Delaware is a Great State for Solar
Solar as a technology depends on sunlight to produce electricity. In theory, the only thing that should affect how well solar works should be how many hours of daylight the solar panels receive. If the panels receive more sunlight, the consumer receives more electricity. That’s not exactly true though.
There are several factors that affect how good solar is from an investment standpoint:
- Price of electricity
- State laws
- Incentives and rebates
Price of electricity
The price solar offsets electric bills, so the higher the cost of electricity, the better the return on investment is. Delaware’s residential customers blended (includes all charges measured in kWh) electricity rate per kWh is currently around $.148. If a system offsets 10,000 kWh of electricity per year, the system saves the consumer +/- $1,480 annually. That is approximately the 11th most expensive state for electricity (although to be fair to Delaware, states 5-20 are all very close to one another in price.) See the average retail price of electricity by state.
If a consumer in another state offsets 10,000 kWh of electricity with solar, but the cost in their state is $.08 per kWh, they would save $800 annually with their solar. Remember that in Delaware, you would save $1,480 for the same amount of electricity production!
The main law that affects a consumer’s ability to benefit from solar is the requirement that utilities allow net metering.
Net metering is the process of spinning the utility’s meter backward if the solar panels are producing more electricity than the consumer is using. The meter spins backward at the same rate it would typically spin forward. All of the excess electricity is credited at the same rate that it would normally be charged to the consumer.
Net metering does more than just benefit the consumer with lower electric bills. It also helps the utility company. During peak times, such as on a hot day in the summer, when a lot of consumers are using a lot of electricity, the utility company sometimes resorts to rolling brown outs because there isn’t enough electricity to power everyone at once.
When electricity is being produced by homeowners at those times, the utility company doesn’t need to worry about sending power to them and can focus their energy on other homes or businesses. Also, when those homes produce excess electricity, that power is sent back to the grid reducing the stress on the grid. In short, producing your own solar power means cheaper power and less brown outs in the summer.
With net metering, the consumer only pays the net amount of power they use and what their system generates. They are also credited the amount of power they generate but don’t use. For example, if the house uses 1,000 kWh in a month and the system generates 1,200 kWh, they will have a 200 kWh credit for the following month because the net difference was 200 kWh in favor of the consumer.
Not all states permit net metering. Some states, like Louisiana, do not allow net metering, meaning that the monthly and annual savings are less than states that do allow net metering.
Incentives and Rebates
As the price of solar has decreased over the years, incentives in Delaware have remained to help encourage consumers to use it. There are grants to help pay for the system as well as money available to help meet environmental goals on an ongoing basis.
State grants often cover 10% or more of the price of solar (in addition to other large incentives available from other sources). Those incentives paired with the ongoing payments (SRECs) for environmental contributions also help increase the cost of having a solar electric system on your home.
Comparing Returns on Investment
Look at Louisiana. In Louisiana, power costs approximately $.10 per kWh for residential consumers and the state laws do not permit net metering nor offer incentives for purchasing solar. Although Louisiana’s sunlight hours are approximately the same as Delaware’s, the return on investment for purchasing solar is much lower.
In Delaware, you would save approximately $1,488 if the system produced 10,000 kWh of electricity. In Louisiana, if power is $.10 per kWh, you would save $1,000, but because there are no net metering laws, approximately 1/3 of the solar produced would be sent back to the grid without spinning the consumer’s meter backward. The true savings for that consumer for the same amount of solar would be approximately $675.
If the same consumer paid $8,000 after incentives in Delaware and $12,000 after incentives in Louisiana, the return on investment would take longer for the consumer in Louisiana.
Annual savings $675
Straight-line payback period 17.7 years
Annual savings $1,488
Straight-line payback period 5.3 years