Homeowners Guide To Calculating Solar Panel Payback Period & ROI
Oklahoma City homeowners go solar for several reasons, like saving money, boosting home value, and helping the environment. Still, they usually have one question in common: is switching to solar panels worth it?
Unfortunately, there isn’t a definitive answer, which varies by home and location.
Some solar panel benefits are intangible - it’s hard to put a price on offsetting carbon dioxide levels. Other benefits like monthly and lifetime savings depend on the size of the system, electricity usage, the number of panels, and other factors that vary between homes. Electricity costs are also hard to predict - yearly averages are between 2-7%. That makes calculating the lifetime of electricity savings with solar panels more of an estimate than a hard and fast number.
Not knowing exactly how much you will save by installing solar panels is one of the biggest hurdles homeowners will go through when deciding to switch.
But there is good news! One way to determine if solar panels are worth it is to calculate what’s known as the solar panel payback period. This is the amount of time it takes to save as much on your electric bill as you paid for the solar panel system.
How To Calculate Solar Panel Payback Period
Calculate your solar panel payback period by starting with the total cost of installing the solar panels minus any incentives or rebates you receive. Then divide the remaining cost by the yearly electricity savings until you reach the amount you originally spent.
Solar Panel Payback Period Example:
System Cost: $30,000
Solar Tax Credit: $9,000
Yearly Energy Savings With Solar: $1,800
Payback Period: $11.6 years
While this equation is relatively simple, it does not factor in yearly rate increases from utility companies. If energy costs increase after installing solar panels, you’ll save more each year in electricity. Thus your payback period will decrease.
Most solar panel manufacturers today guarantee energy production and efficiency for 25 years. Keep this in mind as you calculate your solar panel payback period. Even if it takes 15 years to see a total return on your investment, that still gives you a decade worth of energy savings. Even without factoring in rate increases and using today’s electricity costs, it still amounts to a significant amount of money.
The Average Payback Period For Solar Panels?
Recent studies show that the average solar panel payback period is 8-15 years. Why is there such a big range? It turns out there are several factors that influence the cost of solar panels and the number of years to see a return on investment. Here are the biggest ones:
Amount of sunlight your roof receives - impacts energy production and savings
Solar System size - larger systems mean higher upfront cost
Electricity costs and fees
Electrical panel upgrades - older homes may need additional equipment
Tax credits, rebates, and incentives - all vary widely by state
Net metering rates - each utility company varies
Solar loan finance rates - rates can impact solar panel payback period
One of the best ways to calculate your solar panel payback period is to get a free solar quote. This way, you will know exactly how much energy rooftop solar panels can produce based on your location and the average amount of sunlight. A reputable solar company will also be able to give you options to determine what makes the most financial sense. Click here to schedule online with our expert team!
Can The Solar Tax Credit Reduce The Payback Period?
Yes! The solar tax credit can reduce project costs by 30% and lower the payback period making solar an even better home investment. This amounts to $9,000 or more in total savings for most homeowners. Not sure if your home qualifies for the tax credit. Access our free online guide now by clicking here.
Other Benefits That Make Solar Panels Worth It
There are several things homeowners should keep in mind when deciding to switch, like boosting home value or being able to power their homes through an outage.
Solar Panels Boost Home Value
Some studies show solar panels increase home value, but the total amount varies by state. For example, Zillow reports that homeowners should expect a 4% increase. Still, a recent survey found that solar increased home values by a whopping 149% in some areas.
Should an increase in home value be the primary reason you switch to solar? Probably not, especially with how the housing market has fluctuated over the past few years. However, having this information available can alleviate fears of selling your home in the future and being stuck with a monthly solar payment. Should you move after installing solar panels, you can pay off the loan with the boost in equity at closing.
Environmental Impact
Reducing carbon emissions impacts our environment - less pollution means cleaner air to breathe for everyone. Installing solar panels helps. One home energy system can keep an average of 8,000 lbs of CO2 out of the atmosphere yearly. That’s equivalent to planting 132,281 trees. Unlike monthly energy savings and increased home value, it’s hard to put a dollar value on the environmental impact of solar panels. Still, everyone usually agrees that it’s worth it.
Energy Independence
There’s no denying that a power outage or blackout is annoying, but for some, it can be a life-or-death situation. Those with health conditions or special needs are particularly vulnerable to a lack of power, even if it’s just for a short time. Solar panels and storage systems can help and allow homes to continue to run even if the grid fails. While this may not be a priority for everyone, it can be invaluable to others and is worth considering when making the switch.
Get Help Calculating Your Solar Panel Payback Period
Calculating your solar panel payback period is one way to determine if switching is worth it. However, getting all the information to calculate it can be complicated. Our experts are here to help! Plus, we offer free home solar quotes and will provide you with everything you need to make an informed decision. Ready to get started? Schedule a solar quote online using the form below or give us a call at (405) 310-8081 and speak to an expert.