To understand tier shaving, you must be familiar with how you’re currently billed for your electric use. By California law, PG&E charges you increasingly more per kilowatt hour (kWh) as you use more electricity. (A kWh is the equivalent of 1,000 watts for one hour, equivalent to five 100-watt light bulbs burning for two hours.)
According to the rate chart in Chart 1, PG&E divides your monthly electric use into four tiers, based on increasing levels of usage. If you surpass the allotted kWh amount in each tier level, you’ll be charged the next higher rate for each unit of additional usage. You’re charged only 12 cents per kWh for an initial bare minimum survival amount of electricity. But use just more than twice that much and you’re charged nearly four times more, and your rate shoots up to 40 cents per kWh.
By installing a system engineered to shave off the higher, most expensive tiers, you’ll get the fastest return on investment, maximize your savings and pay less up front. The dramatic effect of tier pricing is shown in Chart 2. The blue and green columns combined show the total amount of average monthly kWh of one user over a year.
The blue portion represents the amount of electricity provided by a solar system designed for tier shaving. The green portion represents the portion of electricity that still needs to be purchased from PG&E over the year. A significant amount green area is left to be purchased but is almost all cheap, affordable electricity. The expensive tiers 3 and 4 are largely eliminated.
Although tier shaving is a great way to maximize your investment, it’s not for everyone. Some are concerned that lower tier billing will rise greatly in the future. Others expect that their own consumption patterns will increase, for reasons such as growing families, a pool, spa or the addition an electric car. These customers invest in a larger solar system or a system that can be expanded to provide up to 100 percent of their energy use. Such systems are still financially beneficial but the return on investment takes longer.
In a nutshell, a solar electric system needs only to be sized large enough to remove the highest percentage of the total monthly bill. Tier shaving, a powerful strategy for slashing a household’s monthly cost of energy, keeps the size of the system small and the price of a solar system low.
Contributed by Spectrum Solar. For more information, visit their Web site www.spectrum-solar.com.