How misleading electricity price info can cost you
Despite electricity price trends indicating that electricity prices have been rising significantly, misleading information and a short-term perspective can still cause investors to undervalue purchasing solar power. Recent press highlights a couple of the common traps you can avoid in your own solar finance planning.
In a recent interview, a Safeway executive announced that they currently are not pursuing any more solar power purchase agreements for its stores, due to poor economics from volatile electricity prices, rising finance costs and decreasing state incentives.
The problem?
Safeway talks about currently volatile electricity prices, indicating that cheaper electricity prices extend the payback on solar projects — possibly 2 to 5 years — contributing to their view that solar financing is currently not economical.
This assessment, in my opinion, unfortunately reflects an incomplete assessment of the company’s mid-long term energy prognosis. There’s plenty of available information from respected, third-party sources that clearly show that electricity prices will continue to rise well above the rate of inflation.
Still, as Environmental Leader reports, there has been a spate of inaccurate press about lower electricity prices, causing solar power buyers to think that deferring solar financing is a better course of action.
Essentially, energy prices this October are set to be 6.5% higher than in January this year. You can review a complete set of stats on the short-term energy outlook of the Energy Information Agency here.
One solar financier confirmed in the article that PG&E electricity prices are up 10 percent over 2007, instead of the 5%-6% annual price increases they’d projected in their customers’ PPA agreements. The result? Quicker paybacks on solar for those customers.
Understanding energy price trends is essential to establishing your company’s green business case. The general message within the “real” data is that, if solar power is an option for your properties, purchase and leasing delays caused by relying on ‘cheap electricity’ pricing misinformation will cost you. Electricity costs have been increasing and continue to rise at rates that are multiples over the current rate of inflation.
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Friday Quiz: Is the tough real estate market affecting solar PV installations?
You already know all the bad news from the real estate sector, but what about the solar power flowing through the real estate?
Quiz yourself (or an unsuspecting colleague…) on this factoid, reported in the latest issue of SolarToday magazine.
Question 1: Solar photovoltaic installations across the US grew 65% last year. But, which real estate sector has more installed solar PV systems?
a. Residential?
b. Or, commercial?
Question 2: Why?
(Don’t cheat)
Answer:
Nearly 19,000 homes and businesses connected to the grid in 2008. But, while residential installations grew by 34 percent, non-residential installations more than doubled.
Why?
Incentives shaped market growth.
2008 US P.V. installations grew 65 percent over 2007 to nearly 340 megawatts (!). Since 2005, the installed capacity of solar PV has more than tripled.
During 2008, the federal ITC was capped at $2,000 for residential installations, but uncapped for commercial. So the overall incentives for commercial PV systems was significantly higher than residential. The average size of a residential PV system increased 7 percent to 4,9 kilowatts (kW) while the average size of a commercial system increased by 67 percent to 114 kW.
Have a good Friday!
