Dollars and Sense

A Sample Financial Summary

Your conversion to solar will obviously depend upon the number of kWh you use and the rate at which you are charged by your utility, but also may vary by the state in which your business is located, and your unique financial goals and profile. However, the example below is based on the application of real and achievable incentives and savings.

Average number of kilowatt-hours used in a month 10,000
Historical electric use over 12-months 120,000
Number of panels needed 313
Cost of turnkey solar design and installation including 5-year maintenance $300,000
State Grant $65,000
Contractual cost $235,000
Federal Investment Tax Credit $90,000
Accelerated depreciation $75,000
Net cost after incentives and credits $70,000
Annual savings on electric bill using average kWh cost $12,000
Simple payback in years 5.8

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Your Commercial Electric Bill

Did you know you are billed by your electric utility based on the highest level of demand you required during the billing period?

Feeling peaked?

pizza-slices-334x140Who doesn’t love pizza? Imagine you have it every single day for lunch, charging it to your account at your local pizzeria. Every day for a month, you order one slice.  One day you find you’re particularly hungry, so instead of one slice, you order three. The pizzeria owner bills you at the end of the month for three slices a day, because your demand peaked at that amount. That is exactly how your electric utility charges you — all month at the highest rate your business demanded. Doesn’t that give you heartburn? You better get solar!

electric-bill

1 A flat fee applied each month regardless of the amount of kWh used.

2A charge based on the rate at which electric energy is delivered to or by a system at a given instant, or averaged over a designed period, during the billing cycle. Perhaps this is the most overlooked utility billing practice: it means that in any given month, your entire bill is based on your highest level of demand for that month even if the level was only reached on one day for one 15-minute period.

3(kWh) are a measure of energy, while kilowatts (kW) are a measure of power. Because it is energy, kWh can change form — and strictly speaking, it isn’t used, it’s converted from one form to another.

Because it is a unit of power, a kW is more straightforward and measures how fast something is using energy.

The relationship between energy and power is a lot like the relationship between distance and speed.

energy = power X time
kWh = kW X time

Do You Know How You’re Charged?

The monthly service charge covers the costs for billing and processing payments, metering, and meter reading. In other words, your business pays to do business with your utility company.

With solar power, you will continue to do business with your utility, equating to a continuation of the service charge.

Demand (kW) is a measure of the maximum rate at which electricity is being used during the billing period. Demand is expressed as kW.

consumption

As shown in the graph above, the business customer used the most energy around 1 p.m. The demand will be measured every day at 1 p.m. for the entire billing cycle. Source: NYS Net Metering FAQ – Commercial.

Perhaps the most misunderstood charge or your commercial electric bill, the rate you are charged for demand is based on the highest level of use for just 15 minutes within the 30-day period! In other words, let us assume you demand 10 kW per day for 29 of 30 days. On a single day in the month for one 15-minute period, your demand peaks at 30 kW. You are charged on the basis of 30 kW for all 30 days.

With solar power, you will still be charged at the highest rate of demand, but your demand will presumably peak at a far lower threshold. You will also be able put “peak shaving” into practice, depending upon your specific energy needs.

Energy (kWh) charge—This is a variable charge to cover the cost to buy or produce the electricity consumed during the billing period. Additionally, it covers the variable cost of supplying necessary transmission and distribution facilities to meet customer’s needs. The actual charge to individual customers will vary month-to-month according to the amount of energy consumed.

With solar power, energy costs will be drastically reduced. While solar may or may not eliminate the energy charge each and every month, when it is charged it will be a fraction of what it once was and with potential changes to your peak demand, the rate at which you are charged will be reduced.

Taxes need no explanation, but obviously, the lower the utility bill, the lower the applicable city, county and state taxes.