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When Electricity is “Free”

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Last Friday, we signed the paperwork with our intent to get solar power.

Over the last few weeks I've been writing about our move to solar power. If you are up-to-date on that you can skip the next few paragraphs. Otherwise, let me bring you up to date. For Earth Day this year, I started to explore whether going with solar power would save me money. Then I forgot about it until the question of leasing solar panels came up on another blog post. That got me motivated to have a company give me a free initial proposal which showed that solar could cover 83% of our energy needs. In meeting with the company, we came up with a revised proposal that would cover 101% of our energy needs.

I wrote about financing our solar panels. That was an adventure in itself as the bank the vendor partners with uses an example loan of 9% interest over 20 years. Fortunately, an alternative is to use home equity to get a loan or line of credit at a rate much closer to Prime (currently 3.25%), which we intend to pay off in 2-3 years. However, a loan with tax-deductible interest at such a low rate is tempting to keep around awhile. I'd still love to get feedback if people would keep a rate like this and use money for investing rather than rushing to pay off the loan.

Finally, I covered the value of "free" electricity. My wife actually used that term. However, it's a common error. I put "free" in quotes, because buying and installing solar panels is anything but free. In fact, the cost for our 7700 watt system is around $33,110. However, after state grants and federal tax credits, the real cost to us is $16,440.

Excluding the financing of that cost (which you can't), we'll have an estimated 8,800 kWH of "free" electricity for many years. It's not an infinite amount. The way it works with net metering is that extra in months of surplus (April through June) earns us credits that we'll use in the peak of summer and winter. At the end of the year, we should come up even-steven... or within a few dollars of that.

In the last article there was a question by Andy of Art of Being Cheap of whether we thought about getting an electric car. Before this move to solar I had thought about it and wrote about it here. However, since then our family has grown and we need an SUV which doesn't really exist as an electric car. Additionally, we have decided that 4-wheel drive is critical for safety on the New England icy roads. The SUVs that are looking to come out don't seem to 4-wheel drive yet.

In the next few years that's going to change. Automakers are starting to announce SUVs that just might fit. For example, there's the 2016 Volvo XC90 plugin that will get 25 miles a trip on pure electricity. After that it will be a gas-based hybrid.

If we have extra solar capacity, my wife could eliminate some of the costs of her commute. Using the solar power from my house to save money on gas is wild! We'd just have to think of how to conserve more electricity at home or pay for new capacity. They say that some of these electric cars get the equivalent of 100mpg. However, our overall cost of electricity is projected to be about half the national average. In some ways, combining the (not so) "free" electricity with the efficiency of these cars would be like getting the equivalent of between 150 and 200 mpg.

Just to get a little "mathy" for minute, I found this comparison of average gas prices per gallon and electric prices per "eGallon" for National and state averages. Nebraska pays 9 cents a kWh and I'll be paying an estimated 6 cents over the long term. Using that eGallon price of 1.21 in Nebraska and applying the simple ratio, it would be about $0.80 cents per eGallon using solar.

I don't know about you, but I find that wicked cool. (I'm so excited that my inner Bostonian is coming out.)

Of course it doesn't stop at charging the car. We have gas heating which is actually priced really low right now. Someone suggested getting a heat pump (more information here). It might be a wise idea, but I'm not sure if it would save us too much money now. If gas gets expensive, it would be worth looking into.

However, we can still use our electricity to save on our heating bills. As part of our move to install central air at the beginning of the year, we got ductless heating and A/C units in the downstairs. These run on electricity and supposedly are very efficient (they earn rebates from the energy company). We could keep the gas heating at a minimum and use the one ductless heating unit in the room that we spend most of our time in.

Finally, there's one great side effect from all this. I'm now more conscious of electricity than I ever was before. When the system is installed I'll be able to view the usage. I imagine it will be like having a bathroom scale around all the time. Right now my electricity usage is like having the scale in the basement... I can get to it, but I don't really think about it and use it. When I have the ability to sign on and see energy use in real time, it could be a game changer. Also, now that I know that saving electricity in one area, lighting for example, can help me save money on gas, it feels more beneficial to conserve our allotment of "free" electricity.

Posted on October 22, 2014.

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9 Responses to “When Electricity is “Free””

  1. I’m very keen to get an electric vehicle, and solar would be awesome too. For now, the several electric vehicle charging stations allow FREE charging! One station is in a parking lot where I park our gas powered car now for two hours twice a week to attend a class. I could easily charge up there for for free, and out variable transportation cost would be nearly free!

  2. I really enjoy reading these solar articles. I think you hit the nail on the head that you’ve opened up a lot more possibilities and that now you’ll be more aware of what you’re using.

  3. JoeTaxpayer says:

    At 15cents/kWh, you’re saving $1393/yr or getting an 8.5% return on your money.
    But. The one thing most articles miss is that the return is tax free. You’d have to get 10% or higher to net that 8.5% return.
    Me, I’d pay the loan with the exact amount my bills used to be, letting the savings pay it off, no more, no less. And the day the HELOC is paid, my power is 100% free.

    • Lazy Man says:

      That’s something that I missed as well. I need to carve a little more space in my brain for “What would Joe Taxpayer say about this?” analysis when I’m writing articles :-).

  4. Paul says:

    You ductless heat and A/C should be a heat pump. The only concern will be there ability to heat in extreme cold. Modern heat pumps should be good to around 0-5 degrees Fahrenheit.

    • Lazy Man says:

      Thanks Paul. Shows you how much I know about this stuff :-).

      I’ll remember to use our standard heating system in the extreme cold. I presume that I might be much better off using the heat pump when it is 45 degrees to keep it warm vs. using it when it is 20?

  5. Some modern ductless minisplits effectively go down to -15. There are folks using them as their only source of heat in VT and NH, so as long as you have good insulation and air sealing you’ll probably be fine.

    You don’t mention it here, but I assume your solar installer has mentioned the SREC process? It’s another source of return on investment that makes solar in MA a really good deal for the homeowner.

  6. […] Lazy Man’s committing to solar! “Free” electricity! […]

  7. jestjack says:

    Thanks for the blog and great info. I have thought long and hard about this and can’t seem to make the numbers work and my usage is similiar to yours. Our state is not very generous with grants and fed tax credit doesn’t help much. Please keep us updated afer the install..

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