The Kilowatt, the Solar Panel and You

by Laura Combs, ESL Business Development Director

For those considering investing in solar energy for their business, non-profit or home, really thinking about and understanding what solar panels can do for you can be confusing. If you are like I was, you think that solar energy is a great idea but you can’t quite see how it actually benefits you financially. Few people are fluent in kilowatts (kW), kilowatt hours (kWh), demand charges and other energy terms, and most of us definitely don’t think about them every day or even once a year. They are something reported on our electricity bills to be glanced over as we get to the bottom line. But they matter!

Your Bill

While most of us just focus on the final figure, it’s important to understand the terms.

For residential, it’s relatively easy. We are assessed fixed charges (monthly fee or rider – most frequently a REPS or Renewable Energy Portfolio Standard rider) and the variable or volume charge, which relates to the amount of energy you use and is shown as kilowatt hours on your bill. Kilowatt hours can vary dramatically month-to-month depending on how much energy your house consumes. You can see a sample residential Duke Energy bill here: Reading Your Residential Bill. We encourage all of our customers to read their applicable rate schedule (an explanation of fixed and variable charges), which you can view here: North Carolina Index of Rate Schedules. Dividing the total amount of the bill by the number of kilowatt hours used will give you the “blended” rate of what you pay; it is a blend of the fixed and kilowatt hour cost.  Keep in mind that your fixed rates are going to stay the same each month (unless the Utility Commission allows Duke to change them), and your kilowatt hour use will vary based on what you actually use. The blended rate serves as the baseline when determining how solar energy offsets your monthly electricity charges.

Commercial customer’s bills are more complicated because the utility assesses the fixed charges, the variable kilowatt hour charge, as well as a “demand” charge. The demand charge is the fee determined by the highest amount of power drawn from the grid during any interval (typically 15 minutes) during the billing period. A sample Duke Energy bill is here: Reading Your Business Bill.

For some commercial rates, such as Medium General Service (MGS), kilowatt hour costs are fixed/not variable ($.0706 per kWh), and the same for the demand charge ($5.86 per kW).

The rate is tiered for some types of customers, such as Small General Service (SGS), which is the rate for many small churches. This means that the more kilowatt hours that you use, the lower the cost per kilowatt hour. For example, for SGS the first 750 kWh is the most expensive at over $.10 per kWh, but the price drops as more kilowatt hours are consumed. And there are even more complicated rate structures!

Don’t worry about understanding it all now - we can help you figure it out. But understanding how you are charged for energy at home and at your business can help you understand how to reduce your costs.  Solar is one such way - so how does it do that?

The Solar Panel

Let’s start at the solar energy baseline – the solar panel. Solar panel output is measured in watts (W). A premium, new, fixed solar panel produces between 300W and 400W per hour, depending on the manufacturer, the model, the location and the weather. North Carolina averages about 4.5 hours of peak, usable solar energy per day. If your home or business is unshaded and the panels are facing south and weather conditions are optimal, a panel will produce approximately 1.4kWh per day for every solar panel installed.

Another way to think about it is in kilowatts – which is the measurement that you find on your business account bill. A 10kW solar panel system (between 25-35 panels depending on the manufacturer) will produce about 14,000 kWh a year. A good rule of thumb is that for every kilowatt of solar you install in North Carolina, approximately 1,400 kWh are generated with ideal conditions. A kilowatt hour production estimate for your system, worthy of another blog post, is based on weather data coupled with technical data of the specific panel, as well as the orientation of the building. The estimate is critical to understanding how a solar energy system will impact your bill.

Net Metering

Fortunately for everyone, the North Carolina Utilities Commission requires Net Metering from Duke Energy, as it has been shown to benefit all customers. Here’s how that works: Let’s say you decide to put a system on your home, place of worship or business, but you are generally out of the building during normal business hours. What happens to those unused kilowatt hours generated by your solar panels?  Because your system is producing kilowatt hours every sunny day, if you are not there to consume them all, the kilowatt hours will flow directly to the electricity grid! This is where Net Metering comes into the equation. Net metering can get a bit complicated, but at its most basic, it describes a billing mechanism between a utility and a customer who is self-generating power. It involves a bi-directional meter that registers when 1) a customer consumes utility grid-supplied power and 2) when their self-generating system is supplying power back to the grid. When the meter is spinning backwards (Yay!) utilities will often credit solar customers for these kilowatt hours at the retail rate, which is the same rate at which you purchase it.

Putting it All Together

Energy use by homes and businesses can vary for a number of reasons, and as we discussed, rate structures for businesses add another layer of complication. We do know that when you install solar, you may purchase significantly less kilowatt hours from Duke Energy and, therefore, save money!

If you have a business that primarily operates during the day, you will also see a reduction in your peak demand charge because your solar panels will be producing and offsetting your maximum energy draw from the utility grid. A school, for example, can see upwards of a 30% reduction in its demand charges because the school’s peak demand is likely when the sun is producing!

If your business has a fairly constant load or demand that is higher in the evening - think hotels/hospitals - or facilities that operate 24 hours a day, seven days a week - solar is not going to have a dramatic impact on demand because your “peak demand” may be at a time when the solar panels aren’t producing and are unable to offset your power draw from the grid. That said, you will likely be able to take advantage of net metering and your system will pay for itself and save you money.

In summary, every kilowatt hour matters! Before investing in solar technology, we recommend reducing your energy consumption. Harvard University has great recommendations here: Top 5 Steps to Reduce Your Energy Consumption. When you are ready to invest in your own green energy power plant, we are here to help you think through your choices.

If you have any questions, please feel free to reach out. Thank you for reading!

Laura Combs

lcombs@eaglesolarandlight.com and (919) 275-2245

Laura Combs is Eagle Solar & Light’s Business Development Director in North Carolina. She has a Master’s degree in Urban and Regional Planning, with a specialty in Environmental Planning. Laura is a former environmental non-profit employee who worked to recover the endangered Florida manatee, is very aware of the need for maintaining slim overhead and maximizing funds, and she is very grateful to bring her knowledge and skills to Eagle Solar & Light and its customers.

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