Solar Return on Investment: How to Calculate Yours

The rate of return on investment (ROI) for a solar installation is an important financial consideration for anyone thinking of purchasing a photovoltaic system.

Alternative energy systems require a significant investment, so of course you need to know the potential savings and payback time you can expect.

Our handy guide will help you calculate the future return on your photovoltaic system installation.

Determine Your Electricity Rates and Usage

Start by taking a look at your most recent electric bill (or contact your utility company for this information) to determine your average electricity rate, or the amount you pay per kilowatt hour (kWh) of usage.

On average, homeowners pay about 12.5 cents per kWh, but your actual rate may be anywhere from 9 cents to 27 cents per kWh, depending upon where you are located. Knowing your exact rate will give you a more accurate estimate of your solar ROI.

You’ll also need to determine your average monthly power usage. How much power you have used each month for the last 12 months is usually printed on your bill as well. Not only will this help you determine the proper size for your PV panel system, but it also will determine your savings. If net metering is available in your area, you can sell excess electricity back to the utility company for a profit.

Consider Your System Costs

According to the most recent US Solar Market Insight report through the Solar Energy Industries Association, homeowners typically pay an average of $4.43 per watt for photovoltaic systems.

Several factors can influence this figure, however. Your initial expenses may be higher or lower, depending upon the costs of your photovoltaic panels and other system components.

Location also plays a part, and in some areas of the country homeowners may pay as little as $3.46 per watt for system installations.

Of course, the less you pay for your photovoltaic system, the better your solar return will be. State, federal and local incentives can bring down your initial costs by several thousand dollars, maximizing the rate at which you will recoup your investment.

Calculate Your Solar Return on Investment

Once you have gathered the necessary information regarding your electricity and photovoltaic installation costs, head to the National Renewable Energy Laboratory website to use their PVWatts calculator.

This valuable tool uses your data to provide information on your system’s expected performance and estimated energy costs. With the results of the PVWatts calculator, you will be able to better understand the potential economic value of your photovoltaic system, and what kind of financial return you can expect on your investment.

If you would like to learn more about the potential payback period for solar energy at your home or business, contact Intermountain Wind & Solar. We are the leading provider of PV panel systems in the Intermountain West, serving customers in Utah, Colorado, Wyoming, Nevada and Idaho.

Contact us today to learn more about how you can gain energy independence and cut your utility costs. We also can help you determine how long it will take you to recoup your return on investment for your solar power system.

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