How Long Do Solar Panels Take to Pay For Themselves?
If you are interested in adding solar panels to your home, there is a lot you need to consider before beginning a solar installation. And one of the first things that many consumers want to know is how long they will need to wait until their investment in a solar energy system breaks even.
If you’ve been wondering how long does it take for solar panels to pay for themselves, you’ve come to the right place. Keep reading to learn everything that you need to know about:
- Investing in solar panels
- Factors that can influence how quickly you break even
- How do you calculate your own solar panel payback period
- And more
What is a solar panel payback period?
A solar payback period is the amount of time that it takes for solar panels to pay for themselves with savings on your monthly energy bill.
For example, imagine that you spend $15,000 on a new solar energy system. If that system saves you $100 on your monthly energy bill, then you would break even on your investment in 150 months (12.5 years).
That being said, if you want to know how long does it take for solar panels to pay for themselves, you also need to consider incentives.
For example, the cost of a brand new solar system might be $15,000. But with federal and state tax incentives, the system could end up costing you a net price of $12,500. This will obviously impact how long it takes for you to break even on your solar investment.
But that’s just one factor that can impact your payback period. In the next section, we’ll cover several more.
Factors that can impact how long it takes to break even on solar panels
The cost of a brand new solar system can vary quite a bit depending on the company you buy from, the system’s power, and where you’re located.
For example, you can buy a small solar energy system for as little as $5,000. But the average solar panel system in the United States is around $12,000 after federal tax incentives.
The cheaper your system is, the less you will have to save on your monthly energy bill to break even. But at the same time, larger systems will be able to save you much more on your monthly energy bill than small ones.
There is a sort of balancing act that consumers need to do to figure out what’s right for them when it comes to solar panel cost. You can spend less upfront and save less over the lifespan of the system. Or spend more upfront and save more as well.
State energy incentives
Everyone who buys solar panels in the United States can benefit from federal tax incentives. But many states offer additional incentives that can help consumers save even more on the cost of adding solar panels to their homes.
Tax credits and rebates are the most common examples of this. But some states also incentivize the purchase of solar energy panels by enabling customers to save more on their energy bills after they swap to solar with things like mandatory net metering legislation.
The amount you currently spend on electricity
Generally, the more that you spend on electricity currently, the more that you can save by adding solar panels to your home. This is because high electricity bills are usually tied to high levels of electricity consumption. And if you consume a lot of energy, your solar panels will be able to save you from having to pull all of that power from the grid, thereby reducing your costs.
The efficiency of your panels
Solar panels that are highly efficient are able to generate much more power than those which struggle to maintain optimal efficiency. And the more power that your solar panels generate, the less energy that you need to pull from the grid. Here you can view the most efficient solar panels.
Your home situation
The location of your home can also have a big impact on how efficiently your solar panels are able to generate power, which directly influences how quickly you will break even on them.
For example, homes that are located in states that receive year-round sun like California and Florida tend to be great for solar panels. That’s because panels can only generate power when the sun is out. And the sun is almost always out in these locations.
That being said, some homes are located in nice, sunny areas, but have nearby obstructions that limit the amount of sun that they actually receive. For example, things like large trees or massive nearby buildings can cause shade to hang on your roof throughout the day, which limits how much energy your panels can create.
How long does it take for solar panels to pay for themselves on average?
Even considering all of the factors covered above, it can still be helpful to get a general feel for how long the average homeowner has to wait until they break even on their solar investment. That’s what this section is for.
In the United States, the average homeowner with solar panels waits just over 8 years for their investment to pay itself off. That looks something like this:
- You pay $12,500 for your solar system
- It saves you $125 per month on your electricity bill
- You break even after owning your solar panel for 8.3 years
How do solar paybacks work on leased systems?
Maybe you aren’t interested in purchasing a new solar panel system but you would like to lease one instead. In that case, your answer to “how long does it take for solar panels to pay for themselves?” will be different.
Leased systems are great because they don’t usually cost anything upfront. If that is the kind of solar lease that you are interested in, then you don’t have to worry about a solar payback period at all. As long as you’re saving money on your monthly energy bill, you start making money right away.
Solar panel payback period calculator
Thankfully, calculating your solar panel payback period is a straightforward process. You can do so in just three simple steps:
- Add all of your costs together. This should include the cost of the solar panel system itself as well as any installation charges and the cost of a battery storage system if you choose to install one.
- Add all of your financial benefits together. This will include the savings you receive from federal and state tax incentives as well as the annual savings you expect to get on your monthly electricity bill.
- Divide your total costs by your total benefits. The number that you get from doing this will be the number of years that it takes for you to break even on your solar panels.
Using your solar payback period to find the right solar energy system
Calculating your solar payback period is a useful way to figure out exactly how long you need to wait until you start turning a profit with your solar investment. However, it can also be a fantastic piece of information to keep track of while shopping for a new solar energy system.
One method of determining which system offers you the best value is to calculate how long it takes for you to pay it off. It isn’t the best idea to rely on this metric alone when shopping for solar panels. But it is a great point of comparison that you can use alongside other factors.
The bottom line: how long does it take to break even on solar panels?
The average U.S. homeowner will need to wait for a little over 8 years for their solar panel investment to pay itself off. But your solar payback period could be longer or shorter than that depending on some of the factors covered above.
Ultimately, the vast majority of solar energy systems will pay for themselves after enough time passes. Solar panels are built to last for 25-30 years on average. That’s usually more than enough time for you to turn a profit on your investment, regardless of whether it takes you 5, 10, or 15 years to break even.