How Long Does it Take for Solar Panels to Pay for Themselves?
The purchase and installation of a residential solar power system should be seen as an investment, rather than an expensive luxury. While some people find the upfront costs of solar panels and other pieces of solar equipment to be somewhat off-putting, the truth is, like any good investment, solar panels actually end up paying for themselves surprisingly quickly.
Not only can a residential solar power system save you a significant amount of money per month by reducing or eliminating your electricity bills, there are also plenty of state and federal tax incentive programs that are designed to financially motivate individuals to embrace solar power. On top of that, solar equipment is now more affordable and efficient than ever before, so your upfront costs are likely going to be far lower than you would expect.
Today, most people who install a solar power system for their home or business choose to do so for the financial benefits. In the past, when solar equipment was more expensive and less efficient, the environmental benefits and ability to access power off-grid were the primary motivators.
While solar panels are still just as environmentally-friendly and continue to be a reliable off-grid power solution, they are now seen first and foremost as a financial investment, or as a vehicle for long-term savings.
With that being said, the question still remains: how long does it take for solar panels to actually pay for themselves? While all solar panels have the potential to pay for themselves, the amount of time it takes will vary. This length of time is known in the solar industry as the solar payback period. The length of the solar payback period for your specific solar panels will depend on a variety of factors, including the price you paid for the solar panels, tax incentives you applied for, the amount you save by avoiding paying for electricity, and even where you live.
What is the Solar Payback Period?
In simple terms, the solar payback period estimate how long it will take for you to break even on the money you invested into your solar power system. While the phrase usually applies to the overall solar power system, a solar payback period calculation can also be carried out for specific pieces of solar equipment, such as solar panels.
As mentioned above, the solar payback period calculation involves looking at the net savings of any incentive programs, the cost invested into the solar equipment, and any savings you would see as a result of avoiding paying for as much, or any electricity.
Since these factors will vary, calculating the solar payback period for your specific system, or your specific solar panels, will differ from the solar payback period someone else might experience.
How Do You Calculate the Solar Payback Period for Your Solar Panels?
To calculate the payback period on individual solar panels, you will need two pieces of information: how much you paid for your solar panels (with any tax incentives or rebates subtracted from that total), and how much those panels will allow you to save on your electricity bills per year.
- How Much You Paid for Your Solar Panels – While this sounds like a relatively simple number, it is important that you also factor in the total you received in solar incentives, meaning tax credits, cash rebates, or any other amount you received for installing solar panels. You also need to take the timing of those incentives into consideration, as there is a difference between incentives that are given out upfront and in full, and those that are paid out over a number of years.
- The Annual Savings from Using Your Solar Panels – The second step in calculating your solar panel payback period will be determining how much those solar panels will save you per year. This total largely depends on the price of electricity where you live and the amount of electricity those solar panels are able to generate. Essentially, you are determining how much less money you need to spend on electricity bills as a result of using your solar panels.
Step 1: Determine the Combined Costs
Subtract the value of up-front incentives and rebates from the gross cost of your solar panels. This includes any money you spent to install and mount the solar panels.
Step 2: Determine Your Annual Savings
Calculate the total amount of money you save by using your solar panels. Start with the amount of money that using your solar panels will save you per month off of your electricity bills.
When performing this calculation, do not just look at the power rating of your particular solar panels, as this total will vary depending on a variety of factors, including how much direct sunlight they actually receive per day, how efficient the overall solar power system is, and how well the solar panels are positioned.
You also need to factor in other financial benefits you receive as a result of using a solar power system. These can include annual government payouts, like SRECs or PBIs, and cash rebates or utility discounts you receive as a result of using a grid-tied system and feeding solar power into the utility grid.
Step 3: Divide Your Combined Costs by Your Annual Financial Savings and Benefits
The result of this calculation will give you the total number of years it will take for you to recoup the costs of your solar panels. From that point onwards, any money you save as a result of using those solar panels can be viewed almost as profit.
What is the Average Solar Payback Period for a Residential Solar Power System?
While the length of time it takes for your solar equipment to pay for itself will vary, most people find that their solar power system will have a payback period between 3 and 7 years.
When you consider that high-quality solar panels are designed to have a lifespan of over 25 years, you can see why so many people view solar panels as financial investments. If you are conscious of net metering and government incentive programs, a solar power system can end up being a fairly significant money saver and, eventually, even a legitimate revenue stream for you and your family.
Choosing the Most Cost-Effective Solar Panels
Given that the cost of your solar panels will play a significant role when it comes to calculating how long they will take to pay for themselves, it is worth taking the time to find solar panels and solar panel kits that find the right balance between affordability, performance, and durability.
Individual Solar Panels:
We carry an extensive range of solar panels and solar panel kits from some of the most reputable brands in the solar industry. You can shop our Full Collection of Solar Panels to find a vast selection of high-quality solar panels at competitive prices.
Or, if you are just looking for a fairly basic, but reliable and efficient solar panel, we highly recommend this High Efficiency 200W 12V Monocrystalline Module. It features a straightforward plug-and-play junction box, an anti-reflective tempered glass cover, efficient mono PERC technology, and a pre-drilled aluminum case. Best of all, it has a 25-year limited power output warranty, as well as a full 5-year warranty on materials and workmanship.
You can also read through our Complete Guide to 300 Watt Solar Panels, which explains everything you need to know about solar panels with a 300W power rating.
Affordable and Reliable Solar Panel Kits:
For those that are new to solar power, we always recommend starting out by choosing a solar panel kit. The convenience of having everything you need to get started in one simple package is really helpful for those with limited solar experience. Since the components are bundled, you will also save money, as the components tend to be less expensive when packaged in a kit than they would be to purchase separately.
You can browse our Complete Collection of Solar Panel Kits to find the perfect option for your specific needs.
For beginners, we almost always recommend the Lion Energy 400 Watt Beginner Solar Panel Kit. At an affordable price point, you get everything you need, including a deep cycle solar battery, a power inverter, an efficient and foldable solar panel, and a high-performance charge controller.
For those with greater power needs, we often recommend this 500 Watt Complete Titan Solar Generator Kit, which offers convenience, portability, and significant savings.
In one convenient package, you get the all-in-one Titan Solar Generator, which contains a built-in 2,000Wh battery, power inverter, and charge controller, as well as five 100W solar panels (learn more about the specifications of 100w solar panels). You also get your choice of flexible or rigid solar panels, so you can choose the kit that matches your exact preferences.
While the exact amount of time it will take for your solar panels to pay for themselves will depend on a variety of factors, the main takeaway is that solar panels are an excellent investment.
Not only do they lower monthly bills and provide decades worth of renewable and free electricity, they reduce your overall carbon footprint and help you make a positive environmental impact.
If you have more questions about calculating the solar payback period for your specific solar power system, we encourage you to reach out. We are always here to help save money with solar power and get started on your own solar journey!
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