Santa Clara, California has its own utility, Silicon Valley Power (SVP). SVP's electricity rates are low compared with those of PG&E. Because of that, I had assumed that it would not make financial sense for someone in Santa Clara to have a photovoltaic system installed on their roof. But then I found out that Silicon Valley Power has a very generous Solar Electric Rebate, currently $3.75 per watt for residential installations under 10kW. Also the $2,000 limit to the 30% Federal Residential Renewable Energy Tax Credit has been lifted as of January 1, 2009. That changes everything. A PV system in Santa Clara can pay for itself in 16 years and last much longer than that.
A residential photovoltaic system costs about $8/Wwatt installed, before applying any tax credits or rebates. This blog post on Per-Watt pricing of PV systems in CA suggests that the installed costs have dropped to closer to $7.5/W in mid-2009. I can not verify those numbers, but it is in line with the costs shown in Chapter 3 of Tracking the Sun - The Installed Costs of Photovoltaics in the U.S. from 1998-2008.
If the cost of a PV system is $8/W, then the 30% Federal tax credit is worth $2.40/W. Add in the current $3.75/W rebate from Santa Clara's utility, and the net cost of the PV system after tax credit and rebates is $1.85/W or just $1,850 per KW. For a typical 4 KW system, that would be $7,400.
The average Santa Clara household uses 500 KWH per month according to an SVP FAQ. That would be 6,000 KWH per year. Using the published electricity rates for 2009, that would cost $39.60 per month or $475.20 per year including the public benefits charge and the state surcharge (which are proportional to KWH used), but not including the monthly meter charge (which is fixed regardless of KWH used).
For my calculations, I assumed that the house is not fortunate enough to have an optimal south-facing roof and that the PV array will face west. This is not the worst-case scenario, but it gives a conservative number for KWH generated by the PV system. A more south-facing array would produce more electricity. I assumed the solar panels are tilted 30 degrees from horizontal. Many house roofs in Santa Clara have roughly that slope. I assumed that the PV system will not always be clean and free of dust and pollen, and will thus produce 10% less than optimum.
In October 2009 the California Solar Surplus Act of 2009 was signed into law requiring utilities to write a check to their customers for surplus solar electricity generated on an annual basis. The California Public Utilities Commission (CPUC) will have to set a rate at which utility customers will be compensated whenever a solar system generates more electricity than it uses in a year. Until now, the utility was allowed to keep that excess electricity for free.
I entered all these assumptions into the Clean Power Estimator at http://cec.cleanpowerestimator.com, along with the zip code 95051. I could not use the electric bill and financial results of the Estimator, because they insist that the utility is PG&E and will not let one designate Silicon Valley Power as the utility. Strangely, the amount entered for Electric Bill $/mo affected the results the Estimator gave for Monthly PV Output, so I set that to the maximum to avoid false Monthly PV Output numbers. Trying different PV System sizes, I found a 4,000 Watt system could produce almost all the electricity that an average Santa Clara household would need in a year. It will generate more than needed in the summer and less than needed in the winter, but with net-metering, it should balance out.
When the California Solar Initiative was passed, there was a requirement that incentive recipients be billed using Time-of-Use (TOU) rates. This requirement was removed in June 2007 with the implication that it would be reinstated at a later date. With Time-of-Use billing, a customer gets charged more for electricity used during "peak" daytime hours and less for electricity used during "off-peak" hours. For SVP, peak hours are 6 am to 10 pm, Monday through Saturday, excluding holidays.
I do not know if SVP net-metering customers with solar systems will be required to use SVC's TOU rates in the future or not. As a worst case scenario, I assumed that the PV system owner will be on TOU rates, and that all the electricity used will be during peak hours. This results in an annual electric bill of $50.11, and an annual savings of $458.16. If TOU rates are not required, the annual bill would be $43.58, and an annual savings of $464.69. Not a huge difference. My calculations are shown in a spreadsheet viewable here. Assumptions are shown in blue and can be changed (if you download the actual spreadsheet) to see how the results would change.
Dividing the $7,400 cost of the PV system (after tax credits and rebates) by the $458 or $460 annual savings on the electric bill, gives a simple payback time of 16 years. Simple payback assumes that the utility rates will not change from year to year, and that there is no time value of the money; no interest rates associated with a loan, and no interest gained by investing the money in something other than the PV system. In reality, SVP's electrcity rates have increased 3% for each of the past two years. Past performance may not be indicative of future results.