We just signed up to participate in a program called Solar Chicago that looks to expand the installed, distributed solar capacity by bringing affordable installations to residential customers. Solar reached grid parity in southern US climates years ago, but is just starting to approach that here in northern Illinois. The program looks to help increase the demand for solar by incentivizing early adopters with financial terms that should help make the case for a future of distributed solar. On the surface, the numbers look good.
Currently, on the real-time pricing program with ComEd, we pay around $0.06 per kilo-watt hour (kWh) for electricity. That averages out to about 5% less than the ComEd flat rate, and just under the current City of Chicago municipal aggregation rate. The cold winter, surprisingly enough, was the major reason for the spike, as we have been paying about $0.055 per kWh this summer. If a solar project is to work, it would make sense for it to cost less than $0.06 per kWh as a starting point.
The Solar Chicago quote we received priced out a 3 kW system for about $13,500. If we participate, we get a $4,000 tax credit off our 2014 federal income tax, reducing the net cost of the installation to $9,500. An Illinois Department of Commerce and Economic Opportunity rebate would offset another $3,500 in cost, lowering the final installed cost to $6,000. The program managers know this is an important target because a 3 kW system can produce around 4,380 kWh of total electricity over the year. Since the system will last a minimum of 25 years, that means that it will produce a total of 109,500 kWh over the lifespan. For the installed cost of $6,000, that equates to $0.0548 per kWh...just under the current market rate for electricity.
This financial analysis assumes that the price for electricity will remain constant relative to inflation. Since this has not happened in any decade over the past sixty years, and certainly not since the deregulation of the Illinois electricity market, the solar electricity will cost less than market price moving forward, meaning the installation makes better economic sense than remaining a full utility customer.
There are several concerns that must be addressed when making this decision as a homeowner. Unless one plans to live in the house for the full 25 years, it must make sense to pass on the value or the cost to a future homeowner. Solar homes have shown a propensity to higher market value than non-solar homes, but this is temperamental. It would be better if we had a market mechanism, such as property-assessed clean energy (PACE) which allows the homeowner to pay for the system using funds provided by the taxing body, then pay for the installation over the property tax bill for 25 years. Alternatively, the utility could get into the game and provide the system using on-bill financing, which would also transfer to the next tenant. Any of these would lower the risk to the new owner.
As for us, we plan to approach the bank to finance the project over a reasonable term, and hopefully using the system itself and not the home as collateral. We expect that to be a difficult conversation, but the financial community needs to find creative ways to finance these types of projects. The City of Chicago name on the program should help this conversation, and there will be financial entities willing to help. We just hope that it comes from our local bank so that almost everything we do provides some benefit to the community.
Stay tuned for more details as we move forward.
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