The helpful folks at SESCI have pointed me to a web site that details the rebates available for those putting solar power onto the grid.

For each kilowatt-hour generated, the producer will be paid 42 cents. That rate is “set for the entire 20-year length of the contract.”

Since we only pay 10.3 cents to take the energy off the grid, that sounds like solar panels would be a LOT more affordable; even profitable! However, there are a few catches.

For example, “new contracts will be subject to review every 2 years,” which sounds a whole lot like the guaranteed term for the $0.42/kwh offer is 2 years, not 20. Additionally, to put power onto the grid, we would have to pay an $800 initial fee AND $800 per year. (There are efforts under way to reduce or eliminate this fee, but that’s how it is today.)

If we assume that energy costs will increase at a rate of 5% per year, and we will always use 4200kwh/year (for simplicity) our energy costs over 25 years will be $28,189.53 from Toronto Hydro, or $35,806.78 from Bullfrog Power. (This latter number isn’t quite fair since presumably wind power will not become more expensive to produce over time.)

Solar Panels come with the previously mentioned up front cost of $25,000 and we are assuming the cost of borrowing that money is 5%. We also have an up front cost of $800 to be a power generator and must pay $800 per year to put power on the grid. (These costs should probably also increase at a rate of 5% per year, but we’ll leave flat for this example).

[Update 2007.11.03: It seems our (relatively low-light) region would require us to purchase a $50,000 solar panel array to cover our current electricity requirements. I have not updated the numbers below to reflect this amount.]

Even if we assume we are consistently paid 42 cents/kwh over 25 years for power we put onto the grid (though I think it’s more likely it would actually drop) and we assume we would be buying power back at the market rates from Toronto Hydro, our electricity expenses on a solar home would be $49,336.80.

So the ‘incentives’ that were missing from the previous calculation actually revealed the additional costs involved in putting power onto the grid. Solar panels would appear to be 38% more expensive than just buying clean power from Bullfrog.

I believe these numbers now factor in all financial incentives, and the projected increase in energy costs of 5% per year.