When you receive your energy bill every month, I bet your eyes automatically drop to read the amount due. Have you ever wondered what all of that other text in the middle of the page is? What determines the price and how does solar come into play? While each state and utility bill will have its own caveats, most bills can be broken into three parts: electricity charges, demand charges and delivery charges.
Electricity charges are made up of a mixture of variable charges based on locality, seasonality, time of day, industry and size of company. Some energy suppliers increase rates when the majority of their customers require electricity to try and incentivize a shift in usage away from peak hours. Electricity can be produced from various sources and will cause variation in cost (natural gas vs. coal for example). According to the US Energy Information Administration, the cost of energy can range anywhere between 7-30 cents per kWh.
Demand charges are calculated by using your highest 15-minute average usage recorded on the demand meter within a given month. These charges are meant to encourage customers to reduce power usage during peak hours and shift their usage to non-peak hours. Demand is generally somewhere between $2 to $20 per kW depending on your utility, the season, and what demand charge bracket you are in, often based on the industry and/or size of the company.
The US electrical grid has over 450,000 miles of high voltage utility lines that connect five grids to power plants where energy is produced. Those grids then feed that power to thousands of utilities. Another 5.5 million miles of local distribution lines link utilities to homes and businesses. In the process of moving all this power, 6% of the energy is lost through heat. The price of maintaining those power lines and paying for that “lost energy” is being passed on to you through transmission and distribution charges.
When you look at your utility bill, you can see the majority of the price of this delivery and transmission under your demand charges.
Impact of Solar
Solar allows you to save money in all the categories of your electricity bill that we have reviewed.
Electricity Charges: Once you move to solar, you are no longer paying for antiquated energy sources like coal or natural gas which can range from 7 to 30 cents kWh. Solar generally costs somewhere between 2 to 12 cents.
Demand Charges: The beauty of solar is that it reaches its peak during the middle of the day, much like the schedule of your business. For many businesses, solar production will map very closely to your peak needs during the day and reduce peak demand charges.
Delivery Charges: By moving the source of your power to your site, you will reduce the energy lost through heat. Enjoy a more efficient energy source by generating the power on your own property.