that the system was generating a positive cash flow for the customer in the first year.
Projected second year savings became much more impressive.
After deducting the benefit of the 30% federal solar tax credit from their loan amount and modeling a guesstimated 1.25% increase in the interest rate on their loan, their projected payment in year 2 was down to $2019.
Their net positive cash flow for the year was up to $878.
This yearly saving amount increased for the remaining 8 years of our financial model, yielding a net savings of almost $15,000 over 10 years, AFTER deducting the costs of paying back the loan.
We are no longer talking about a payback period of years for a residential solar energy system. In cases such as this there is an immediate positive cash flow from the day the system is turned on. In simple terms, they were paying LESS on their loan than they would have been paying to their utility.
That is money in the pocket starting in the first month. And when those loan payments eventually end the savings are even greater.
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