Solar panels offer a great return on investment (ROI), and will more than pay for themselves in almost every case. A quality solar panel installation will last for more than 40 years, and typically pays for itself within 8-12 years. With grants and incentives, that number can be even lower. So, you’re almost guaranteed a positive ROI from your solar panels.
Average solar panel ROI depends on a few factors. How many solar panels you have installed, your average energy usage and cost, and weather can all play a role in how much money solar panels save over their lifetime. If financed, monthly payments for solar panel installation are typically lower than your monthly utility bill, meaning you start saving money immediately.
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. →
What Is the Average Payback Period for Solar Panels?
The payback period for residential solar panels is often in the 8-12 year timeframe while the payback period for commercial systems is often even less. However, this calculation ignores the positive fact that going solar raises the property value of your home by about the same amount it costs to install solar panels. 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 seen from your electric bill to add up to the purchase price of your solar panels. Cromwell Solar has been calculating the costs and benefits of going solar for customers for decades, and we understand the nuances involved. So how do we do it?
Factors Affecting Solar Panel ROI
To determine the payback period of solar panels on a home we start with the total project cost and reduce it by any incentives that you get (like the 30% federal solar tax credit). After determining the price after incentives we have our starting place for year zero, and now we just need to figure out your annual energy savings. Energy savings calculations should be done carefully and conservatively — a conscientious company like Cromwell Solar prefers to under-promise and over-deliver.
To understand what your yearly energy savings from installing solar would be we model the expected energy output of the solar panels on your roof (or ground mount). Some factors we look at include:
Roof pitch: How steep of an angle solar panels are placed at.
Orientation: What exact direction does each solar panel face?
Local weather patterns: We include data on average yearly weather in your location using data from weather stations located every few miles across the USA.
After factoring in these variables, we then multiply the energy production your system makes 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 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 8-12 year payback 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. Someday, when you sell your home, you’ll get that initial investment back in an increase in your selling price. With this property value increase in mind, you don’t have to stay in your home for the entire 8-12 years to recover the costs of going solar.
Contact Cromwell for a free quote for solar panel installation today.