The Typical Solar Panel Payback Period

Many homeowners who begin to dig into the financial details of going solar want to know what a typical solar panel payback period is.

As the word is getting out about how affordable solar power is now, this is a justifiably common question to ask. Financially savvy consumers will want to know how long it will take to recoup the money that is spent on a larger than typical investment. Solar is no exception to this rule.

Unfortunately, there is no one answer. Even an often quoted range of 5 to 8 years does not cover every solar panel installation. As of this post, halfway through 2015, a solar payback period can range even more widely. The range can be as wide as 3 to 15 years.

So what can affect a solar power payback number? Quite a few things, actually. Here’s a list of the most common factors –

Factors Affecting Solar Payback Range

1. Total solar cost.
2. Price for utility electricity.
3. Available tax incentives and state rebates.
4. Amount of daily sun-light hours.
solar panel payback period
As you can see, these factors can affect the payback range largely depending on where in the country a solar customer lives.

Typical Example

Total solar panel system cost -$15,000
After taxes and rebates – $9,000

Price for utility electricity – $0.15/kwh
Monthly usage – 900kwh
Yearly cost for electricity – $1,620
Utility electricity offset by solar – $1,296 (80 percent offset)

Solar payback period is $9,000/$1,296 = 6.9 years.

A shorter payback period of 3 to 5 years is more common in parts of the country where utility electricity is higher like the North East and South West.

On the other hand, plenty of Americans pay 9 to 13 cents per kilowatt hour. Does solar make financial sense for them? Absolutely. It may take longer for a solar panel system to be paid off, but they will also benefit as well. In a situation where the payback period is 10 years, these homeowners will still benefit from more than 15 years of free electricity because solar power systems are warrantied for 25 years. There are systems still producing energy that are more than 30 years old.

It should be stressed that the specific payback range that you may seem is not the best number to focus on. This is because it takes the focus away from the true long term value that a solar panel system can offer. When you consider that a system will be producing energy for decades, the differences between a 5 year payback versus an 8 year payback begin to look somewhat trivial. The bottom line is that residential solar power is now a phenomenal investment opportunity for homeowners everywhere.

Whether your specific solar payback is on the shorter or longer side, you’re bound to save thousands over the long term.

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