Is the electricity really cheaper?

You probably did OK. The amount of electricity that can be generated on your roof is about 30-35% more per panel than what can be generated on my roof.

But, if I were you, 20 years loan would be a deal-breaker. Doesn't matter even if it was a low 0.99% interest rate, if it takes 20 years to pay it off, that's too expensive for me. The only loan I am willing to keep instead of paying off is the mortgage. I don't have much left on it, but it makes no sense to pay it off early now with the current low rate when I can earn more by investing the would-be additional payments. Otherwise, I don't want to make any financial obligation that is longer than a few years. That does not mean I pay everything by cash and have no credit. My credit score is over 800. In fact, I rarely use cash as a means of payment, but I only use credit for the minimal terms that can be paid off very quickly. I never keep a balance on my credit cards and I have 5-6 of them. The last 4 purchases of our cars were all on low-rate auto loans but they were all paid off shorter than the contract term within the first year or two.

 

I guess the proof is in the pudding. If it works as Salamander King says, All he had to do was to invest $30K in 1991 and he'd have between $40K and $325K in that investment account, without ever putting another dime into it. One has to assume that he did it since it was such a sure fire deal. So, how did that work out?

Has anyone on the board made such an investment and actually made 8% compounded monthly for the last 30 years? Or even the last 20 years?

Here's an interesting calculator that gives you the growth over time if invested in specific years. I fed it with a one time investment of $30K, invested in 2001 and ending in 2020 adjusted for inflation and using the DOW as the investment. Total gain was (drum roll please) $29K

Historical Investment Calculator | financial-calculators.com

It all depends on when you put your money in and when you take it out.

 

Exactly. That's why I don't want to lock up $30K up on my roof because I can't take it out when I want to.

 

With that logic, why buy a home? Why buy a new car when an old one is cheaper?


iPhone ? Pro

 

That's an interesting calculator. Thanks, I like it. I bookmarked it. I used a similar number as you used. Just changed to a one-time investment of $30K, invested in 1990 instead of 2001 as you did, and ending in 2020 without adjusting the index for inflation. I don't know why but answering YES to the inflation question for this ended in error. Maybe the inflation rate for 2020 is not out yet? Anyway, the result of inflation unadjusted ROR is, hay what ya know, very respectable 8.5%. That's better than my simulated 8% ROR on the hypothetical $30K investment. LOL

 

Because I can sell a house or a car to recoup the cost of purchasing a house or car, but I can't sell the solar panels to recoup the cost easily. Or can I? There is also a big difference between buying a house or car vs. buying a solar panel on top of the roof. House and car are purchased because they are essential. Yes, I could have rented a house and a car. But that would have been substantially more expensive than buying and it would have limited our lifestyle severely. The solar panel is not essential for our living. I can do without it fine without making a financial commitment to it.

BTW, I would buy a used car over a new car any day as long as it is a better value. Most of the cars I purchased over the years are used. However, my recent purchases of cars were brand new Prius Primes. That's only because buying it new was cheaper than buying it used.

 

Have we gotten away from the original question: Is the electricity really cheaper?
How does the cost of electricity to charge the Prime compare with the cost of gasoline per mile in running a Prius Prime?

Here's another question:
I've often been asked whether the additional cost of buying a hybrid actually has saved money in the long run. With the amount I drive, the COVID year of almost no driving, and the way gasoline costs have fluctuated, it will now take about thirteen years before I come out ahead on the cost on gas alone, compared with a non-hybrid car. My Prius cost roughly $8,000 more than a new Corolla at the time I bought it. (When I bought the Prius, I thought the break even point would be about seven years. But the price of gasoline dropped down again.) To add insult, our state added an annual $75 hybrid fee to our car registration. So that has messed up hybrid savings even more.

But the cost of gas alone is not the whole picture. When the price of gas goes up, it doesn't concern me as much as it used to. The Prius is polluting the air much less. It's very well built (three bears tried to break in unsuccessfully during a camping trip), and a pleasure to drive. I love adding things like a 1kW inverter, and having the gas engine cycle on and off as necessary. The hatch and rear seats folding flat has allowed transporting major items which wouldn't fit in many other cars. It's been the most trouble-free car I've ever owned. In the almost twelve years I've owned it, there have been no major repairs. It still looks good. (OK, in it's ugly sort of way, it's still beautiful.)

 

Yeah, that question has been squarely answered by simple arithmetic. If the gas price per gallon in your area is more than approximately 13 times the cost of electricity per kWh, then electricity is cheaper to drive PP on EV mode. This is using EPA-rated 54mpg for gas and 25miles of EV range on electricity only and 6.5kWh to charge the traction battery from 0% to 100%.

In our region, that number is $0.21/kWhx13=$2.73. Our gas price recently hit that mark for the first time in a few years. Yes right now, with a gas price of $2.89/gal I just saw yesterday, the electricity is really cheaper. But I am not charging... I don't have a Prius Prime anymore. LOL

The discussion of the solar panel came into play because, in some situations, it can lower the cost of electricity.

 

I don't see how a fixed $86 per month is more expensive than a $90/month payment which will go up year after year.

Same here. We pay the cards in full every month. Credit rating when we borrowed $10k for my wife's car in August was four points short of a perfect score. We have since paid off the loan, btw, so we're back to no car payments.

I don't have records of what my 401K balance was in 1991, but I didn't add much after 1998. I'd say it was around $30-40k. It's nearing $400k now. It's mostly been in a fund that tracks the S&P500. As retirement looms, I'm moving more of it into less volatile finds, but the S&P is hard to beat for long-term growth. This is from The Motley Fool.


But, as @Terrell reminded me, we really are digressing. LOL! I'll stop now.

 

In my view, paying for electricity as you go is different from paying for a solar panel financed. With the electricity bill, I pay only as much as what I use, and will not pay any more if and when I stop using electricity. With solar panels, I will be stuck with the payment even if it does not generate enough electricity or credit to cover the cost of the monthly electric bill. In our state NEM billing, if the panel produces an excess amount of electricity than our annual consumption, then I get nothing and the utility gets free electricity from us. I have read on this and other threads that the electricity bill is going up year after year. But I don't find that to be a case. At least not in our current home. I kept the last 10+ years of electric bills and plotted the cost/kWh, but it just has not changed much. Some years, it drops and some years it increases, but on average it has been a steady ~$0.20/kWh rate for more than 10 years.

 

Oh my!!! In other words, your state officials don't want people installing solar. We get back after a year whatever the wholesale price is for electricity, which I hear is 3 cents/kWh. Not a lot, but then again, I'm using the grid for a battery. And that's why you want to size the system so you don't overproduce too much. And if I do use more than I produce, that doesn't reduce the value of what I did produce.

As for rate increases, when we first moved back from Honduras, we were paying just over nine cents/kWh. Now we pay just over 12 cents. That's a 33% hike in six years.

And then there's the green aspect. Our electricity comes from natural gas -- better than coal, but solar is better yet. That's not my primary consideration, but it's still something I chose to include in the decision.

 

Well, it was worse just three years ago, as I commented, the NEM rule was changed and PUC started to phase out the Net Energy Billing. Under the new rule, the retail price electricity credit which was given as billing credit to NEM customers for 12 mo rolling base would phase out over 10 years. 10% rate cut on transmission and distribution portion of the NEM electricity bill each year down to 0% in 10 years. The only portion that Net meter would compensate would be the supply of the electricity which is currently $0.07/kWh. With this rule, someone who installed a solar panel 10 years later, would get only $0.07/kWh supply compensated and still have to pay ~$0.13/kWh for the transmission and distribution cost. Fortunately, this rule was repealed and the previous NEM rule was reinstated after state political power change from (R) to (D). But seeing what has happened in the last 4+ years at the national level, I have absolutely no confidence that the current NEM billing rule will stay unchanged for the next 30 years. Just like what has happened in the states charging more "fees" on hybrids and EVs, I can see in not so distant future that some penalty fees are added to solar panel owners for not paying enough to maintain and operate the grid.

Yeah, when you have such a low rate to begin with, a 4 cents difference is a big change. In our area, a few cents fluctuation can happen month to month. Here is the plot of the electricity rate/kWh in our home for the last 10+ years. The rate does not include the surcharge, fees, tax. That's why it is a bit less than $0.20/kWh. Add all of the "other fees", it will come to be very close to an average of $0.2/kWh.

I am all for the environmental benefit of renewable energy production. That's why I have been paying an extra $18/mo to cover the cost of renewable energy production at the source for our electricity consumed. Although the electrons are all mixed in the grid, at least I am supporting renewable energy production and development. Later this year, I will be starting the subscription to the community solar to cover our entire electricity use. The solar farm is currently under construction and due to be operational sometime this fall. When I start the subscription, I will enjoy a more than 15% reduction in our monthly electric bills guaranteed and I don't have to pay upfront capital investment cost to have 100% solar energy. The subscription-based community solar has no long-term contract, so if I do not like it, I can cancel anytime without any penalty.

 

Our last electric bill was $0.12726 / kWh -- not counting all the fees added on for Grid Connection, Customer Service Charge, and State Low-Income Asst Fee, which are based on days, and are charged whether or not we use any electricity.

So, based on your formula, $0.12726 x 13 = $1.654
Our gas price currently is $2.799
That's a big difference! Why is your power so much more expensive? Are you including all the extra fees? If I do that, then our electric is about $0.2081 / kWh, closer to yours. And still the electric is cheaper than gas. Too bad I don't have a Prime.

 

If I didn't have solar, it would be more expensive for me to charge my car than burn gas. I hate those TOU plans, and conforming to those would necessitate lifestyle changes/sacrifices that I'm unwilling to make. A regular Prius would have been a better choice and forget a full electric car. Solar was a good investment for me. It's paying for itself with the 30% tax credit and free money (money that would have been wasted on payments to the power company), I'm spending little on gasoline, and I have a short payback period. I paid for it up front, but I can't remember if it was money I had in a cash account that was earning less than 1% or another fund I had invested in the risky stock market, or a mix of both. The money was put to good use. I'll never use all the money I've saved up anyway, so you can't take it with you, as they say.

Salamander_King talks about an 8% investment return vs. the risks associated with a solar system investment. He should have used 1% in his analysis instead of 8 because investment in the stock market involves considerable risk.

 

New England states, CA, and Hawaii drive the national average cost of electricity currently at ~$0.12/kWh. While you seem to be paying much more on extra fees than I do, our electricity is mostly based on kWh usage.

Our electricity bills consist of Supply, Distribution, Transmission, Stranded Costs, Conservation Charges all charged on /kWh basis. The only part that I pay not directly /kWh use is Renewable energy surcharges that I buy fixed cost per 500kWh. I buy 1000kWh of this Renewable surcharge to cover our 100% electricity consumption. Our usage is sometimes more than 1000kWh/mo but sometimes less, so it averages out to be just about to 1000kWh/mo and the cost of having 100% renewable energy at $0.018/kWh surcharges. Then tax is added as % of the total bill. My current cost of $0.21/kWh includes everything. Since I wanted to go green and pay for the renewable surcharge and I have to pay tax anyway, it is calculated by dividing a total monthly electricity bill by the amount of kWh consumed which is ~1000kWh/mo and ~$200/mo. Remarkably, our electricity usage and cost has been very constant over last 10 years at our home. We had ~$30/mo increase in the bill while I was doing a daily Prime charging ($26/mo = $0.2x6.5kWhx20days), but I no longer own PRIME so the current bill is around $175/mo. For calculation of electricity cost, adding all the fees into per kWh cost is the best way to figure out the true cost. Otherwise, you may be thinking it cost less to charge while it is costing more in reality.

 

True. However on the other side, all the fees are charged regardless of how many kWh we use. The fees are based on number of days, so get charged even when no power at all is used.

This has also become true of our water usage. We were gone for four months and I turned the water off at the meter, but we still were billed for: Water Base Charge Meter, Sewer Base Charge, Landfill Remediation, Stormwater Base Charge, Stormwater Impervious, Stormwater Pervious, and Urban Forestry -- $45.71 / month for using zero water. When we do use water, it adds only $10-13 to our monthly bill. Municipalities have become very clever the way they do billing.

 

I understand your rationale and wanting to treat the "additional" fees separately from the usage cost. But my thinking is that if you don't pay those additional fees, your electricity service would be shut down. Then you would not be able to charge your car at all. They are essential costs to operate. So, the easiest way to calculate the true cost is to add it all up into the per kWh usage cost.

Another way to think would be to distribute the portion of the additional fees by the used kWh. Say if the additional fees you had to pay regardless of the usage was $20/mo and total per kWh usage cost was $100 for 1,000kWh used at $0.1/kWh. Your total electric bill was $120 for that month. Of the 1,000kWh used, say 150kWh was used to charge the car which is 15% of total usage. Thus 15% of the additional fee or $3 should be included in the cost of charging the car. So, it now becomes $18 total to use 150kWh of electricity ($0.1/kWhx150kWh + $3 proportional additional fees) to charge the car or $0.12/kWh (18/150). But as you realized, the result is exactly the same number you get from adding all the fees into the per kWh usage $120/1000kWh=$0.12/kWh. In essence, the operation is the same. I think adding all the costs and dividing it by the total kWh used for the month is easier and would be a close enough estimation of the "true" usage cost.

There are many situations like above, that you would have to add the additional cost into the calculation of the true cost. The water fee schedule you mentioned is another good example. I think of them as "overhead costs" to operate, and they must be included in the cost analyses.

 

Great examples of how varied each state/region can be.
Next door to Wisconsin in Minnesota, most of those charges/fees are dependent upon you net electric usage.
Power does not get cut off if you don’t pay them, as most months they are $0.
We do have a static meter fee, however, even with that, if you have enough credit, is zeroed out.

All I can suggest is that each person get more involved with their PUC, or whatever your state uses to fulfill that role.

 

Yeah, from what I have read on this thread, CA's electric fee schedule is a mess. I would never understand TOU and tiered payment systems without doing a deep dive. Fortunately, our current electricity bill is super simple in that everything is tied to kWh usage (even tax and renewable surcharge are basically tied to the total kWh usage). We have no TOU, no tiered fee schedule, and if I stick with the PUC's standard offer fee schedule, then there are no additional fees and the rate is regulated and stable enough.

Our state has deregulated electricity suppliers. I was enticed by the marketing gimmick of 10% guaranteed saving on clean electricity 100% generated by winds and signed up for an independent supplier for one year. Well, the rate was very low at the beginning few months, but being a variable rate, it shot up after 6 months to almost 3 times the standard offer from the Utility. I was stuck with the supplier for a whole year due to my contract. If I did cancel it earlier, then not only I did not save on the monthly bills but also I would have had to pay the penalty fee. In the end, after one year of the contract was over, I switched back to the standard offer supplied by our state PUC, and demanded the 10% guaranteed saving from the independent supplier. Yap, I got a check for over $1,000 representing the difference of what I have paid for the electricity during the contract period over the standard offer cost plus 10% saving on top of it. But it took many many months to get it. I may find myself in a similar situation with my newly contracted community solar subscription. But I wanted to give it a try again.

After seeing what has happened in Texas this winter, yeah, my goal is to build a house totally off-grid to live in.

 

Yes, Texas was a huge mess. Seems they have short memories. Similar thing happened to them in 2011. Our son's family lives there.

I have a friend who built a home in the country and tries to live entirely "off the grid." He inspired me to get solar. His house is super insulated with very thick walls (maybe two feet thick), so uses very little power to heat in winter. He does most of the heating with a big wood burner. He has his own water supply, and for power, a huge array of solar -- on his house, his pole barn, in the field, and two big sun tracking arrays. And batteries. He's purchased the solar inexpensively by buying houses with solar, removing the solar panels, then selling the houses. He says the house price is pretty much the same with or without the solar panels. For a while he drove a Leaf powered entirely by his setup, but he's gotten rid of it now. He's a retired engineer, and has time. He generates enough power every month to sell his power to the grid to earn money. (So he tells me -- I suspect he's actually invested a lot in his installation. And batteries -- which cost a lot, even though he buys them "used.") He enjoys it, it gives him a project to manage, and he's having fun.