Tuesday, July 16, 2024

How Quickly Do Solar Panels Pay For Themselves

Estimate Residential Solar Panel Cost


The brunt of the expense with solar panels is in installation and the purchase of the actual panels.

» MORE: Compare solar loans and apply

Minimal long-term expenses can make up for the upfront costs. Most systems dont require much maintenance and are designed to last for 20 years or more with little change to the amount of electricity produced, Nilsen says.

When calculating the total price, consider how much energy you regularly consume your usage is listed on your monthly utility bill and what size system will generate the amount needed. Some tools, like the SolarReviews calculator, estimate the system size for you.

With installation, an average residential 5kW size system costs between $3 and $5 per watt, according to the CSE, which results in the $15,000 to $25,000 range. That cost is before any tax credits and incentives.

If you know your current energy usage, you can calculate how much youll need to pay for solar panels.

» MORE: Calculate your monthly payments on a solar loan

Then comparison shop for solar panels as you would other big-ticket items, such as a car or TV, says Vikram Aggarwal, CEO of the solar marketplace EnergySage. Some companies lower installation costs through rebates and other programs.

Aggarwal recommends getting quotes from three to five contractors. EnergySage compiles solar companies customer reviews, certifications, Better Business Bureau profiles and other information to help you find reputable providers.

Can I Reduce My Payback Period

There are several ways you can trim your payback period. Firstly, choose a trusted and credible installer, as this will help to guarantee the quality and efficiency of your system. Check they are certified with The North American Board of Certified Energy Practitioners , look at their track record, and scour their warranties, which should cover equipment, performance, and labor. A product warranty should be for around 25 years.

It’s also worth checking your installer’s operations and maintenance packages. Ideally, your solar panels should be inspected and cleaned at least once-a-year to keep them operating at maximum efficiency. While some installers include this, others provide it as an add-on, which can quickly rack-up your annual costs and decrease your payback period.

Incentives such as net metering can also help to shorten your payback period. Under net metering, any surplus power your solar panels produce will be fed back into your local electric grid so that it doesn’t go to waste. In return, you receive credits on your energy bill which you can use to offset future bills, such as when your panels aren’t producing enough power to meet your needs.

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.

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How Long Will It Take For Solar Panels To Pay For Themselves

The amount of time it takes for solar panels to pay for themselves varies from state to state. It can take as little as four years in states like Hawaii, or as long as 18 years in states like Arkansas. The national average is roughly 7 ½ years. The reason there is so much variance in payback time is that incentives and tax credits vary from state to state.

One thing is for sure, however: Solar panels will pay for themselves. They can pay you back even if you sell your home. Bottom line solar panels are among the best investments that you can make in your home.

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Myth #1  Solar panels are too expensive

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Is Solar Actually Green

Solar power is becoming increasingly common. Part of the key to its popularity is its scalability. While solar farms are becoming prevalent globally, of equal importance are the millions of individual small arrays being installed on houses and commercial property.

While all power generation has a footprint, that of solar power is a very small one. Yes, there are addressable problems with manufacture, but once panels are commissioned, they need very little maintenance. There are also questions about the recycling of photovoltaic panels, but many of those are posed simply because the technology is new. As the industry expands, the interest in recycling old panels will rise.

Everything humankind does has consequences, but there are few negative effects from the increase in solar power. Again, it is worth repeating that coal, oil and natural gas are infinitely more damaging to the environment than solar power.

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Myth #: Batteries Are Too Expensive To Make Solar Viable

This myth usually stems from people not knowing that most solar PV systems do not need batteries. Unless you really want or need backup power,batteries are not required or recommended for grid-connected solar arrays.

Yes batteries are expensive, which is precisely why we donot recommend the average homeowner to buy them.

Rather than store your excess energy in a battery, netmetering through your electrical retailer will allow you to sell your energyback to the grid for a credit, which will roll over month by month. When the sun is not shining such as at night,you will simply draw energy from the grid, potentially using up your storedcredit.

In select cases batteries are required such as for off-grid solar powered homes,then the expense of batteries is far superior to the alternative of not havingpower.

Key Takeaway: Grid-connectedsolar power systems do not require batteries. When the solar panels are not generating energy, you can draw from thegrid and use up your credit.

Keep An Eye On Trade Policy

Does Solar PV pay for itself. Payback calculation on our 3.9kw array

Changes in government trade policy also impact prices. In January 2018, President Trump imposed a four-year tariff on imported solar cells and panels that started at 30% and was set to drop 5% each year until February 2022. In 2020, the tariff rate for the fourth year was raised from 15% to 18%. The tariff resulted in a 16 cent per watt increase for the average consumer in 2018, which translated to an overall increase of $960 for a six-kW system, according to EnergySage.

The cost of foreign-manufactured panels may still drop, lessening the tariffs effect over time.

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Solar Panels Are Expensive

Even with government subsidies, tax relief, and environmental incentives solar panel prices remain high. Taxpayers who want to invest in this technology should factor in how long it might take them to recoup their initial investment so they understand whether or not solar panels are right for them at present.

How Long Does It Take For Solar Panels To Pay Off

Now that you have the formula, you can easily answer this question yourself. In addition, here are some final things to bear in mind:

  • State/employer incentives will also reduce years to payback.
  • If you live in a sunnier state with great weather, youll have more hours of sun, therefore fewer years to payback.
  • As electricity costs increase , your savings will increase, thus fewer years to payback. This formula doesnt account for this.
  • Also, panel performance decreases over time by roughly 0.7%, causing the opposite effect.

Consider those sleepless nights banished!

Image Credit under CC License from Pixabay

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Calculating Your Solar Payback Period

Now that you know the factors that contribute to combined costs and combined benefits of installing solar panels, you can now calculate your solar panel payback period.

To do this, follow these steps:

1. Determine Combined Costs

  • Subtract the value of all incentives and rebates you quality for from the gross cost of your solar panel system.

2. Determine annual benefits

  • Add up all the annual financial benefits you could receive, such as avoided electricity costs.

3. Divide your combined costs by your annual financial benefits

  • This number represents the number of years it will take to achieve your solar panel payback period. After this time, you have surpassed the break even point and can now reap the full financial benefits of your solar panel system.

What Affects Your Investment


There are a number of factors with solar panels that will influence how profitable the investment is for you. A good example of this is future energy prices. If energy prices continue to rise, then the amount you save will increase. The higher energy prices are pushed, the more money you will save.

It is also true that inflation will have an effect on your investment. Generation and export tariffs will be increased with inflation, so this can help you to determine what kind of return that you can see from future tariffs.

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What Is The Payback On Solar Panels

The typical solar payback period in the United States is just over 8 years. If the cost of installing solar is $ 20,000 and your system is to save you $ 2,500 a year on energy bills waived, your solar panel or flat-worth point refund is 8 years $ 20,000 / $ 2,500 = 8).

How is payback on a solar panel calculated?

The basic formula for calculating your suns payback period is to divide the cost of the system, including tax rebates and financial incentives, by the annual amount you save on utility bills. This will give you the number of years you need to balance your solar panels.

How do you calculate payback period for ROI for solar panels?

How to calculate the ROI. Once you know how much you have spent on electricity in the past year, to determine your solar ROI, divide the total cost of the system by the annual benefit of installing the system.

How Is Solar Payback Calculated

To calculate your solar panel payback period, its important to determine the combined costs and combined benefits of installed solar panels. There are several factors that affect the combined costs and combined benefits of going solar.

The average time it takes solar panels to pay for themselves is between 6-10 years for most homeowners. Keep in mind, there are many variables that can change this dramatically.

  • Cost of your solar panel system
  • The gross cost of your solar panel system is the largest expense. This amount is the total cost of your solar panel system prior to any financial incentives. This amount is dependent on the size of your solar installation, equipment used, and labor involved.
  • Value of financial incentives
  • There are numerous solar incentives that are available across the country. These solar incentives include federal, state, and even local incentives in the form of rebates, tax credits, solar renewable energy credits , and more. These solar incentives can dramatically reduce the cost of installing solar panels and shorten your solar panel payback period.
  • Average monthly electricity usage
  • Determining your average monthly electricity usage is one of the most important first steps in determining how much energy you want to offset, as well as the size of solar panel system you might need. The higher your monthly electricity usage, the greater potential savings you could gain from solar, and the shorter your solar panel payback period.

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What Is Considered A Good Solar Payback Period

More important than payback time is a concept called Internal Rate of Return, or IRR for short. IRR is expressed as a percentage of return on investment, and answers the question, Considering the estimated future benefits of this investment, what percentage return would you need to get from another investment to be equal to this one?

In the solar industry, we use IRR to compare the return on an investment in solar with the returns of other popular ways to invest.

For example, a long-term investment in a broad stock index fund has historically resulted in an IRR of about 8% per year. A home solar system in a state like Virginia, where the payback time of an investment in solar is around 12 years, has an IRR of about 8%.

The good news is, there are many states with better IRR and payback time than Virginia, especially in the northeast and California, where electricity costs are very high. For example, people in Massachusetts, New Jersey, California, and New York can expect IRRs of between 16 and 20 percentdouble or more of the average return of a long-term index fund.

See the solar payback period for your specific home

The Verdict: Is Solar Worth It

How long did our off-grid solar system take to pay for itself?

So, to answer the question, are solar panels worth it? In most cases, yes especially if you can connect to the grid and reduce the burden of energy storage costs, or if you need to provide power in a remote location.

DIY grid-tied systems pay for themselves in about 5 years on average, and contractors extend that window to 8 to 10 years. Considering panels are warrantied for 25 years, both options become a profitable investment in the long run.

Off-grid considerations are slightly different. Batteries add a significant up-front cost, and they will also need to be replaced over the life of the system. But it allows you to buy affordable, rural land and produce clean power where you need it.

System costs must be evaluated against other means of delivering energy to the property. Running power lines to your property can cost an estimated $20,000 for a half-mile run. Though battery storage is expensive, it may still be cheaper than the alternatives.

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Not All Homes Are Suitable For Solar Panels

To maximise what your panels can make, it’s best to make sure your home is right for them:

  • You usually need a predominantly south-facing roof. If your roof faces south-west or west you’ll still get some benefit, but it may be less effective, and you might not get the maximum savings.
  • Your roof should be unshaded between 10am and 4pm. While some early or late shading from other buildings or trees is OK, during the peak period for daylight you want the panels to be out of any shade.
  • You need a fair bit of space. Solar panels typically take up two square metres each, so the size of your roof matters.
  • Your roof needs to be in good condition. Make sure you’ve had an inspection carried out to ensure your roof isn’t damaged, as this could affect the installation. If you have old tiles, it may be worth getting them replaced before your panels are installed.
  • It’s best to have a diagonal roof to catch the most rays. If you want to install panels on a flat roof it could cost more, as you may need fixings to hold the panels in place.
  • Find Out Whether Solar Panels Are Worth It Or Not

    Generally, one of the first things that come to peoples minds when thinking of solar panels is that they are expensive. Another common thought is that you need a lot of sunlight to make a panel work, which would be ideal, but not actually necessary. A third common thought is that cities in the south of the UK get more sunlight per year than those up north. Although there is a bit of truth in each of these ideas, they are not 100% correct.

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    What About Some Numbers

    With this in mind, we are now interested in figuring out if investing in solar panels in the north of England is a good idea or not. This means if lower sunlight hours are significant enough to make the investment pointless or if solar panels will actually work well and thus pay for themselves in a few years.

    Checking some numbers, we get to the expected results: cities in the south come out with the lowest payback years. While the national average is 9.5 years, it takes only 8.4 years in Plymouth, Exeter and Truro for a domestic solar panel installation to pay for itself. However, cities in the north are not as left behind as one would expect.

    So, installing solar panels in the north remains a good deal! If you are interested in green energy, you can switch to solar energy and be proud of being a first mover in this area. Furthermore, as the government is concerned about reaching its green tariffs by 2020, there are many incentive programs that you can benefit from .

    Fill in the contact form above to get your solar panel installed as fast as possible. GreenMatch will provide you with up to four free quotes, without any further obligation.

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