The Impact of SCE’s Rate Changes
At the beginning of 2020, SCE (Southern California Edison) released updated electricity rates for customers who go solar. Generally speaking, when utilities change their rates, it doesn’t spell good news for solar customers. When we first heard about SCE’s rate changes, of course we thought this would follow the same trend. In this case, we were thrilled to find out through this study that the changes resulted in an increase in solar savings. Let’s take a look.
Details of the Study
When conducting this study, we wanted to make sure we were only looking at the effects of the changing rates and nothing else. There are a few assumptions and details that are worth stating before diving into the results.
- We looked at 10 different projects in SCE territory, with 3 bids each, for a total of 30 different bids.
- Each bid we looked at was at or slightly above 100% electricity (kWh) offset, meaning the solar system was producing at least as many kWh over the course of the year as the home was consuming. The reasons for this will become clear as we go deeper into the study.
- All of the projects we’re looking at were on the old and new versions of the TOU-D-4-9PM rate plan. There are two other rate plans SCE customers can choose when going solar, but TOU-D-4-9PM is the default and was used in all examples here.
- The average utility bill before going solar from this batch of projects was $172, ranging from $61 to $510 a month.
- Some of the projects included additional work, such as a main panel upgrade or special roof mounts for the houses in question. This is largely irrelevant when comparing savings before and after the rate change, but is worth mentioning as it would increase costs on some projects and decrease the savings relative to the utility costs.
The Status Quo
The previous 4-9 rate plan was implemented in early 2019. Due to the structural changes of the Time-of-Use rates, we saw what we call the “bill after solar” increase significantly. The bill after solar is the remaining payment to the utility (SCE in this case) after going solar. This cost increase is due to the value of electricity decreasing during times where solar systems would be producing the most, or earning credits, and an increase during times where solar systems would not be producing energy, or using energy from the grid. This meant that solar energy producers were receiving less value for their solar energy than they had been previousl
Over the projects in this study, the average bill after solar was $48.40 a month. Keep in mind, these are all projects reaching 100% kWh offset. This means that while producing all of the electricity needed to supply the home, the average customer in this study would still have a significant payment to SCE. To put this into a little more perspective, with an assumed electricity rate increase of 5% a year (standard assumption in CA) over the lifetime of the solar system, the average home in this study would still owe SCE nearly $28,000 over those 25 years despite producing all of the kWh required to supply the home.
It’s worth noting that all utilities charge something to stay connected to the grid after going solar. There are grid maintenance fees, charges for net metering, and other associated costs for still relying on the grid in some capacity. However, nearly $50 per month is more than most homeowners expect to continue to pay to the utility after going solar.
The good news for SCE customers in 2019 who were looking to go solar was that it was still an attractive option in most cases. On average, it would take around 10 years to pay off the system, the annual return on investment (ROI) was 11.36%, and over 25 years the savings were nearly $52,000 on the electric bill.
The better news for SCE customers is the savings just got stronger.
The New 4-9 Rates
The updated rates for SCE went live at the beginning of 2020. These rates are available to both new solar customers and those who went solar under the old rate plan, so all can benefit from these changes. In short, the improvements were a result of a more balanced electricity prices between times when solar systems would be earning credits and when homeowners would be drawing credits from the grid. So, what does this mean?
The average bill after solar was reduced to $29.77 a month, nearly a $20 monthly improvement from the previous version of the 4-9 rate plan. This rate change had significant improvements in savings for our solar customers. Across the projects we analyzed for this study, the average lifetime savings increased by nearly $12,000 to a total of almost $64,000 of savings over 25 years (a 22% increase on average, with a high of 57% increase in lifetime savings). We saw the payback period decrease by an average of 1.5 years and annual ROI increase by 3%. As far as immediate savings go, this is a massive improvement.
In one proposal of the 30 analyzed, the lifetime savings did get slightly worse. That case had a lot to do with the specific usage profile and panel layout. For the sake of transparency, it’s worth noting this rate change isn’t always an overwhelming positive change, but any regression in savings would likely be marginal, while the improvement in savings has the potential to be fairly significant.
SCE has made a really positive step for customers who are looking to go solar, a step that is relatively rare for utility companies. If the solar industry lowered installation costs or an incentive was introduced that resulted in this type of an improvement in savings, you’d be hearing about it from every solar contractor under the sun. It would be hailed as a major step forward for the industry, but because this was a change made by SCE, a utility company, it’s not getting nearly as much coverage. For an average customer, the improvement is clear and going solar in SCE today is better than it was a year ago. For those considering the switch, now is as good a time as any to explore your options and improved savings under these new rate plans.