Solar Payback

Published on 20 Sep, 2017 by Harvey Petersen

Categories: Solar 101, Solar financing, Solar incentives, Solar panels


 

Solar Payback period for installing solar panels

A lot of people still think solar is still expensive. The truth is, the price of installing solar panels for your home has fallen drastically over the last few years and is now one of the most cost competitive forms of energy production for both utility and residential use. This article will explain the real cost of solar and how long the payback period is where you live.

This article gives an estimate of what your payback period might be. However, ultimately payback period depends on many variables that will be unique to you, including your location, your utility company, the amount of power you use, the time of day you use power most, your roof and building type.

In general terms residential solar payback, given current solar panels cost as at September 2017 will range between 5-10 years, depending on your unique characteristics.

This means almost every solar system will pay for itself and save the owner money over the 25-year lifetime of the solar system. The best way to get an accurate, personalized solar payback information is to use a solar calculator or talk to a solar installer in your area.

 

What factors affect the payback period for installing solar panels?

The Price of electricity in your state

The price of electricity will depend on where you live and your electricity provider. For example, the average base price of power in California and New York is 18.3 and 18.5 cents per kilowatt-hour respectively.

Power prices are a bit lower for states like Florida, Mississippi, Utah and Idaho at around 10-12 cents per kilowatt-hour. Places like Hawaii, Connecticut and Alaska are expensive at 20 cents and above. These prices are taken from US EIA. The price of electricity may vary for different utilities and cities, these are just averages.

 

Average retail price of electricity, annual

 

Every year customers pay more and more for the same amount of electivity. In 2001 the price of electricity was around 8.5 cents per kilowatt-hour, and in 2016 the price is up to about 12.5 cents per kilowatt-hour. This is a huge increase. It is most likely this same pattern will continue over the coming years. The best way to protect your savings from these increasing prices is to buy or lease a solar system. A solar system will lock in the price you pay for the next 25 years, and the options available mean you can own a system for $0 upfront.

Solar Power System Cost

The Price of solar Depends on how big the system is and the quality of the solar panels used for the installation. The average price of solar has fallen dramatically in recent years and you can now buy a high quality system for $3.10 a watt. This means a 7 kW (7000W) system will cost about $21,700 before the solar investment tax credit (ITC). After the ITC, it will cost $15,190 if no other incentives apply. $15,190 sounds like a lot of money, but in some cases this is enough to offset your total total power usage, setting your power bill to $0.

Over 25 years you will most likely end up tens of thousands of dollars ahead.

Federal and state incentives

Incentives vary at the state, city and even utility level. The incentive that applies to everyone is the Solar Investment Tax Credit (ITC).

The ITC gives a tax credit for %30 of the total system cost, basically giving 30% of the system cost back to the customer. The ITC saves customers thousands of dollars.

In most states net metering exists. Net metering is effectively an unlimited free battery because it allows you to economically store the value of power you produced during the day for use at night even though you do not physically store the power.

SRECs and the solar carve out also exist in some states. For more information on what incentives apply to you read the solar incentives page.

Solar Incentives in America right now are very generous. They are set to start winding down in the next few years, (net metering has already been diluted in some jurisdictions i.e Net metering 2.0 in California is slightly worse than NEM 1) and in 2022 the ITC will be gone. Right now, solar incentives are as good as they will ever be and homeowners should take advantage of these generous solar incentives and install solar on their home now while they still exist.

The amount of sun

The amount of sun that falls on the house will obviously affect how much energy a solar system can produce. If a house gets a lot of sun it will produce lots of power.

If trees or other objects shade the house or it’s in an area that doesn’t get a lot of sun, a solar system will produce less power. Even if there is shading over the roof, solar can still work.

Light will still make its way through clouds or past trees, although it will produce less power than an unobstructed solar system.

 

What is the average residential solar payback period in each state?

Below is the average solar payback for a number of key solar states based on an assumption of a $200 per month power bill and a cash purchase of a solar power system.

Payback period over time

State Payback Period Minimum period of free power from when system is paid off until expiration of warranty (panels will most likely still work after warranty period but this is a minimum)
California 6.4 18.6
Colorado 9 16
Connecticut 7 18
District of Columbia 4 21
Delaware 10 15
Florida 9 16
Georgia 11 14
Hawaii 6 19
Idaho 5.6 19.4
Iowa 13 12
Maryland 7 18
Massachusetts 5.6 19.4
Minnesota 9 16
New Hampshire 6 19
New Jersey 5 20
New Mexico 10 15
New York 6 19
Ohio 10 15
Oregon 7 18
Rhode Island 6 19
South Carolina 5.8 19.2
Texas 10 15
Utah 5.6 19.4
Vermont 10 15
Virginia  12 13

 

What will your solar Payback Period be at your house?

The best way to calculate your real payback period is to use the solar calculator, it’s free and available to anyone. This section will run through the calculator to get a payback period for a typical house in California. The calculator asks for some information to calculate accurate results. This estimate is for a house in Beverly Hills with a power bill of $150 and a cash purchase of the system. The information below shows the final results.

 

Solar Calculator results

 

As you can see from the image above the payback period for the 6kW system is 7 years 8 months, this falls in the 5-10 years outlined at the start of the article. The calculator is the best way to get accurate, personalized information regarding solar. Best of all, it only takes about 2 minutes to use.

When it comes to solar in America it really depends on where you live and your personal situation. Incentives apply to different states, electricity prices vary widely and the amount of sun a house gets is different everywhere. This makes it difficult to give an accurate, one-size-fits-all estimate of how much solar will cost. That is why your solar calculator the best way to find out the cost and payback period of a solar system. The calculator takes in relevant information and calculates a report tailored to you. Use our free solar calculator to see how much solar can save you.

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Author: Harvey Petersen

Harvey Petersen is a newbie freelance writer. He is currently studying a Bachelor of Mechatronic Engineering at Adelaide University and spends the rest of his time learning/writing about the solar industry.