The benefit of smaller solar systems

November 24, 2020 | 3min read

The goal for a homeowner when going solar is normally to net meter out. To do that, a solar system is built which produces roughly 100% of the power that the household will use in a month. The goal is to reduce the home’s electric bill to as close to zero as possible. But in some states, net metering isn’t done. Instead, utility companies in those states only pay their export rate to solar customers for electricity generated by their systems. That export rate, measured in cents per kilowatt-hour, is often lower than the homeowner’s cost to produce that electricity. In cases like this, where the homeowner would incur a loss by selling power to their utility, it makes sense to build a smaller solar system that would export little to no electricity to the grid.

The difference between net metering and export rate

Under net metering, a home with solar panels receives a one-to-one credit for the amount of electricity they supply to the grid. This means if you pay $0.12 per kilowatt-hour for electricity, you get paid $0.12 for the electricity you supply to the grid. It gets a bit more complicated with time-of-use (TOU) billing. You are credited at whatever the rate is during the times of day your system supplies electricity to the grid. You get charged at whatever the rate is at the time you draw power from the grid. TOU rates are often higher in the evening than they are during the day. This means you’re likely to pay more for the electricity you use in the evening than you get credited for power your system produces while the sun is shining.

Export rate credits you less than you pay to use electricity

The export rate is often at or below the cost that a utility company pays a power plant for power provided to the grid. As of the date of this post. Recently, the Utah Public Service commission slashed the compensation rate for solar customers to just $0.05969 in the summer and $0.05639 in the winter. A rate this low could mean that some solar owners are compensated at a rate that is less than what they are paying to produce that electricity. When this is the case, it makes sense to build a smaller solar system.

How a smaller solar system benefits homeowners stuck with export rates

If a homeowner is stuck with export rates, then it makes sense to build a smaller solar system. A system sized to produce about 60% of the homes’ electrical consumption would likely be ideal. With a system that size, the household is likely to consume nearly all of the system’s output. This enables the homeowner to save money on electricity because the power produced by the system costs less than the utility’s retail rate (the rate you are charged for electricity). Since the home consumes nearly all of the power produced by the system the homeowner avoids losing money through being shortchanged at the utility’s export rate.

States where a smaller solar system may make sense

There are three states where utilities compensate solar owners at their export rates. Arizona, Utah, and Jacksonville, Florida. In those three states, if you are thinking about going solar, consider saving yourself some money and installing a smaller solar system. You’ll pay less for your system overall, and you’ll avoid losing money on your utility’s export rate. If you already have a system that produces 100% of your usage in those states, consider installing home batteries so you can store the excess power produced by your system for later use. If you are concerned about what size system is best for your needs, Freedom Forever can put you in touch with one of our independent authorized dealers who can discuss your options with you.

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