LA WATCHDOG-As part of the Department of Water and Power’s study to achieve a carbon free future by 2045, it is proposing that a third of the City’s single family residences install rooftop solar systems at a total cost of $3 to $5 billion, or $15,000 to $25,000 for each of the 200,000 homes.
There are many benefits for DWP. It fulfills the need for in-basin sources of renewable energy. It also eliminates the need to build, finance, operate, and maintain additional out-of-basin solar and wind facilities as well as lessens its dependency on large transmission lines that are subject to wildfires, earthquakes, and other dangers.
But is solar rooftop a worthwhile investment for single family homeowners?
Based on a variety of assumptions, the cash breakeven is 10 years and the return on investment is the range of 6% over a 15 year period. This is an acceptable rate of return for some, but not all homeowners. And if power rates increase, the cash breakeven period is earlier and the return on investment is higher.
However, these returns assume that the homeowner benefits from “net metering,” where surplus energy transferred into the DWP grid during the day that is valued at the retail price. Under this scenario, the remaining Ratepayers are subsidizing owners of rooftop solar.
However, if the transferred energy is subject to “net billing,” the rates of return are negative. Under “net billing,” exported energy is valued relative to other sources of generation at the time of export, an amount equal to the wholesale rate which is considerably lower than the retail rate under “net metering.” Under this scenario, the Ratepayers are not subsidizing rooftop solar installations.
With the “net billing” scenario, the return on investment is negative and the breakeven time frame far exceeds the useful life of the solar installation.
If a homeowner were to install a battery at a cost of $15,000 to $25,000, the return on investment is essentially zero and the cash breakeven time is approaching 15 to 20 years.
There are a number of other risks to a homeowner who installs rooftop solar. These include the trustworthiness and capability of the contractor installing the solar system, the monthly operating costs, the potential of rooftop leaks, and the length and strength of any warranty, both on the efficiency of rooftop solar system and any damage to the roof and the rest of the house, including the risk of fire.
If homeowners are going to install a rooftop solar system that may include batteries, the Department needs to develop a program where it will ensure reliable contractors, low cost financing, warranties for the operating efficiency and other risks to the home (especially fire), and guarantee a reasonable rate of return on investment. Otherwise, why bother?
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council. He is a Neighborhood Council Budget Advocate. He can be reached at: [email protected])