Homeowners across the world are looking for ways to cut back on the cost of their electricity bills. Solar energy gives them an environmentally friendly option to create energy.
Solar panels could help a homeowner save a lot of money long-term. However, many homeowners are wondering how long does it take for solar panels to pay for themselves?
Solar panels are a good investment because they do pay for themselves over time. In addition, they can save you money on your electric bill, and you may qualify for solar rebates and tax credits.
While solar power does pay for itself, homeowners should be aware that it takes time. Several factors play a role in how long the payback period takes, but the main one is the location you live in.
On this page, we will discuss the solar panel payback period and how long you should expect it to take. There are many benefits to the solar panel system, including annual financial benefits.
Keep reading to learn more about the solar payback period.
What is a solar panel system?
These are panels installed on a rooftop in a series to create a system used to generate energy with many environmental benefits. If you’re looking for ways to use less electric power and cut down the size of your bills, solar energy may be worth looking into.
Solar panels are designed to generate electricity by using energy from the sun. The sun creates particles of energy called “photons”, which the solar system uses to create power.
These solar panels are installed on the roof of a home or building, where they can get the most sun throughout the day.
On average, 5 hours of sunlight during the day is enough to create nearly 1.5 kilowatts of power from one panel. So it won’t take long until you start to see less electricity usage on your electricity bill after having solar panels installed.
Will solar panels pay for themselves?
While the cost of materials and solar installation may seem steep at first, it’s important to remember that this is an investment. This means that the solar panel system pays for itself over time.
The biggest question on nearly every homeowner’s mind is, “how long will that take?”
The solar panel payback period is different for every homeowner. Where you live plays a big part in how long it takes for the solar panel installation to pay for itself.
Many solar incentives help these solar panels pay for themselves.
What is the solar panel payback period?
The solar panel payback period is the timeframe in which the solar panels pay for themselves. The many solar incentives and the avoided electricity costs are what equivalates to the solar payback.
There are many things to consider to what helps solar energy pay for itself:
- How many solar panels are installed
- Weather conditions in your location
- Estimated electricity generation
- Total costs of solar panel system (including solar installation)
- Solar incentives (rebates and tax credits)
- The average cost of electricity bill
How long will it take for the solar panels to pay for themselves?
The length of time to expect for the average US homeowner’s solar panel system to pay for itself is typically between 9 to 12 years. Always remember that this heavily depends on your location.
Some homeowners have noticed that their solar panels have paid off in less time, while other homeowners have had to wait longer.
A house with solar panels in Hawaii is likely to experience a shorter solar payback period. This is because there are many sunny days all year round, and there is often a nice breeze to go along with that.
As a result, many homeowners in Hawaii have been fortunate enough to have the solar panels pay for themselves in as little as 6 years.
Homeowners in states that aren’t as sunny haven’t had much luck. In areas like Alaska, where it’s often cloudy, it’s more difficult for the solar panel system to generate power.
In this case, it could take up to 16 years for the solar panels to pay for themselves.
What is a good solar panel payback period?
Ideally, a solar system should pay for itself within half of its lifespan. But, unfortunately, the average lifespan of a solar system is 25 years.
However, there have been many upgrades and improvements to the materials over the years. Therefore, modern solar panel systems could last even longer than that.
A good solar panel payback period is anything shorter than 12 to 13 years. However, many homeowners who live in areas where the solar payback period could be longer than that may see value in installing solar panels because the cost of materials is declining.
It’s a lot cheaper to install solar panels now than it was 15 years ago.
How much does it cost to install a solar panel system?
Solar costs vary between different states. However, the average total cost of one solar panel ranges from $200 to $250.
For most US homeowners, an entire solar power system will cost them an average of $12,000 to $13,000.
Keep in mind that this is just the average price for most US homeowners. Some people have been able to get solar panels for much lower, even as low as $5,000.
Other homeowners have had bigger plans in mind and opted for more expensive and expansive solar energy systems, ranging up to $40,000.
It’s important to keep in mind that there will also be extra costs for installing solar panels. These posts will be determined by the technicians doing the installations.
Homeowners may also need to set aside money for an inverter and other equipment they may need for the job.
The upfront combined costs of installing solar panels may seem like a lot, but the average savings will pay for the initial cost and then some. In addition, every homeowner with solar electricity notices an annual savings with their electricity costs.
What solar incentives should homeowners know about?
On top of helping people save money on their electricity bills, solar panels qualify for annual financial benefits as well. This helps shorten the solar payback period.
Of course, there are upfront incentives, like tax breaks.
Any project that begins before 2023 will be eligible for a solar tax break. This can help homeowners by giving them a rebate on the final price of their project.
In addition, homeowners will be able to receive a tax break of 22% to 26% on their solar panel systems, allowing for a shorter payback period.
While homeowners won’t be eligible for this federal tax credit on any home solar projects after 2023, commercial buildings will still be eligible for an annual benefit of 10%.
How much can homeowners save on their electricity bills?
The electricity costs are what really shortens the solar payback period. This is because the energy generated from solar panels allows people to cut back on their electricity usage.
Cutting costs every time the sun shines, the solar industry has helped people save a lot of money on their power bills.
Within 30 years, the average North American household with solar systems could save over $17,000. That’s more than the average gross cost of installing a good quality solar PV.
Keep in mind, solar savings all depend on the size of your system and your location.
Every type of solar panel will be able to generate a certain amount of watts. Once you install solar PV, you may be able to figure out an estimate of how much you could save.
Figuring out how much you could save
Figuring out an estimate of how much you could save requires looking at your electricity usage. First, determine how many kWh each panel in your system can generate when there is full sun annually and then multiply that by how many panels are in the system.
This will show you how much solar energy can be generated.
The easiest way to determine how much you could save is by taking the electricity rates that utility companies charge per kWh and multiplying that by the amount of kWh the solar energy can generate.
This will give you an idea of how much electricity money is being saved annually.
Once you figure out the average amount of money you could be saving each year, it will help determine how long the solar payback period should last. One major advantage of solar energy is that the cost of electricity is rapidly rising in North America.
Each year people see higher electricity rates, especially when excess energy is being used. But, unfortunately, it doesn’t take long for that bill to add up.
This is why so many homeowners are contacting their local solar company.
How to achieve payback sooner.
To see more monthly savings on your energy bill, you should consider the type of solar panel you chose to install. A more efficient panel may have a higher net cost, but the monthly savings will shorten the payback time.
You may reach a break-even point sooner than expected because the efficient panels generate more watts.
These panels are relatively maintenance-free; however, their quality and installation play a big role in how efficient they will be. For example, a poorly built solar energy system could allow moisture in, which will cause it to deteriorate a lot faster.
A premium built panel installed by professionals may cost more upfront but has many financial benefits in the long run. First, the money they will save you on the energy bill will allow a quicker payback time.
More ways it can help you save…
Some states have net metering policies that credit excess energy to the homeowner’s bill. This is usually stated as “avoided cost rate”.
In short terms, this is the energy you didn’t use being credited back to your bill.
Net metering allows electric companies to credit the wholesale amount per kWh avoided. At times this may only be a few pennies per kWh, but it still adds up over time.
It’s easier to achieve the break-even point when all aspects of savings are considered.
What are solar loans?
A solar loan can help you pay for the installation costs. If you want to get your installation project started before 2023 to take advantage of the annual benefits before they expire, you don’t have to pay cash upfront.
There are many opportunities for loans to make your home solar project possible.
Green mortgages are a great opportunity for a new homebuyer to look at a second borrowing option for making their home greener friendly. Many companies also offer the option for green financing to get the project started.
However, these aren’t the only financing options to help pay for the total cost of solar installation. Some other solar loans worth considering include:
- Secured solar loan
- P-Race solar loan
- Government-sponsored loans
- Home equity
- Personal loans, line of credit
Why consider loans?
Loans can help people shorten the payback periods. Many people are on the fence about financing, but the truth is that many financing companies offer lower rates for a solar loan.
You will still cut the federal tax credit to help the solar project pay for itself by taking advantage of financing options sooner.
One thing to consider is that the sooner the solar installation happens, the sooner you can start saving money on the power bills. You are using more power every day, which is why it’s a good idea to consider a loan to help get the project started sooner.
Final thoughts – How long does it take for solar panels to pay for themselves
The average US household will notice that their solar panels may payoff within 9 to 12 years. However, several factors could shorten or extend this timeframe.
A home located in a sunny area with a good breeze will likely see the panels pay off sooner, while those in an area with a lot of rain may see a longer timeframe.
A good rule of thumb to consider is that any panel system that pays for itself in less than half of its lifespan is well worth the investment. So, for example, if a panel estimated to last 25 years pays for itself in under 12 years, it has saved the homeowner money on their investment.
The payback period may seem long, but the savings are well worth it. In addition, these panels are a green friendly way to cut back on the amount of energy a household uses.