Prices for residential electricity from utilities have climbed steadily in the past decade. There has been some fluctuation due to changes in the cost of production and fuel. Nationally, the increase has been approximately 30 percent over 10 years. But not everyone has seen changes in their electricity costs.
Those who have installed solar photovoltaic (PV) panels have not experienced the increase. In fact, in a time of fuel price fluctuation, solar energy — usually touted for environmental benefits — has stabilized electricity costs. Even those still paying for their solar systems have mitigated those higher electricity bills. Going solar served as a financial “hedge.”
Changes in solar expenditures
Not only is the cost of solar power stable; it has actually declined. The initial investment and the time required to recoup the cost for a solar energy system have dropped considerably.
For those who purchase a solar energy system for their home, the electricity generated will be free once the system is paid off (with the exception of maintenance costs). This ensures considerable future savings while others face energy cost uncertainty and higher expenditures.
Additionally, those who purchase up front, lease or pay for a solar system with a fixed-rate loan, gain stability in energy expenses from the onset. Having a solar energy system makes electricity costs more predictable than grid electricity. While there are weather-related variations in production by the solar system from year to year, the peak energy production period in the summer dovetails perfectly with the peak power requirements. Regardless of weather variations, solar energy costs will be lower than grid electricity costs over the long term.
The future for traditional energy sources
Could electricity prices fall in the future? Yes, but a reduction is highly unlikely because of fuel requirements and distribution costs.
Utility electricity costs fluctuate but have a long-term tendency to rise because of the cost of the fuel required. Besides the need to purchase the fossil fuel, there is the need to refine, transport and ensure pollution protections are in place among other factors that affect costs, even if the supply of the fuel is uninterrupted.
The reality is that fossil fuel availability and prices are affected by factors beyond consumers and the local utility control. The resources are limited, and much of them are controlled by others. The security of the fuel supply has been a global issue since the Organization of the Petroleum Exporting Countries (OPEC) oil embargo of 1973 and through repeated Persian Gulf wars. Price volatility, even in the period of declining oil prices in recent years, also creates an effect on energy security and pricing because of uncertainty surrounding when things will change.
In spite of that volatility in their supply chain, many utilities began purchasing and generating energy from solar, wind and other renewable energy sources only when forced to by the government. Unlike traditional companies that have considerable incentives to keep their operating costs as predictable as possible, utilities were held back by their ability to pass their costs on to captive customer bases.
Now, much like homeowners, utilities are looking to renewable energy resources as part of their generation resource plans. It could be because of mandates to cut their carbon footprints and requirements of a state and/or federal Renewable Portfolio Standard (RPS) that a specified minimum amount of renewable energy be provided to customers. But the reality and overlapping motivation for most utilities is a need to stabilize their energy production prices.
Another factor raising costs for utilities, and ultimately for their ratepayers, is distribution of electricity costs. The electric grid in many parts of the country is old and woefully inadequate. From high-power transmission lines to local street poles, elements have outlived their expected use. Rapid growth in many suburbs has not been met with growth in infrastructure in some parts of the country. The costs of replacing, upgrading or adding systems are astronomical but necessary to get power to local utility customers.
This is not true for solar power generated at home. There are no fuel distribution costs or massive investments in land, poles or wires required. Those costs are eliminated for those using their own solar system.
Benefits of price stability
In most household budget items, price increases and fluctuations are beyond a homeowner’s control. Energy does not have to be one of those items. Going solar gives you some control over the electricity market. But — bottom line — a solar energy system at home can protect against rising electricity prices in the future.
RGS Energy, founded in 1978, is a market leader in solar energy system installation. To learn how solar can keep your electric bills low and to get a free quote, visit RGSEnergy.com.