The good news is that solar electric systems make good financial sense for most California homeowners, as well as those in many other states. For California residents with a $70 or larger monthly electric bill, it is likely they’ll see: pre-tax equivalent rate of return of 10% or more; greater savings on the electric bill than a loan would cost; and home equity increasing more than the system costs. High Electricity Rates and California’s tiered rate system (with top rates of 49¢ per kWh) penalizes residential customers for high electric usage.

Net Metering allows a homeowner to get retail value for each kWh produced. Excess summer and daytime credits that were “sold” to the utility can be used up at night and in the winter. The utility becomes a battery that can store energy for up to a year. On Time of Use (TOU) rate schedules, electricity value depends on the time of day and year. The PG&E E-6 schedule has peak rates during summer weekday afternoons (29¢/kWh) and off-peak rates (as low as 8¢/kWh) at other times.

Combining Net Metering with TOU allows a solar customer to “sell” back power to the utility during peak periods at the high rate, and buy back during off-peak hours. Most solar electricity is produced during peak hours. The customer gets more value for the same kWh produced, and needs a smaller solar system to offset their electric bill. Afternoon shade must be avoided due to the higher value of afternoon electricity.

Systems are eligible for the Federal Tax Credit of 30% (no limit).