I read recently where the price of energy doubled over the past decade in the US. And DOE's Energy Information Administration posted the average price of electricity for 2009 in the US at 11.6 cents per kwh. Wondering what the cost of electricity might look like in 25 years (the expected life of my solar panels) if the price of electricity doubled every 10 years, I built an Excel table. The attached table indicates that, if electricity goes up an average of 5.55% a year, the cost of electricity will double every 10 years and electricity will cost $1.71 per kwh in 25 years. This is a little difficult to believe so I thought I would share this table to see if someone could identify a goof I made somewhere.

OK the mistake you made was to multiply the average yearly inflation by the average yearly inflation and multiply that by the previus years costs for electricity.

 

If you have a calcuator, assuming a 5.5% yearly inflation rate

cost in year (X)  = CURRENT COST * 1.05EXP(x)

SO IN YEAR 25,  11.6* 1.055EXP(25) = 44.23 CENTS PER KWH

In excel the formula would be =0.116*(1.0055exp(number of cell containing the year))

I'm with you.  Thanks.  I've attached an updated table and included a few more columns so you can see where I was headed with this analysis.

It looks like in order for electric rates to double over the next decade, electricity would have to increase by about 7% a year if current rates are .116 cents per kwh.  Assuming energy does go up at this rate, it also appears that the solar panels would reach breakeven between years 17 and 18.  Let me know if you see anything else that appears to be amiss.  Thanks again.

 

several things to think about.

1. electicity generating costs vary all over the map.  It depends in large part on the generation energy source.  hydro, nuke, wind,coal, nat gas, solar. 
Personaly I pay 18.6 Cents per kwh in connecticut plus a flat fee of 16$ mo. 
2. I think it is very hard to predict the costs of different forms of energy into the future

http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_a.html

is a state by state breakdown of current costs for electricity.  On the same site you can find all the historical data for each state.
eric

Agreed.  In North Texas, the dominate provider is about 67% coal, is saddled with $44B in debt and this is a deregulated market.  If cap and trade becomes real, I would expect any cost increases driven by cap and trade to get passed onto the consumers somehow.  But, like you indicated, it's really anyone's guess what will happen but it will sure be nice to be net zero if it does happen.