Guest authored by Andrew Lyle
Note: The City of Fort Collins is converting all of its residential customers to a Time of Use electric rate this fall, and other Colorado utilities may follow suit. This post is part 2 of a 3 part series on how to intelligently analyze energy management, solar PV, and battery storage under Time of Use circumstances. This post will dig into solar PV ownership.
Time of use rates are coming nationwide, if they haven’t been implemented by your utility yet. The implementation of these rates are far from a nefarious profit gathering ploy. Many customers don’t see a rate increase vs time agnostic traditional rates. Further, for those who choose to change their consumption habits to “game the system”, easy to reach savings can be had. One question is how this new rate structure affects returns on solar PV systems. Below is an analysis of possible outcomes for the City Of Fort Collins TOD rates. When a project analysis is undertaken, it is incorrect to do anything but hourly analysis on system performance.
One of the key concepts to understand when analyzing solar returns with Time Of Day (TOD) rates is to understand Levelized Cost Of Energy (LCOE). When you buy a solar system, you are essentially paying for 25 years of energy upfront. When you divide the cost of the system by expected production over those 25 years, you can find generally what the cost of that power is. This number is important as the larger the difference between the price of your solar power (LCOE) and the price of purchased power, the greater the return. Below are (3) different investigations: A South facing array under TOD rates, a West facing array under TOD rates, and the same array under traditional tiered rate structure.
A final comment on the analysis — all of this is done without adding into the equation any costs of carbon, environmental stewardship, and comfort in being able to produce your own power to consume. I would add these into my personal decision making but this is for everyone to decide for themselves. My personal goal in creating this guide is to give consumers the power to be informed ahead of time and not have unrealistic expectations about performance.
South Facing In TOD Rate
“Off winter” refers to the cumulative amount of savings from a solar array generated during off peak hours in winter. “On winter” refers to the amount of savings from a solar array generated during on peak hours in winter. “Off” and “On” summer refer to savings in those periods. Winter is considered September – May. On peak hours are 5-9 pm during winter and 2-7 pm during summer (weekdays only).
As we can see that the array creates the about 70% of its total value in the off peak periods, when the energy costs about $0.065/kWh from the utility. Annual savings total ~$585.
West Facing In TOD Rate
Let’s face the array west to get more evening power! While this strategy does work in the summer, the overall losses throughout the year actually make this a net loss compared to fully south. Annual savings total ~$550.
South Facing In “Traditional” Rates
How would have the system looked in the good ‘ol days? Annual savings total ~$780.
The take away would be that any analysis done by simply looking at monthly production then multiplied by a single cost of energy will lead to inaccurate projections. And although returns aren’t as competitive under TOD rates compared to traditional rates in this example, it is still a positive return for solar. Further, solar + storage systems are becoming more and more cost effective and storage will only work to magnify the effects of the solar production. The goal of this exercise was to present a straightforward look into solar PV financial performance with TOD rates so that everyone can make an informed choice as these rates become more common.