The financial benefits of installing solar panels is becoming more and more obvious to many Americans. Solar energy is a way for homeowners, businesses, industries, governments, and even utility companies to invest in huge energy savings that will add up quickly and save them money long into the future.

But the main question most people want an answer to is, “How long does it take for solar panels to pay for themselves?

There are many factors that factor into the payback period of your solar panel installation. Some are easy to calculate, others not so much. Thankfully, Green Ridge Solar can help breakdown these factors and give you a clearer picture of your solar panel payback period.

What Is A Solar Payback Period?

The solar panel payback period is a calculation of how long it will take for your solar installation to pay for itself.

In other words, the payback period for solar panels is how long your solar system takes to “break-even” and recoup the initial cost of your investment. This time frame can also be called the solar break-even point. 

Solar Panel Payback Timeline

HOw Is Solar Payback Calculated?

To calculate your solar panel payback period, it’s 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 (SRECs), 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.
  • Estimated Electricity Generation
    • Most of the time, a solar company will try to design a solar panel system that matches your energy usage needs. This solar design process will take into consideration factors such as how many panels can fit on our roof or property, seasonal weather patterns, future energy demand increase, and others. From this, they will design a solar panel system that meets your desired energy offset.

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.

    Solar Panel Payback Calculation

    Use Our SOlar Calculator

    Calculating your solar payback period doesn’t have to be difficult. In fact, we created a solar calculator to help you!

    Our solar calculator takes all the factors into consideration and provides a clear and accurate result.

    All you have to do it provide a few quick details, and we do the rest! Try it out!

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