Calculating Your Solar Energy System Payback Period

You know that a solar energy system will pay for itself over time, but how soon, exactly, does this take?

How long will it be before you see a full return on your investment, and your system is running at a point of pure profit? It may be less time than you think.

Take a look at the following guide to estimate the payback period for your photovoltaic system.

Determine Your Combined Solar Costs

To understand your solar payback period, you must first calculate your initial system expenses.

This, of course, includes the costs of all of your equipment, including the photovoltaic panels, the inverter and mounting hardware. If your system is not grid-connected, you must also factor in the costs of your battery bank and charge controller.

And, of course, remember to add any installation charges to your total as well.

Now, subtract any financial incentives you received. Taking advantage of local, state and federal tax credits and rebates can reduce your investment costs by up to 50 percent, bringing your combined costs down by thousands.

Determine Your Annual Financial Benefits from Going Solar

Your electric bills will be lower as a result of using solar energy — possibly much lower, depending on the size of your PV panel array.

According to the United States Energy Information Administration (EIA), the average American household paid roughly $116 per month for electricity in 2014. So, if you install an off-grid photovoltaic system, you could save nearly $4,000 in annual electric costs.

If you are staying tied to the utility grid, multiply this average by the percentage of your home electricity the solar system will provide. For example, if your system will generate 40 percent of the energy used in your home, your electric bill savings would be roughly $1,600 per year.

If your photovoltaic system generates more energy than your household consumes, you may even earn a profit through a process called net metering.

Net metering regulations require the utility company to pay you the retail rate for the excess electricity your solar array produces. Because this varies by location, check with your local electric utility provider to determine the current net metering rate.

Calculate Your Solar Payback Period

Now, armed with this information, you can estimate the payback period for your solar energy system.

Simply take your total combined costs and divide by your annual financial benefit amount. You’ll have an estimate of the number of years it will take to reach the point when your photovoltaic system has paid for itself.

Other factors, including solar radiation levels, the weather and the costs of financing can also affect your payback period.

Intermountain Wind & Solar specializes in helping customers throughout the Intermountain West in their quest for cost savings and energy independence. Contact us today to arrange a complimentary consultation. We can help you identify the payback period for your solar energy system.