Investing in Solar

Curious to know what an investment in solar looks like?

Customers invest in solar for a variety of reasons, but if you’re interested in when you might recover your investment, you should be aware of possible changes that may impact your payback. Your investment will likely take longer to recover due to anticipated changes to how Idaho Power credits customers for excess energy sent back to the grid and the value of that credit. If you make a solar investment looking only at the current compensation structure, you are unlikely to have an accurate payback estimate.

Why are things changing?

At the direction of the Idaho Public Utilities Commission (IPUC), Idaho Power will work with stakeholders to study the costs and benefits of customer generation. Right now, Idaho Power on-site generation customers are billed on a net monthly basis, with excess energy credited at the retail rate (8-10¢/kWh). Changes to the billing structure will likely impact two key factors:

  • How excess energy is measured (i.e., the measurement interval over which energy is netted, such as instantaneously, hourly or monthly).
  • The amount customers are credited for excess energy, with the goal of making that credit more accurately reflect the value of the energy produced. For reference, the value of energy produced by a new solar farm set to come online in Idaho next year is 2.175¢/kWh.

Who will future changes apply to?

The IPUC determined that any future changes will impact customers interconnecting a new or expanded system after Dec. 20, 2019, for residential and small commercial customers and after Dec. 1, 2020, for large commercial and irrigation customers.

How can possible changes impact payback?

The example below shows a customer who uses an average amount of energy per year and installs a standard system with a life of 30 years. This customer would see a simple payback period of 12-16 years under the current compensation structure if they pay cash for the system. However, that payback period increases to 20-24 years for that same customer with net hourly billing and an excess energy credit rate of 2-3¢/kWh. If the system is financed, the simple payback period extends further. If the investment is evaluated using a discounted payback method, which is more accurate for evaluating the financial value of a project, it doesn’t pay back over the life of the system regardless of whether it is financed or paid for in cash. (See FAQs for calculation details.)

 

Example for using solar on-site generation to match about 75% of a home’s energy use under current and potential future compensation structures.

illustration of a medium sized house

 

Average Monthly Energy Use: 980 kWh

Average Monthly Bill: $100

Solar System Size: 6 kW

Average System Life: 30 years

 

Current
Compensation Structure
Modified *
Compensation Structure
Measurement Interval Net Monthly Net Hourly 
Excess Energy Credit Value 8-10¢ 2-3¢
Estimated Break-Even Point
(Simple Payback) if Paying Up Front in Cash
12–16 years 20–24 years
Estimated Break-Even Point
(Discounted Payback) if Paying Up Front in Cash
Financial loss. Does not payback within 30 years. Financial loss. Does not payback within 30 years.
Estimated Break-Even Point
(Simple Payback) if Financing with 20-year Loan
18–22 years  28+ years
Estimated Break-Even Point
(Discounted Payback) if Financing with 20-year Loan
Financial loss. Does not payback within 30 years. Financial loss. Does not payback within 30 years.

*Future compensation structure, including measurement interval and excess energy credit value, has not been determined. This illustrative example demonstrates potential impacts of future changes on customer investments. Please visit our FAQs to learn more about compensation structure and the assumptions used for this example.

Want to explore further?

Online solar estimators, such as Google’s Project Sunroof, are available to help customize system cost estimates and payback timeframes. However, these estimates are based on the current compensation structure and do not account for the changes being pursued with the Idaho Public Utilities Commission that would likely lengthen payback periods.

If you’d like to learn more about what an investment in solar would look like at your home, call us at 1-800-632-6605 or email cg@idahopower.com.