The value homeowners realize from having solar panels installed varies from state to state in the U.S. This value is most often measured as a solar payback or investment return. The solar payback period refers to the length of time it takes to realize enough electricity savings from a solar system to pay for the cost of installing it. The shorter the payback period, the greater the return on investment.
What is the typical payback period for residential solar installations in San Diego?
To determine a typical payback period and return on investment for a residential solar installation in San Diego two factors must be considered: 1) the cost of installing the solar panels; 2) the revenue earned by the solar system. The costs are typically easy to determine. A solar company will usually quote one fee that includes the cost of the solar panels and all approvals, permits and inspections for the authority of jurisdiction and SDG&E.
The revenue produced by a solar system is a function of the amount of energy it produces each year compared to what would have been paid to the utility if the same amount of energy had been purchased from the utility without the installation of solar panels.
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Fundamentally, the amount of solar energy a residential PV system produces depends on weather conditions and climate. And most importantly, the amount of sunshine (the incident solar radiation or solar insolation in a given location). No surprises here that Southern California hits it out of the park on energy generation from solar panels. You can go weeks without seeing a cloud in San Diego. Electricity generation of up to 1,650 kWh per year per 1 kW of peak DC solar panels installed makes San Diego a very attractive location for solar panels.
Moving down to the bottom line, the financial incentives available for residential solar energy systems can make or break an investment decision. These vary widely across the US. In California, the most important incentives are the 26% federal solar tax credit and the NEM 2 net metering law passed by the California PUC. If we run numbers for a typical household, in San Diego, with a $250 per month SDG&E electric bill, through the “solar panels cost and savings calculator” we see the recent average cost of installed solar systems in San Diego and SDG&E electric rates, for all site location types, including clay tile, flat roof and ground mount systems that are more costly.
To what extent do high SDG&E electricity rates contribute to return on investment for solar users in San Diego?
San Diego topped a ranking of installed solar energy capacity and ranked second in installed solar energy capacity per capita in major US cities, according to a report from the California Environment Research & Policy Center. In so doing, San Diego surpassed Los Angeles, the previous first place holder, and trailed only Honolulu, Hawaii in the per capita ranking.
Let’s dig a little deeper and look at whether it’s actually worthwhile for a San Diego resident to invest in a solar PV system. To do so, we’ll make use of residential solar information resources of utility energy costs in major cities and metro areas across the country. To zoom in on the likely cost of actually having a residential PV system installed in San Diego, we’ll also make use of our tried and true, local guide to solar installation companies and residential solar cost calculator.
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What we note from this is that SDG&E, the electric utility serving San Diego, has some of the highest electric rates in the nation. This, along with the exceptional amount of sunshine in Southern California, is why San Diego has the shortest payback times in the nation (and therefore the highest return on investment) for residential solar panels in California.
What incentives are available, in San Diego, to help with the cost of installing solar panels?
There are a variety of residential solar incentives available across the US. As the Solar Energy Industries Association explains: “Effective direct incentives can take a variety of forms depending on the particular situation and administrative abilities of a given state. Some states have chosen to offer tax credits, others to offer up-front rebates administered by state agencies or utilities, and still others offer performance-based incentives that are paid by an agency or utility over time based on kilowatt-hour production.”
Sorting through all these incentive programs, much less doing all the paperwork required to qualify for them, can be daunting. In all likelihood, you will be able to find and work with a solar finance/installation company that will assume much of the bureaucratic burden. Make it a point to include this on your checklist when shopping for the right provider.
California continues to be a nationwide, and worldwide, leader when it comes to solar and “green” energy policies and programs. The most important incentive, by far, is the 26% federal solar tax credit and the NEM 2 net metering law that gives you almost full retail value for excess solar power exported into the grid during the day.
How much does San Diego’s high degree of sunshine contribute to the attractiveness of solar there?
Although we have touched on this topic, measuring the amount of solar energy a residential PV system is likely to generate over any given period of time is not as simple or straightforward as it might appear at first glance. It’s important to be sure you’re comparing apples to apples here.
By scientific convention, the amount of solar radiation available per unit area in a specific location is measured in kilowatt-hours per square foot per day, or for those more physics-minded, in megajoules per square meter per year. Other variables come into play, such as whether or not “direct” radiation, aka “direct-beam” radiation, or “diffuse” radiation is being measured. The former, as the term suggests, only measures the light that hits the earth’s surface directly, not any scattered or reflected sunlight. Diffuse radiation is a measurement of scattered sunlight while “albedo” radiation measures light reflected by the earth’s surface. As we have seen, 1 kW DC of solar panels installed in San Diego produces up to 1,650 kWh of energy per year. In comparison, many places in the north-east of America produce around 1,200 kWh per year. Using these numbers, San Diego produces up to 37% more power than the same panels would if they were installed in the north-east. This is a major contributor to making San Diego one of the most profitable cities in America for utilization of solar panels.