Los Angeles Electric Rate Linked to Solar Power

[OKIsItJustMe]

http://www.nytimes.com/2010/03/11/science/earth/11solar.html

March 10, 2010

Los Angeles Electric Rate Linked to Solar Power

By JENNIFER STEINHAUER

LOS ANGELES — Los Angeles averages more than 300 days of sunshine a year, and it often seems as if environmentalists outnumber rattlesnakes in many parts of the sprawling city. It would seem, then, that solar energy would be a thriving local industry here.

But that has never been the case, and experts cite cost as the main reason.

Now, the Los Angeles Department of Water and Power, the largest municipal utility in the United States, is poised to pass a roughly 5 percent rate increase on electricity use. The proceeds would be earmarked for renewable energy purchases and programs, including one that would repay people or businesses that use solar panels to contribute to the power grid.

The commission that governs the utility, which is losing about $6 million a week or an estimated $500 million by the end of the 2011 fiscal year, is expected to vote next week to increase by seven-tenths of 1 cent the current user rate of 12 cents per kilowatt hour. Some proceeds from the increase — which is subject to a City Council vote if the Council chooses to do so, which would not be unlikely — would be used to shore up the budget shortfall, in the hope of protecting the utility’s bond rating.

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[NNadir]

1. And to think, they unseated the elected Governor and replaced him with a plastic toy

because of high electricity rates.

They're really in for a whopper of an increase for this scam.

The price of solar electricity is triple what their grid rates are in that dangerous natural gas fueled prison of contempt for reality.

[Statistical]

2. Unfortunately economical solar remains elusive.

Over the years I have contemplated installing PV array on my home and even have software to calculate return on investment.
Often times people look at "break even time" but that is a useless metric.

If you have a break even time of 20 years that means after 20 years you have paid back the principle but "earned" 0%. The money spent on solar instead could be put into 20 year treasury bond. After 20 years you won't have broken even (which is 0.000% return) you would have 98% more money (at 3.5% compounded over 20 years). So for solar to make financial sense (there are other non-financial reasons to install solar) the lifetime return on investment should be higher than what can be earned with no risk (Treasury bonds).

With current prices and subsidies plus free labor (DIY) over a 30 year lifetime an array generates a return of less than 1% in my area (4.95 solar insolation) vs 4.67% on 30 year Treasury bond. With no federal subsidy it is a negative return. Which means over lifetime of the array the electricity produces will be worth less than the cost of the array.

That is even with taking into account favorable assumptions like grid energy prices rising 5% per year, solar panel outputs only decaying at 0.4% per year (about half of warrantied output), free labor/install, being able to finance via HELOC at 6%, and being able to deduct entire interest expense.