Analysis of Historic Utility Rate Increases Makes Strong Case for California Business to Shift to Solar Electricity
San Mateo, CA – May 21, 2008 – Today Tioga Energy released a report that makes a case for solar energy as a cost saving hedge against future increases in electric utility rates. The report, titled “Hedging Against Utility Rate Fluctuations with a Solar PPA” details the rise in energy rates in California since 1970, and gauges the potential for rate increases in the years to come. The volatility and escalation witnessed to date, coupled with the challenges California-based businesses and organizations face, illustrate the need for businesses to consider managing their electricity price risk through a solar power purchase agreement. Tioga Energy has made the full report available for download at www.tiogaenergy.com.
Stability of Solar Energy Prices
Relying on data collected from the Energy Information Administration and an analysis by the California Public Utilities Commission, the Tioga Energy report reviews California rate increases from 1970 to the present, analyzes the likelihood of future utility electricity price increases, and then compares the forecasted electric utility rate increases with the fixed rates of a solar power purchase agreement (PPA). The findings demonstrate a compelling argument for businesses to adopt solar energy for its positive impact as a financial hedge.
The study found that California rates have risen steadily from 1970 to 2004, with compound annual growth rates (CAGR) in the range of 7%, depending on customer and utility segments. Further analysis shows that a range of complex factors will have significant impact on future utility rates, including increased reliance on natural gas; a high probability of additional operating costs associated with carbon emissions cap-and-trade legislation; and increased costs and time required for new power plant and transmission development.
Leveraging proven statistical modeling methodologies outlined in the paper, the report illustrates the probability of electric utility rate increases in the future, and how solar PPAs provide strong protection against the risks of those increases. Tioga’s solar energy savings model – which is used with customers and partners to forecast probable solar savings under various scenarios – shows that:
- Typical Solar Energy PPAs offer a very high probability of significant savings over future electric utility rates.
- Even Solar Energy PPAs with an initial price substantially higher than current electric utility rates can be more likely than not to generate a net savings over time.
Solar Energy Savings Model
Tioga’s solar energy savings model demonstrates that the fixed rates of a solar PPA offer strong protection against the risk of electric utility rate increases. The paper demonstrates a solar energy PPA’s validity as a sound financial choice to guard against the probable electric utility rate increases caused by rising utility fuel and construction costs and environmental regulation associated with global climate change.
Download the full report from Tioga Energy
