Investing in solar panels is a significant financial commitment, and one of the most common questions homeowners have is about the return on investment. Specifically, how long will it take for the savings generated by solar energy to cover the initial cost of installation? In this article, we’ll explore the factors that influence the payback period for solar panels, including installation costs, energy savings, and available incentives. By understanding these elements, you can better assess how soon you can expect your solar investment to start paying off.
How Long to Pay Off My Solar Panels?
In addition to the widespread promotion of the benefits of solar power, the rising cost of domestic energy encourages more homeowners to wonder if solar is a worthwhile investment. This depends largely on the answer to the question: how long does it take me to pay off my solar panels? There are several factors influencing the answer, including the size of your house, how much power you use, and even where you live.
Investing in solar power is a big, and quite daunting, step, and it’s quite right to consider all the implications before making the decision. You are contemplating a massive installation on your roof, which will totally change the appearance of your house, and could even put off potential buyers if you need to sell. What’s more, you are looking at a financial investment that is second only to your house purchase.
Basic Factors
To start working out the pay-off date, you must first have an understanding of both the system’s price and the value of the generated electricity. Depending on the size and choice of panels, the systems themselves will cost anything from $10,000 to $50,000. This is, though, before the Federal tax credits of 30 percent, plus the rebates that your state will receive. For instance, an average household would probably need a system of 5 kilowatts (5,000 watts). A system’s basic cost is worked out by multiplying the size in watts by the price per watt the device is priced at, so if the seller’s price were $3.95 per watt, the system’s initial cost would be $19,750. The Federal tax credit, however, plus a $1,000 state tax credit, could lower the net price to around $12,000. The other factor determining your pay-off time is the regular electricity rate in your region. For instance, if your installed rate is $3.95, and your average electricity cost is $0.20 per kilowatt hour, your pay-back time should be about 15 years. Generally, the less expensive your system, and the higher your regular electricity rate, the shorter the pay-back time on your system will be.
Additional Reductions
That simple calculation, though, does not take into account additional ways to reduce your pay-back period, which again depends largely on the environment in which you work. One is the SREC or Solar Renewable Energy Certification, which is comparable to energy stock certificates. One SREC is received from one-megawatt hour produced from solar panels (Mwh, equivalent to 1,000 kilowatts used continuously for an hour). Several states have their own SREC systems, like Massachusetts and New Jersey, enabling homeowners to receive SRECs to sell back to power companies. This means that a home with a 5kw device can produce 5Mwh per year, receiving 5 SRECs, or $1,000 to $5,000. So you could be raising your pay-back time to 6-9 years on a 5kw device in NJ. Many states also operate net metering policies that allow solar systems connected to the grid to return any excess electricity to the grid when generating more power than required. The business will pay the full retail price to the consumer in the form of credit for future purchases. This could help might the payback time.
Good Investment
A definitive answer to the question is not possible: how long will it take me to pay off my solar panels, as there are so many variables. Nevertheless, the payback period could be shortened from 15 years to as little as 6-9 years for a 5kw system with a basic cost of $19,750–$20,000. This does not take into account your substantial energy cost savings, and your solar panels could be a very good investment if you live in your house for long enough.
Considering Going Solar? Solar Harmonics is Here to Help
Most of our clients are looking for a company they can trust to help them go solar. Based on our decade in business, online reviews, and Diamond Certification, Solar Harmonics is the best choice to trust to complete your solar project on time, on budget, and with the expected results. It is our mission to design the best value solar panel system that produces reliably over the next 30 – 40 years and saves the most money for our clients. If the financial goals of our clients intersect with the global and environmental goals of our founder, it is a win for everyone except the utility companies. Contact us today for your free quote!
