Calculating Your Solar ROI Potential

The ROI (return on investment) offered by solar panel installation is making this home improvement project more popular every day. When considering upgrades to your home or business, ROI is a sound way to determine when and where to invest. Many property owners are asking themselves, “Are solar panels worth the investment?” Although the answer to this question is almost always a resounding “Yes,” it’s helpful for you to see the numbers for yourself. To calculate your potential ROI, consider your property’s location, sun exposure, type of installation and current incentives available, as well as financing terms. Below is an easy step-by-step formula to determine the financial benefits of solar installation.

Identify Current Average Utility Rates

It’s best for ROI purposes to determine your average annual electricity rate. First, identify the rates during different times of the year, as many utility companies have usage pricing tiers and higher peak-time usage rates. This means that your electricity may have a varying per-unit cost, depending on the time of year and how much you use. Determining your average rate per kilowatt hour over the course of a year can provide a more precise value to compare against potential savings.

Identify Your Average Power Usage

This information is required in order to determine the appropriate size and scope of your photovoltaic solar energy system. It will also help determine your savings and whether your system will return any excess power back to the grid. Remember this is an average, and some months will have higher usage than others.

Determine System Cost

Once you know how much energy generating capacity you require, you can obtain pricing on your solar energy generating system. When you request cost estimates, ensure that the contractor has included the cost of installation, permits, wiring, battery and storage options and financing charges.

Identify Potential Rebates and Power Credits

Consider any rebates offered in your area, potential federal and state tax credits and any other financial incentives to which you may be entitled. Also, based on your proposed system capacity and your power needs, determine the value of electrical credits you will receive in exchange for power you return to the grid.

Calculate the Savings and Benefits

Whatever percentage of your energy needs a solar system will provide, multiply it by your average bill to determine your savings. For example, if your annual power expense is $2,500 and your PV system will supply 90 percent of your home’s energy needs, your annual savings will be $2,250. To calculate the ROI, divide the cost of your system by your annual savings. If your new system costs $15,000, it will have paid for itself in just over six years. With a life expectancy of more than 30 years, you can easily see how financially beneficial solar energy can be. And don’t forget, adding a PV system will greatly increase your home’s value and salability.

If you live in Utah, Idaho, Colorado, Wyoming or Nevada, contact Intermountain Wind and Solar to learn more about adding an alternative energy generating system at your home or business. Their experienced professional team can answer any questions you may have and help you calculate your own solar ROI.

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