How Long Will it Take to Recoup My Solar Panel Investment?

Clients who are considering solar panels for their homes or buildings will naturally have a number of questions during this process, and some of these revolve around cost and investment. A common example: How long will it take to recoup my solar panel investment?

At Intermountain Wind & Solar, we're here to offer the very best solar power services in Salt Lake City, Utah and Boise, Idaho areas - helping clients save money on their power rates while helping build a more sustainable world. We regularly assist clients with solar financing, helping give them a full understanding of exactly how their solar investment works. Here's a primer on what we in the industry refer to as the "solar panel payback period" - why it matters, how to calculate it, and the key factors that tend to influence it.

How Solar Payback Periods Work

While solar panels and solar power systems have decreased in costs in major ways over the last decade or so, they are still a significant investment. For most residential or commercial clients, this is a long-term investment with the goal of lowering monthly energy bills and increasing overall property values.

The solar panel payback period refers to how long it takes for a solar system to "pay for itself" in terms of these savings - once you hit this point, all subsequent savings are pure profit for you. In many cases, this payback period will be several years or even a decade or more - but it's still worth it when considering the long-term financial benefits.

How to Calculate

Calculating the solar payback period is relatively simple: Take the total cost of your solar panel system, including installation and any other associated fees, and divide it by the total annual savings you expect to see on your energy bills. This will give you the number of years it will take for the system to pay for itself.

For example, if your solar panel system costs $15,000 and you expect to save $3,000 annually on your energy bills, your payback period would be 5 years.

Now, how do you calculate some of the specifics we just went over? Let's dive a little deeper.

Calculating Total Costs

When it comes to calculating the initial costs of your solar investment, you have to consider a few variables:

• Total system cost: This will vary depending on the size of your system, installation fees, and any additional features you may want.
• Tax incentives: There are often tax incentives available for you, including the federal solar tax credit and multiple others. Consider these and subtract any such numbers from your total cost.
• Rebates: In addition to tax incentives, there are often state or local rebates available. Add these to your total cost.
• Financing: If you're financing your solar panel system through a loan or other means, make sure to factor in the interest rates and any associated fees.

Calculating Expected Savings

On the flip side, calculating your expected savings from solar is much simpler:

• Average monthly energy bill: Take a look at your past few years of energy bills and get an average. This will give an idea of how much you currently spend on energy each month.
• Solar production estimate: Based on your location, roof orientation, and other factors, your solar installer should be able to provide an estimate for how much energy your system will produce annually.
• Electricity rates: Lastly, look at how much you pay per kilowatt-hour (kWh) for electricity - this will vary depending on where you live. Multiply the kWh rate by your expected solar production to get an estimate of how much you'll save annually.

Other Factors That Influence Payback Period

There are several key factors that can influence your solar panel payback period:

• Location and climate: Solar panels are most effective in areas with plenty of sunlight, so those living in warmer climates may see a quicker payback period.
• Electricity rates: The higher the kWh rate in your area, the more savings you can expect from solar - leading to a shorter payback period.
• System size and efficiency: A larger system with higher efficiency will produce more energy, leading to bigger savings and a shorter payback period.
• Financing options: Different financing options have different interest rates and fees, which can impact the overall cost of your solar panel system and therefore the payback period.

The solar panel payback period is an important factor to consider when investing in solar energy. While it may take several years for the system to pay for itself, the long-term financial benefits make it a worthwhile investment for many homeowners and businesses. By calculating your total costs and expected savings, you can get a better understanding of your specific payback period and understand exactly when you'll recoup your investment entirely.

At Intermountain Wind & Solar, we're proud to offer quality solar panel services to clients around SLC, Utah and Boise, Idaho. Contact us today to learn more or get information on financing and important financial details!