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Solar Panel Return on Investment

By Benjamin Strusnik April 12, 2022

Solar panels are a reliable and renewable energy source and completely worth the investment. 

But, how long does it take for solar panels to pay for themselves

Your solar panel return on investment rate depends on how efficient your panels are and how much you were previously paying for electricity.

Make sure to use the highest-quality and most efficient panels on the market. By purchasing a high-quality solar panel, you’re sure to have the shortest possible return time for your investment.

Have a look at our 200-watt solar panel for a top-quality product. This alternative energy source harnesses light from the sun, into clean and dependable power. It’s solid and efficient, making for better light to energy conversion.

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If you have an efficient solar panel system and utilize the solar cells correctly, you’ll have a faster return on your investment.

In this article, we’ll assist you in understanding solar panel return on investment.

What Is Return on Investment on Solar Panels?

Solar panels are not only great for the environment, but they’re also a good investment.

Return on investment on solar panels is a performance measure that’s used to evaluate the efficiency and profitability of the solar panel.

It directly measures the amount you save on the electricity from a solar panel, relative to the cost of the solar panel.

What Is the Payback Period?

The payback period is the amount of time after you’ve installed your solar panels where you can earn the initial cost of investment back from savings on electricity.

Depending on how large your home is, how much energy you use, where you’re located, and how much sun the solar panels get, the payback period will vary.

How To Calculate Your Solar Panel Return on Investment?

To calculate return on investment (ROI), the profit earned on the solar panel or the amount you save on your energy bill is divided by the cost of the solar panel. For example, if your solar panel saves you $100 on electricity in a year and it costs you $1,000 to buy, your return on investment would be 10%.

In the United States, the average return on investment on solar panels is around 10%, but this varies widely according to location and the specifics of your home or business.

In summary, your ROI is the initial investment, divided by your monthly savings.

For an easy way to calculate return on investments, use the solar estimates with costs and savings projections and calculate that on a modern spreadsheet program.

How Long Does It Take to Get a Return on Investment for Solar Panels?

A solar panel with a standard photovoltaic or PV system can expect to see a return on investment of 20% in the first year.

The payback period may vary according to individual and solar panel systems. Some people spend more on their system, while others may use more electricity or live in an area where the cost of electricity is higher.

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Solar panel payback period, the time it takes to earn your return can take anywhere from 5 to 15 years. However, the average time it takes for solar panels to pay for themselves is between 6 and 10 years.

Local electricity costs, incentives like state-specific tax credits, and solar rebates are determining factors of how long it can take.

Once you’ve gone through this period and received your tax credit back from the government, you’ll be making a relative profit off your solar energy system. This is when you’ll be able to start making money.

Tax Credits and Return of Investment

Another way that solar panels can quickly pay for themselves is with tax incentives.

With the solar tax credit, you’ll be allowed to receive a 26% tax credit on any money that you spend when you have your solar panel installed. The rules for these incentives change depending on where you live, though. So make sure you read up on your local regulations before doing any calculations.

This includes the removal of trees, permits, and roofing. The sooner you have your solar panel installed the better chance you have of getting a higher percentage of a tax credit.

What Is the Solar Tax Credit For 2022-2024?

Solar panel systems installed in 2022 will receive a tax credit of 26%, by 2023 the tax credit will be slightly reduced to 22%, from  2024-2026 this will be down to 10%.

The rule is that you can qualify for the ITC for the tax year that you had your solar panels installed if you live in the United States and your solar panel system generates electricity.

Is Solar a Good Investment?

The amount you’ll save on electricity is a useful benefit, including the impact that solar-powered systems have on the environment in the long term. Solar panels can save you money.

But what happens to unused electricity generated by solar panels on a home? The extra electricity generated by your solar system is sold back to the electricity grid.

With solar panels, electric bill costs are greatly reduced.

A typical home solar panel system setup that produces between 350-kilowatt hours per month will save up to 90% of costs on monthly electricity bills. 

You’ll not only save money but bring a return on your investment in a short period of time.

The increase in property values, the lowering of utility costs, and the federal tax credit all make the cost of installing solar panels worth it.

Even though the installation of solar panels is costly, the price has reduced over the years as it becomes more popular.

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It’s also possible for your home to run completely on solar power. 

Bear in mind that the higher your energy requirements, the more solar panels you will need. If you intend to go off the grid, be mindful that you will need to invest more in order to make a smooth transition.

Solar panels are suited to both homes and business buildings to save on costs and make use of the sun’s energy to produce electricity. If your home is in a sunny place, there's an even greater advantage.

What Are the Two Main Disadvantages of Solar Energy?

The first is the initial investment cost. 

The purchase and installation of a solar system are pricey. However, in the long term, it’s cost-effective and beneficial for personal use and the private sector.

Overall, extremely beneficial financially and environmentally.

Secondly, solar panels are best suited for homes that receive ample sun exposure throughout the year. Solar energy is weather dependent.

Although solar energy can be generated on cloudy and rainy days, the efficiency of the solar panel does drop. However, over the last few years, technology has greatly improved, increasing its efficiency.

Solar Panel Return on Investment FAQs

Do Solar Panels Increase Your Home Value?

When you install solar panels at your home the value of your property will increase by up to 4.1%.

This is also due to the great incentives to buy a home with a solar panel, including reduced monthly spending on utility bills and living in an environmentally friendly home.

What Is the Average Lifespan of a Solar Panel?

The standard lifespan of a solar panel is between 25 and 30 years. As resilient and durable as solar panels are, they don’t last forever. 

Proper maintenance and cleaning can, however, extend its lifespan, enabling the solar panel to last from 40 to 50 years.

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The cost-effectiveness of solar panels and their lifespan make it a full-proof investment plan.

Is Solar Panels Tax Deductible for Landlords?

You can claim tax deductions on the purchase of a solar panel as it is a capital expenditure and can be claimed over many years. The landlord can also claim the rebate for exporting power back to the grid to help pay off the system.

Do Solar Panels Work with Your Electric Bill?

When your solar panels absorb energy from the sun it is converted into AC electricity by inverter technology. This electricity will flow through your home and power your electrical appliances and devices.

The solar-powered electricity is not added to your electric bill.

What Is Meant by A Photovoltaic Solar Panel System?

A photovoltaic system is also known as a PV system or solar power system.

This is an electric power system that’s designed to supply usable solar power by using photovoltaics, materials, and technological devices that are used to convert sunlight into electricity.

Most PV systems are connected to the grid. Systems that are off-grid, or stand-alone systems only make up a small percentage of the market.

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