When Do Savings From Solar Panels Start Really Adding Up?
Typically those who install solar panels will start to see savings add up for at least six years.
The decision to invest in solar panels is a big one. While many Americans choose to do so to benefit the environment or have an alternative source of power during outages, it’s important to understand when (or even if) the panels will start paying for themselves. The honest answer, according to CNET, is that solar panel savings don’t actually start to happen for years after the homeowner initially invests—in fact, it can often take more than a decade.
Becca Jones-Albertus from the US Department of Energy Solar Energy Technologies Office and Jamie Haenggi, President of ADT Solar, suggest that an average payback period for solar panels in households in the United States is between six to 12 years, but it varies for each home. Factors affecting the payback period include the total cost of the system, incentives and tax credits, the home’s energy consumption, electricity production of the solar system, and the cost of electricity and rate of increase. The higher the electricity rates, the more beneficial solar can be.
According to Haenggi, homeowners should look at several variables to determine how long until they start to see their solar panel savings. The first variable is the total solar panel system cost, which can range from a few thousand dollars to tens of thousands, depending (again) on a variety of factors, like where the individual lives, their electricity needs, and the type of system installed. Common sense will tell you that the higher the cost of the system, the longer it will take to recoup the investment.
Homeowners can also take advantage of incentives and tax credits (if offered in your area) that can affect the payback period in favor of the homeowner. State and federal rebates can significantly reduce the money spent on solar panels and make the payback period shorter.
It’s also good to consider how much of the home’s electricity the solar system will be covering. If the solar system provides for all of the electricity needs of the home, the payback period will be shorter, but if it only covers a portion of the electricity used, it could take longer to see the return on investment. Similarly, the location of the solar panels on the roof is important: a roof that is well-lit throughout the day will produce more electricity, while if the panels are hanging out underneath a lot of shade, they will unmistakably produce less, thus also affecting the rate of time it takes to start saving from the system.
To calculate the payback period of your solar panels, start with the total cost to install the solar system, including interest and fees if a loan is taken out. Then subtract any rebates, incentives, or tax credits to find the net cost of the solar system after discounts. Next, estimate the annual electricity bill savings and divide the net cost of the system by the annual savings.
The resulting number is the number of years it will take for the solar panels to “pay for themselves.” This equation will obviously only provide a rough estimate, so make sure to speak with your solar provider to get a more precise timeline of when you’ll be able to start reaping the savings from the solar panel installation.