Solar Panels Payback Period
One of the benefits of choosing a renewable energy source such as solar panels to power your home is the prospect of making a profit from it. Not only is this seen in a reduction of your electricity bill because you are producing energy yourself, but you can also sell your excess production to a power company via the Feed in Tariff.
Deciding on what your return on investment will be for residential solar panels depends on a number of factors, not least what it costs you to set up and purchase it but also the quality and standard of the system components that are installed. Your roof size and the direction it faces will dictate the number of panels you can have placed there and the amount of energy you generate, as will the quality of in each panel.
Most solar panel installations should last between 20 and 25 years and over with the right maintenance, and the initial cost can normally be off-set within the first 12-18 years. There are many factors to conisder when looking at the payback period for solar panels.
Figuring Out Your Household Payback Times It’s Complicated
If you’ve already looked at prices for solar PV systems, you may havenoticed large variations between the advertised payback times for panels.Some are much shorter than others, but tend to ignore plenty of potentialcosts and changes. For example, no allowance may be made for the decline inthe panels’ output over time.
Payback times will vary depending upon:
- available sunlight hours this influences productivity of the system and the amount of rebates
- electricity prices combined with FiTs
- the cost and quality of the system
- how much solar power is self consumed
- positioning of the panels and issues with the site.
“Some in the PV industry are far too simplistic about these calculations they’re being misleading,” says Damien Moyse, energy projects and policymanager for the Alternative Technology Association.
“They’re experts in solar energy, but not necessarily in the calculationsaround FiTs, self-consumption patterns, or the variable generation orexport amounts at different times of year.”
CHOICE tip: Payback times will differ with eachhousehold and you should investigate with your own inputs.
The ATA has a free Solar and battery advicetool if you’re thinking about installing a solar system. You enter your household type and location, and choose abudget range. You’re then emailed a report showing the solar-only and solarplus battery systems in your budget. The report lets you compare cost, billsavings, environmental benefit, and payback period.
Lifetime Savings Are A Better Measurement
Using the above formula, a cheaper system has a shorter payback period than a higher performance system .
Does this mean its a better return on investment?
A high-performance system is designed to last over 25 years. However, entry level systems only last around 10-15 years.
So while it costs more upfront, you get at least 10 extra years of free electricity with a high- performance system compared to a cheaper system supercharging your total savings:
Cheaper system delivering $2400 per year in savings = lifetime total of $36,000 High-performance system delivering $2400 per year in savings = lifetime total of $60,000
And thats assuming that electricity rates wont increase in that timeframe. Which they will. Not to mention replacement costs .
But what do you do if the upfront cost of a high-performance system is preventing you from pulling the trigger even with the generous government rebates?
You May Like: Is It Better To Lease Or Buy Solar Panels
Get Out Of Utility Debt
The payback period is often used as a key metric for home solar, but it doesnt capture the whole story. When considering the cost of solar, compare it to the cost of your electricity now. What is the payback period on your current utility expense? Of course, you never see a return on the money you send off to the utility company, but more than that, Colorado utility rates are likely to rise significantly over the years.
A home solar panel installation protects you from rising energy costs and gives you energy independence. Youll have your own power-producing asset on top of your roof, capturing sun rays and turning them into solar savings!
Want to see how much solar potential your home has? Request a free quote from your local solar company to evaluate the value and impact of solar for your home. Theyll provide you with a payback period so you can see how long solar panels will take to pay for themselves, but theyll also show the lifetime value, home value increase, and environmental benefits youll gain.
How Long Until Youve Paid Off Your Solar Panels
We get it. The upfront cost of solar panels can give many homeowners pause. However, when you think longterm, theres a real return on investment that will pay off for years to come.
If youre currently weighing the pros and cons of purchasing solar panels, consider how long it will take before you begin to see real financial gains.
Read Also: How To Remove Solar Panels
Are Solar Panels Really Worth It
A payback period is the amount of time it takes to earn back your initial investment. Solar panels can help you save enough money on energy bills over time to offset the upfront costs. How much you save per month depends on the size of your solar system, your home’s energy consumption and other factors.
Calculating the payback period will be unique to your circumstances due to the variability of the upfront costs, as well as the difference in energy costs based on your location. But here are some guidelines to help you estimate when you will break even.
Youre Our First Priorityevery Time
We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
Read Also: How To Make A Solar Panel With Cd
How Long To Pay Off Solar
When a person takes on a financial liability, like car or house payments, they look forward to seeing the notification paid in full. Theres a deep level of satisfaction knowing that youll never have to send more money for that thing every again! The same is true with purchasing a system, but theres something more. Many solar panel owners expect a payment for any unused power they generate, to help cover the solar investment even sooner.
With or without excess energy payments, it doesnt take long to pay off a solar panel system in California. With a house, it usually takes about 20 or 30 years. With cars, it takes a little less time the average new-car loan in 2020 had a duration of 6 years. With solar panel systems, however, the variance is a little wider. Average solar panel installations in California take anywhere from 2 to 8 years to pay off. Why the difference?
How Much Does A 5kw Solar System Cost And How Long Will It Take To Pay Itself Off
If you want to join the 20% of Australian households now generatingelectricity on their rooftops, we’ll show you how long a 5kW rooftop solarsystem could take to pay for itself through reduced power bills.
Calculating a payback period is complicated and looks at your electricityconsumption patterns, location, energy tariffs and solar feed-in tariffs, and the cost and quality of your system. Use our figures as a guideonly.
Recommended Reading: Do You Have To Rinse Pine Sol
What Is A Solar Payback Period
As with other investments, the solar payback period estimates how long it will take for you to break even on your solar energy investment. The payback period for solar is calculated based on the cost of solar, net of any incentives, and the savings youll see by avoiding paying for electricity.
As an example, if your solar panel system has a payback period of eight years, this means that your solar panels will save enough on your electricity bills to cover the cost you paid for them in just eight years. But solar panels last for 25 or even 30 years, so after year eight, its all gravy: thats when youll truly start to see massive savings from solar, often on the order of tens of thousands of dollars over the next two decades.
In this piece, we talk through the payback period of solar when you pay for solar upfront. But thats not the only way to pay for a solar panel system: both solar loans and solar leases/PPAs are very popular methods of financing a solar energy system. In the case of a solar loan or a lease/PPA, you pay for solar monthly, as opposed to up front. While youll save less money in the long run by paying for solar with a loan or lease, so long as your monthly solar payments are less than what you currently pay for electricity, your payback period for solar is right away: youll start saving in month one!
Are Solar Panels Efficient
Some solar panels convert 22 percent of their available energy into electrical power. This is an actually amazing number if you consider the fact that we are paying a lot of our electricity bills every month. The solar panels are made of solar cells. A cell is a small disk of a semiconductor like silicon. They are attached by wire to a circuit. As light strikes the semiconductor, light is converted into electricity that flows through the circuit. As soon as the light is removed, the solar cell stops producing power.
A solar pool heating system uses the suns radiant energy to heat your water. The water is directed to the collectors, rising from the bottom to the top. As it gradually rises, its heated by the natural energy and then returned to your pool. This cycle continues until your pool water reaches the desired temperature. You can enjoy an added 10-13° to your water without any extra costs or air pollution!
Also Check: Can You Lease Solar Panels
How Do You Clean Solar Panels Safely
What are the best ways to clean solar panels?
- A water pipe from ground level can do wonders in most cases. The safest method of cleaning in most cases is to flush roof solar from ground level with a hose.
- Use isopropyl alcohol to clean stubborn stains.
- Use soft brushes and a plastic scourer to make a short scum.
Do I need to turn off solar panels to clean?
Things first, you should shut down the system. Be sure to turn off AC and DC isolators, as liquid and electricity are not friends. If possible, it is best to clean your panels from the ground, although it can be difficult to get cleaning tools long enough to complete your installation.
Can I clean solar panels myself?
Cleaning process: Rinse solar panels with clean water to clean loose dirt. Use a soft scrub and soapy water from the bucket or mix a sprayer to gently wash the surface of the panels. Rinse solar panels with clean water from the hose a second time. Dry squeegee panels.
How Can Homes Use Solar Power
If you are considering going solar, the most popular and efficient option is to install solar panels. Generally placed on the roof of the home because of exposure to sunlight, solar panels use Photovoltaic cells that absorb photons from sunlight. This then creates an electric field and that electricity can be used or harvested for later use.
Although solar panels are the best way to use solar energy to power your home, there are other ways to use solar energy that have a lower barrier to entry. For example, solar water heaters work in much the same way as solar panelsbut are less expensive to install than full solar panel systems. For the purposes of this article, however, the pros and cons of solar power will be based on solar panels.
Read Also: How To Calculate Solar Panel Output
Final Word On Solar Panel Payback Period
Now that youve read through the steps outlined in this article, you can calculate the estimated solar payback period if youve gotten a quote for home solar panels. If you havent yet received solar panel quotes, you can start the process by using our solar panel calculator and learning about offers from solar providers in your area.
Remember, the method above just results in a simple payback estimate, without accounting for increases in electricity costs over time, solar panel degradation, or any other factors.
In addition to electric bill savings, there are other benefits of solar panels which arent as easy to put a value on. The most important of these is an increase in home value, estimated to be about 4% of the pre-solar value of your home.
On top of that, there are environmental benefits of renewable energy and, if you add batteries to your solar installation, the peace of mind that comes with being more resilient if the power goes out.
Adding solar panels to your home truly does add value in many ways.
See how much you can save with solar panels for your home
The Cost Of Residential Solar Panels
The initial cost of an installation will obviously vary depending on the size and quality of panels installed. A small 1 kW system will more than likely set you back between £2-3,000 whilst a bigger, more efficient 4 kW panel array will be in the region of £6-7,500.
Most people who decide to have solar panels will either fund it themselves from savings or take out a loan. There is the option to have panels installed for free but you will have to hand over your Feed in Tariff to the company which means you will not make any money from generating excess electricity, though you will benefit from cleaner energy and cheaper bills.
There are other options to consider such as the Governments Green Deal, which you may qualify for and can provide a low interest loan for solar panel installations.
Snapshot Of Payback Rate For A 5kw System Across Capital Cities
The following statements relate to households that export 75% of theirsolar generation back to the grid, which is typical when people are not athome most days of the week.
Adelaideâs plentiful sunshine, low system prices, good FiT rates and veryhigh electricity prices mean the payback period is short at around threeyears.
Perthâs low out-of-pocket system costs mean a relatively short paybackperiod of about five years.
Brisbane and Sydney have similar payback periods of around five years.
Darwinâs high system costs are offset by the veryhigh FiT of approximately 26c per kWh giving it a mid-range payback periodof approximately five to six years.
Canberra has low systems costs and low energy prices but also low FiTs. Itspayback period is approximately six years.
Melbourne has a payback period of around six years. It has mid-range systemprices and lower than average retail electricity prices, but fewer availablesunshine hours.
Hobart has relatively high electricity rates but less available sunshineand thus lower generation and fewer rebates. This means it has the longestpayback period of around seven years.
Myth #: Solar Capacity Growth Does Not Tell The Full Story
More and more people are writingabout how the solar industry is misleading the public by citing capacity growth trends.
The basis for this is somewhat of a head-scratcher sincegrowth in PV capacity is a very compelling sign of a healthy industryaccelerating to meet the growing demand of the public. But I will humour thenaysayers and outline ‘the whole story’ of solar here.
Solar PV capacity is increasing at ~95%/yr in Alberta . Globally, PV capacity is increasing at around60%/yr. These numbers do not mean thatsolar is already dominating the market, but that it is slowly catching on. The graph below shows the Alberta solar power capacity growth trend of the last decade.
Solar energy represents a tiny, tiny fraction of global energy and even smaller fraction in Canada. Solar energy inAlberta represents about 0.1% of the energy generation profile, with about 90%coming from fossil fuels. The imagebelow shows the breakdown, with solar not even visible.
In Ontario, which has 99%+ of the solar power in Canada,about 1% of theprovinces energy comes from solar. Currently, solar energy plays a minuscule role in the energy generation inCanada and the world.
But this data does not mean that solar power doesnt work,or isnt viable. It simply means thatmore time is required for the solar market in Canada to develop. Provinces such as Albertawould benefit from more solar since the emissions from energy generationare the highest in the country due to coal being the dominant fuel source.
Cost Of Electricity And Rate Of Increase In That Cost
Heres where the rubber meets the road. In a state with net metering, you can take the number of kWh your system will produce in a year and multiply it by your per-kWh rate from the utility. That number will equal your annual solar savings.
To get a simple solar payback time frame, just divide the net cost from Step 3 by your average annual savings to get the number of years it will take for your solar savings to equal the net cost of the system.
Unfortunately, however, its not always that easy. Why? Because electricity rates increase over time, and some states do not offer net metering.
Heres where our friend in Bakersfield finally learns their solar payback period!
Californias net metering law is a bit complicated, and your average rate depends on time-of-use billing. Click on those links to learn more, but for our purposes well use an average cost per-kWh here.
The solar energy our friends panels make earns them an average of 24 cents per kWh. Therefore, those 10,200 kWh will save them an estimated $2,450 in one year. Dividing $12,654 by $2,450 gives a solar payback period of about 5.2 years, even if electric rates dont go up between now and then.
If their solar panels were fully connected by September 2021, theyd be paid off before the summer of 2027, and will keep making electricity until at least 2047. Thats what wed call a great deal!
Electricity rates increase over time
Some states dont offer net metering