The value homeowners realize from having solar panels installed varies across the U.S. This value is often measured as a solar payback or investment return. The solar payback period refers to the length of time over which the electricity savings from a solar system pays for the cost of installing it. The shorter the payback period the better and the shorter the payback period the better the percentage investment return.
So what is the typical solar payback period for residential solar installations in San Diego?
To determine a typical payback period and investment return for a residential solar installation in San Diego we need to look at both the “costs of installing solar panels in San Diego” and also the revenue earned by a solar system installed here. The costs are typically easy to determine when you are getting a solar company to do your installation because they usually quote one all up fee that includes the cost of solar panels, all approvals, permits and inspections for the authority of jurisdiction and SDG&E.
The revenue produced by a solar system is a function of the amount of energy it produces each year and the cost that would have been paid to the utility should the same amount of energy have been purchased from the utility.
Most fundamentally, of course, the amount of solar energy a residential PV system produces depends on weather conditions and climate, and most importantly, the amount of sunshine – the incident solar radiation or solar insolation – in a given location. No surprises here that Southern California hits it out of the park on energy generation from solar panels...you can go weeks without seeing a cloud in San Diego. At electricity generation of 1478 kwh per year per 1 kw of peak DC solar panels installed San Diego is a very attractive location in which to install solar panels.
Moving down to the financial bottom line, the financial incentives available for residential solar energy systems can make or break an investment decision, and these also vary widely across the US. In California the most important remaining incentives is the 30% federal solar tax credit and the NEM 2 net metering law passed by the California PUC. If we run numbers for a typical household in San Diego with a $250 per month SDG&E electric bill through the “solar panels cost and savings calculator” you see that at the current average cost of installed solar systems in San Diego and at current SDG&E electric rates a homeowner.
*Please note that the investment return figures do not include the possible increase in property value.
You can run your own numbers for your house based on your usage via the link above. A payback period of only 5.5 years, given solar panels last a minimum of 25 years is insanely good and makes San Diego the most profitable city in America in which to install solar panels on your home.
To what extent does high SDG&E electricity rates contribute to solar investment returns in San Diego?
San Diego topped a ranking of installed solar energy capacity and ranked second in installed solar energy capacity per capita in major US cities in 2016, according to a report from the Environment California Research & Policy Center. In doing so, San Diego surpassed Los Angeles, the previous first place holder and trailed only Honolulu, Hawaii in the per capita ranking.
Let's dig a little deeper and find out whether or not it's actually worthwhile for a San Diego resident to invest in a solar PV system. To do so, we'll make use of a new residential solar information resource Solar-Estimate has been developing. It's an online compilation of utility energy costs in major cities and metro areas across the US that we are adding to almost daily. To zoom in on the likely cost of actually having a residential PV system installed in San Diego, we'll also make use of our tried and true, local guide to solar installation companies and residential solar cost calculator.
What we note from this is that SDG&E, the electric utility covering San Diego has some of the highest electric rates in the nation. This, along with the high amount of sunshine in Southern California is why San Diego has the shortest payback times in the nation (and therefore the highest investment return) for installing residential solar panels in California.
The City of San Diego is setting a Blazing Example when it comes to installing solar
“The city [San Diego] is setting a blazing example by investing in solar power to create clean air, local green jobs and a brighter future for all,” the non-profit, non-partisan Environment California Research & Policy Center's Michelle Kinman commented regarding San Diego's rise to the #1 US solar energy city in 2016. “The sky’s the limit when it comes to putting San Diego’s clean and abundant sunshine to work as long as city leaders continue to embrace forward-thinking solar policies,” she said.
What incentives are available to help with the cost of installing solar panels in San Diego?
There are a variety of types of residential solar incentives available in states across the US, however. As the Solar Energy Industries Association explains: “Effective direct incentives can take a variety of forms depending on the particular situation and administrative abilities of a given state. Some states have chosen to offer tax credits, others to offer up-front rebates administered by state agencies or utilities, and still, others offer performance-based incentives that are paid by an agency or utility over time based on kilowatt-hour production.”
Sorting through all these incentive programs, much less doing all the paperwork required to qualify for them, can be daunting. In all likelihood, you will be able to find and work with a solar finance/installation company that will assume much of the bureaucratic burden, but make it a point to include this on your checklist when shopping for the right provider.
California continues to be a nationwide, and worldwide leader when it comes to the institution of solar and “green” energy policies and programs. In addition to qualifying for the federal renewable energy investment tax credit (ITC), for example, solar PV residences of any type in San Diego 's Mission Valley (zip code 92103) may qualify for any of 19 other residential solar incentive programs offered by the state of California or the city of San Diego, as well as other federal government incentives, such as the Energy-Efficient Mortgages program. By comparison, a solar residence in the Reno Northwest section of neighboring Nevada (zip code 89523) may qualify for 12 available solar incentive programs, including the federal renewable energy investment tax credit. A solar PV residence in Phoenix, Arizona's 85032 zip code could qualify for 13.
However, having said this by far the most important incentive is the 30% federal solar tax credit and the NEM 2 net metering law that gives you almost full retail value for excess solar power exported into the grid during the day.
How much does the high rates of sunshine in San Diego contribute to the attractiveness of solar in San Diego?
Although we have touched on this topic above, measuring the amount of solar energy a residential PV system is likely to generate over any given period of time is not as simple or straightforward as it might appear at first glance, and it's important to be sure you're comparing apples to apples here.
By scientific convention, the amount of solar radiation available per unit area in a specific location is measured in kilowatt-hours per square foot per day, or for those more physics-minded, in megajoules per square meter per year. Other variables come into play, such as whether or not “direct” radiation, aka “direct-beam” radiation, or “diffuse” radiation is being measured. The former, as the term suggests, only measures the light that hits the earth's surface directly, not any scattered or reflected sunlight. Diffuse radiation is a measurement of scattered sunlight while “albedo” radiation measures light reflected by the earth's surface. As we have already stated above 1kw of solar panels installed in San Diego produces 1478 kwh of energy per year. In comparison many places in the north east of America produce around 1100 kwh per. If we take these numbers then San Diego produce 34% more power then the same panels would installed in the north east. This is a very big contributor to making San Diego one of the most profitable cities in America in which to purchase solar panels.
How much does solar panel installation cost in San Diego?
According to Solar-Estimate city-by-city breakdown of solar PV and utility bill costs the average cost of solar panel installation in California is $3.18 per watt. However, the average cost of soalr panel installation in San Diego is slightly higher than the state average at $3.63 per watt. The average system size in the US is 6 kW, which mean the average price of a solar system in San Diego is $18,150 (before claiming 30% tax credit and other rebates).
Installation of a 5.27 kW solar PV system should supply all the electricity needs of a San Diego resident that pays an average, monthly utility bill of $176 The net cost of paying cash to install a 5.27 kW, residential PV system in San Diego – after taking the 30% federal solar tax credit – is $13,723. Said residential PV system would produce an average 7,939 kWh per year of emissions-free electricity at an all-in lifetime, or levelized cost of solar energy of $0.07/kWh. That compares to the average utility bill cost projected out over the next 25 years of $0.47/kWh. All this considered, a San Diego resident paying cash to install this residential solar energy system would earn his or her investment back in five years and nine months. Solar panels, with proper maintenance, typically last 20-25 or more years, however. That leaves this San Diego resident with 19, possibly more, years' worth of electricity without having to pay a utility bill, not to mention the contributions he, she or they will be making towards improving human and environmental, health, safety and quality of life. All in all, it seems clear that installing a residential solar energy system in San Diego is a worthwhile investment. You can run your numbers based on your energy usage and see current offers from the leading solar companies in San Diego by using our “solar quoting marketplace”.