Solar Power & Electric Cars--the numbers are better than ever

I admit that I'm biased--I really want solar power and electric cars to work.  This is not because I stand to make any money from either of these technologies.  Much more important than that, I believe that the future survival of humanity requires it.  Check out the current record forest fires in Colorado for the latest warning shout from global warming.

But I also try to be as accurate as possible with the facts.  I know that electric cars and solar power are expensive.  The question is whether they are cost effective.  If people can save money by buying solar panels and electric cars, then they will buy them.  The key issue here is that both of these purchases require big up-front investments.  Since most of us don't have enough cash on hand, that means that we need to borrow it.  The good news is that interest rates keep going down, making these investments better than ever.

Solar is now cheaper than PG&E

For solar, the ideal is a 30 year mortgage.  The current rate for that is around 3.5%.  According to a June 19, 2012 report from Greentech Media the current cost for solar installed in the U.S. is $4.44 (compared to only $2.24 per watt in Germany!).  Using the U.S. figure for our modest 3.24 kilowatt system, the cost would be $14,386.  At 3.5% for 30 years, the Capital Recovery Factor is .054.  Therefore, the cost would be .054 x $14,386 = $777 per year.  Since our system generated 4,371 kilowatt hours (kwh) in its first year, that would come to $777/4,371 = 17.8 cents per kwh, which is slightly less than PG&E's average.

That's the unsubsidized cost.  In fact there is a 30% federal tax credit which reduces the cost to $l0,070.  The annual cost then becomes .054 x $10,070 = $544 per year, dropping the cost to 12.4 cents per kwh, lower than the lowest PG&E rate for standard households of 12.8 cents/kwh.  With these costs any homeowner in Northern California can save money with solar.  It used to be that only heavy electricity users would save money, but that is no longer the case--now everyone can save!

But that's not all!  Because of net metering, solar is reimbursed at the peak rates, while most of our electricity is in the off-peak charging our car.  Therefore, our 4,371 kwh of solar power paid for 6,460 kwh of power.  See Everything is going according to plan for more details on these numbers. Adding $54 in PG&E minimum charges to the $544 payment for the solar means that the actual cost per kwh would be $598/6,460 = 9.2 cents per kwh.

What about electric cars?

The low interest rates also make the additional investment in an electric car more attractive.  For a car that you plan to keep for its life, a 15 year loan would be ideal.  The current rate on 15 year home refinancing loans is around 3%.   A Chevy Volt costs around $33,000 after rebates.  Assuming that is about $15,000 more than what a conventional car costs, what is the better deal--borrow $15,000 or buy a gasoline car? 

If the gasoline car gets 25 miles per gallon of gas, and gas costs $3.75 per gallon, that means it costs 15 cents per mile to drive.  Electricity to charge a car at night is now priced at about 6 cents per kwh (PG&E wants to raise this to 10 cents--see pg&e proposed rate change), so the Volt costs about 2 cents per mile to drive (3 miles per kwh).  This means you save 13 cents per mile compared to the gasoline car.  At 10,000 miles per year that is $1300.  The Capital Recovery Factor for 15 years at 3% is .084, which means that it would cost you .084 x 15,000 = $1,260 to pay off the loan.  In other words the $1,300 you save is greater than the $1,260 it costs to pay the loan. 

So a Volt is a better buy than a gasoline car that gets 25 miles per gallon.  By similar math, a Leaf, costing $26,000 after rebates is cheaper than a gasoline car costing $18,000 and getting 40 miles per gallon.

So  make your next car electric, and you'll be saving money.