How to Buy Power for Less Than Wholesale
Find out how to buy power for less than the wholesale price in this article by Mo Rousso
If you examine your monthly electricity bill, you will find numerous line item charges. Among those charges are Generation charges and Delivery charges. See the bill below:
Generation charges represent the amount that the utility pays for power and then passes onto the rate payer. Delivery charges are what the utility charges to deliver that electricity to your home or business. So, by considering investing in your own on-site generation, like solar, you, in essence, eliminate the delivery charges from your electricity bill. In other words, instead of buying power from the utility, you obtain power from an asset that you own and operate at a cost equal to or less than the Generation charges on your typical monthly electricity bill.
Technologies, such as rooftop solar, are a reliable and cost effective way to obtain your electricity at less than what utilities would charge you for Generation alone. So, how does that work?
There is a concept in the industry called Levelized Cost of Energy, or LCOE. This represents the all-in amortized costs to produce electricity over the selected period of time. Inputs to the formula include:
- Capital costs
- Operations and maintenance costs
- Equipment replacement costs
- Labor costs
- Inflation or other escalation factors
- The amount of electricity generated
- Any federal, state, local, or utility incentives
- Effective income tax rates
- Discount finance rate
- Finance charges
To provide an example, we are currently installing a 300kW rooftop solar project for a commercial client in San Diego County. We created a financial model that used all of the parameters listed above. Their LCOE calculated out to be $0.006/kWh over the chosen 30-year period. If you compare this LCOE rate to the Generation charges in the above bill, $.006/kWh is an order of magnitude savings over the $.03105 - $.06467/kWh rate the utility charges for generation.
Bottom line: you will be paying significantly less than wholesale prices for electricity resulting in substantial cash savings over the long operating life of your solar system!