The Economics of Residential Solar Panel Installations for Customers on Tiered Rate Plans

Abstract

This case study uses data from a Southern California Edison residential customer on a grandfathered tiered rate plan to investigate 1) whether it was economically beneficial for the customer to have installed solar panels, and 2) what level of usage offset (the percentage of the customer’s annual electricity consumption that is provided by the solar panels) would have resulted in the maximum financial return for the customer. We find that solar panels are an excellent investment for this customer, and that the ideal usage offset for this customer (and others on the tiered rate plans) is 100%. That is, the savings are maximized when the solar panels produce 100% of the customers’ annual electricity consumption.