For a residential solar project the payback period is often in the 10–12 year timeframe. However, this calculation ignores the fact that installing solar raises the property value of your home by about the same amount of the cost to install it.
Factoring in the increase in property value means that solar really has an instant payback, but most people want to know about how long it takes for the savings on your electric bill to equal the purchase price of your solar panels.
Homeowner's Guide to Going Solar
We’ve put together this FREE comprehensive guide to going solar to help homeowners like you think about the pros and cons of going solar, and learn more about the installation process. →
How to Calculate the Average Payback Period for Solar Panels
To determine the solar panel payback period on a home, we start with the total project cost and subtract any incentives that you get (like the 30% solar tax credit). With the price after incentives determined we have our starting place for year zero, and we just need to calculate your annual energy savings from your solar panels. Energy savings calculations should be done carefully and conservatively — a conscientious company like Cromwell Solar prefers to under-promise and over-deliver.
Learn more about the Federal Solar Tax Credit >
How to Calculate Yearly Energy Savings for Solar Panels
To get at what the yearly energy savings from installing solar would be, we model the expected energy output of the solar panels on your roof (or ground mount) looking at the pitch (how steep of an angle they are placed at) and orientation (what exact direction do they face) of each solar panel in your project along with the local weather patterns using data from weather stations located every few miles across the USA. We then multiply the energy produced by your solar panel system each month by your specific seasonal electric rate to determine your monthly energy savings, and add those up to get your yearly savings.
As your electric rates increase over time, the savings you see on your bills increase over time as well, and so we factor in some energy inflation to calculate future years’ savings. Looking at the numbers this way, we can determine how many years it takes to recover your solar investment. With a 10–12 year solar payback period you are actually getting a great return on your solar panel investment, particularly if you consider the fact that your home’s value increase may well be keeping your initial investment intact. When you sell your home, you’ll also get that initial investment back in an increase in your selling price. Keeping this property value increase in mind, you don’t have to stay in your home for the entire 10–12 years to recover the costs of going solar.
Learn more about home solar panel costs, benefits, payback period, and tax credits.