One of the biggest reasons we’ve found residential customers have doubts about solar is due to the initial cost of solar equipment and installation. Although all systems Roost Energy quotes offer safe, reliable returns and will more than pay for themselves during their lifetime, it can be a lot of cash upfront when compared to your bi-monthly electrical bills.
On top of that, unlike many other provinces in Canada and States in the US, there are currently no incentives to further entice eco-conscious customers to make the switch to solar. And solar leasing models that recently drove the USA to over 1 million solar powered homes, aren’t really on offer here in any reasonable form yet. So how to get around this and still make solar work in BC for the average home owner?
Solar in the Okanagan is most economically attractive for those customers who have higher electricity usage either due to the purchase of an electric vehicle or if they use electricity to cool their homes in the summer months (ex. air conditioning or geo-thermal pumps). Cooling loads are particularly well suited for solar generation as the heaviest cooling times tend to match well with solar panels highest production. For example, for my own home’s usage, I tended to stay mostly within the “tier 1” rate of BC Hydro’s residential rate structure in the cooler months, but, due to home cooling, have much higher bills in the summer months, and get much of my consumption charged at the higher 13 cent/kWh rate. Installing solar panels this year on our home have helped us stay out of that higher tier of electricity.
So let’s take an example of a fairly typical electrical profile in the Okanagan with higher electricity usage during the hot summer months, as per figure 1 below:
Figure 1: Consumption profile of a Vernon home with higher electricity usage during the warmer, summer months. For BC Hydro, step 1 is currently 9.1¢ and Step 2 is 13.7¢ per kWh after 5% rider and GST.
A 5KW system system with a 25 year warranty on a south facing roof would produce around 6000 kWh of electricity per year and would have an installed cost, after tax, of about $17,000. If you are one of us who get into that second, more expensive, tier of electricity, that could result in savings of up to $900 or more in utility costs for the first year (more for Fortis electrical customers who are charged over 15¢ per kWh in the second tier). Below is the same electricity profile, but now adjusted to show the contribution of the solar power across the year in dark orange:
Figure 2: Consumption profile of a Vernon home solar covering off the majority of the more expensive tier 2 pricing from BC Hydro.
To add $17,000 to an existing mortgage at 3% interest rate (prime is currently 2.70%) and an amortization period of 25 years (to match the warrantied life of the solar components), monthly payments would be $80/month or $960 for the year. So with savings at $900 and borrowing costs of $960, it only costs an extra $60 in the first year after your solar panels are installed. In other words, for the added cost of a grande latte a month, you could switch to clean renewable solar power and help protect yourself against the province’s rising energy costs.
But wait, it gets better. Electricity rates have been on the rise recently in excess of 5% per year on average (BC Hydro was allowed to increase their rates by 28% between 2015 and 2019) and will continue so for the foreseeable future.
If you assume a reasonable ongoing increase of only 4% per year in electricity prices, the annual savings increases year on year. In our example above, these savings are dramatic over the life of the panels. By year 3, it is a wash at $960 in electricity savings and by year 25 getting to over $1000 saved per year. As you can see in the graph below, the savings as compared to the annual mortgage payments could amount to thousands of dollars…and the savings just gets better and better for every year of production beyond the 25 year warranty.
Figure 3: Savings from solar generation increasing year on year as compared to finance payments 3% interest.
Talking to some of the representatives at RBC Bank recently, they indicated that adding the cost of solar onto an existing mortgage is a straight-forward process which does not require re-financing. They will simply blend this, in our example, $17,000 into the current mortgage at current rate for the remainder of the term. So, if you had a 3.2% mortgage rate originally for your home, but rates have since dropped by 0.2%, the $17,000 would be added and “blended” in a 3% rate. Other banks may handle this scenario differently.
If adding to an existing mortgage is not an option, virtually all banks and credit unions have other home improvement lending products available that a solar panel addition could provide. Some lending centres in Canada have now started offering products specifically targeted at renewable energy generation for residential and small business customers such as VanCity’s Home Energy loan, RBC Solar Panel Financing, and Scotia Bank’s ecoEnergy financing.