Solar Panel ROI: Payback Period, Startup Costs, Incentives

Whether your primary purpose for installing solar panels is convenience, a lower energy bill, environmental friendliness or any other reason, this sort of project is an investment for the future. Solar panels are built to last many years, converting your power needs into a more sustainable format – and like other long-term property upgrades, a major factor in the success of such an installation is your eventual return on investment, or ROI.

At Intermountain Wind & Solar, we're happy to offer a wide range of both residential and commercial solar panel installation and related solutions for a variety of clients. We've helped numerous customers understand and calculate their expected solar ROI, and we'll do the same for you as you work the numbers to determine if this is the right move given your needs and property characteristics. What are the important variables that impact solar ROI? This multi-part blog series will dig into several to keep in mind.

Payback Period

When calculating solar ROI, perhaps the single most important term is the "payback period." Essentially, this refers to how long it will take you to recoup the cost of solar installation through the savings solar panels provide you compared to your previous power source(s).

In many cases, especially if you take advantage of solar incentives we'll go over in a moment, a rough average for solar payback period among many property owners is about seven years. However, this can vary significantly based on the system you choose, your previous energy costs and needs, and more. Determining exactly how long your payback period will be, and whether a solar installation is worth it for you based on this period, involves going over several factors we'll dig into from here.

Basic Startup Costs

Firstly, there are some standard startup costs that you can expect for any solar installation:

  • The panels themselves, which capture the sun's rays and convert them into electrical energy.
  • Batteries, which store collected energy for future use.
  • An inverter, which converts the energy into voltage that can be used on your equipment.

While startup costs will vary based on your materials and the number of panels you choose, most initial investments tend to run in the $10,000-$20,000 range (this also includes installation in most cases).

Incentive Programs

If those numbers scared you, breathe easy – there are several incentive programs available to help cover some of these costs. They include:

  • ITC: Short for federal solar Investment Tax Credit, the ITC program has existed since 2006. As of 2020, it allows homeowners to deduct 26% of the cost of a solar system from federal income tax.
  • State incentives: These vary between states, but feature areas ranging from property tax credits to sales tax exemptions, cash rebates and more.
  • Federal grants: There are several programs here, including the FHA PowerSaver Grant program that allows clients to borrow up to $25,000 for a solar installation.

For more on how to calculate solar panel installation ROI, or to learn about any of our solar installation or maintenance services, speak to the staff at Intermountain Wind & Solar today.

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