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Solar panels are expensive. Here's how to find out how long it takes for your energy savings to pay off.
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Mike De Socio is a freelance journalist based in upstate New York who tells stories about cities, climate change and the LGBTQ+ community. His work has been published in Bloomberg, The Guardian, Fortune, HuffPost, Xtra, YES! Stock and much more.
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There are many different reasons to considersolar panels.
You can,like many Americansyou will help the environment and save money at the same time by giving your homealternative power source. Or maybe you just want to save money on your energy bills.
"Solar comes in the form of how we begin to power our homes, how we connect as a community to meet the energy needs of our community"Jamie Haenggie, chairman of ADT Solar, told CNET.
Mensolar panels are expensive, and you need to consider how long it will take before the savings you get from solar energy will exceed the amount you paid to put the panels on your roof. Before you invite a team of solar installers to your roof, you'll want to understand when - or if - the panels will start to pay for themselves.
Here's your guide to how long it will take you to start saving money with solar panels.
The best solar companies in 2023 Look at Cnet
What is the payback period for solar panels?
"Solar payback period" is a fancy way of saying how long it takes for the money spent to offset the money saved (or serve) on your electricity bill.
This is a ratio - usually a matter of years - that tells you how long you will have to wait for a real return on investment. Solar payback periods can vary widely and also depend on how you pay for the system.
"There are many factors that affect this in any home or household," he saidBecca Jones-Albertus, director of the US Department of Energy's Office of Solar Energy Technology.
Haenggi of ADT Solar said the average payback period in the U.S. is six to 12 years, with most households leaning toward the latter. Like Jones-Albertus, she insisted it was a moving target.
"People are reluctant to say, 'Well, here's a twist,' because the energy market has been so volatile," Haenggi said.
Factors affecting the payback period of solar energy investments
No two solar systems are the same, and that means no two solar payback periods are the same either. "It seems like an easy answer, but it's more complicated," Haenggi said.
The calculation of the potential payback period will depend on many variables.
The total costs of a solar system
Theyou pay more for your system, the longer the repayment will take. Solar systems can cost anywhere from a few thousand dollars to tens of thousands, depending on where you live,Your electricity needsand what type of system you choose to install. ANDSolar batteryit can easily add $10,000 or more to the cost of the system. It goes without saying: the higher the price, the longer the payback period.
Incentives and tax credits
Once you know the total cost of your solar system, you also need to consider any state or federal rebates you may be eligible for. FederalClean energy mortgagegives you, for example, a 30% return.from the statemay also have additional incentives. These credits can cut a significant portion of the money you pay for your solar panels and shorten your payback period.
Energy consumption in your home
Sometimes rooftop solar can completely cover your electricity needs - reducing your electric bill to $0 - and sometimes it only covers a portion of it. If you use a lot of power, solar energy may only translate into a small reduction in your electricity costs, meaning it may take longer to pay back your investment.
Electricity production in your solar system
You've probably never thought much about your roof, but it makes a big difference to how your solar investment turns out. If you have room on your roof for more panels to bask in the sun all day, you'll produce a ton of electricity and pay for it faster. But if you live on a shady lot and your panel production is more intermittent, you won't see a payback as quickly.
Electricity costs and growth rate
This is a huge but sometimes overlooked factor in solar payback. Basically, the higher electricity prices where you live, the more lucrative PV can be for you. That's because as utility prices rise, you'll save more money by relying on solar panels instead of getting power from the grid.
How to calculate the payback period for solar energy
If you want to get a general idea of the potential payback period for solar, here's how. Remember, you'll want to consult with experts (read: solar installers) to make sure you're getting accurate numbers here. But this might help you get an idea:
- Start with the total cost of installing a solar system in your home. (Make sure to include interest and fees if you take out a loan.)
- Then subtract the value of any discounts, incentives or tax credits.
- Now you have the net cost of your solar system after discounts.
- Estimate annual savings on your electricity bill with solar panels. (Again, your solar installer or utility provider may be able to help.)
- Divide the net cost of the system by the annual bill savings.
- The number you get is the number of years the panels will 'pay for themselves'.
Here's another look at the formula:(Total costs for solar installation - discounts) / Savings on the electricity bill per year = Repayment period in years
In practice, it might look like this: Let's say the total system price for your home is $25,000. You know you qualify for a $10,000 bonus, so now the net cost is $15,000. You also know that the panels will help you save around DKK 1,500 per year on your electricity bills. So $15,000 divided by $1,500 is 10. That means solar has a payback period of 10 years.
Why is it important to know your repayment period?
Now you have solar payback time. But how does that affect your decision?
"It depends on what motivates the household to decide [to install] solar," Jones-Albertus said. Maybe you just want to help the environment and aren't worried about the cost. But "people are interested in the resilience aspect and the financial aspect," she said.
If you are interested in the financial aspect, the payback period is an important number when making decisions. A payback period of about 10 years, plus or minus, is pretty average and can prove to be a solid investment, Haenggi said.
But again, it depends on your goals and comfort level. If, for example, you plan to move or sell your home within a short time, this will change your bill. You may not be at home to see the repayment in electricity savings, but you can see the payment coming inhigher selling priceto your home.
"This system on your roof translates into an increase in property values," Jones-Albertus said.
Jones-Albertus and Haenggi agree that there are several scenarios where a PV installation probably doesn't make sense, regardless of the payback period. If you know your roof will need to be replaced soon, you will definitely want to wait until that happens before installing solar panels on it. And if you have a ton of trees towering over your house, the solar system is unlikely to ever generate a significant return; if so, Jones-Albertus recommends considerationlonely.
How to pay for solar panels
There are many different ways to pay for solar panels, and they all affect the payback period of your solar investment.
- Cash:If you are just saving up for a purchase (viahigh interest savings account), you avoid paying interest on your loan and reduce the total costs of your solar panels. "In the long run, the highest return usually comes from paying for the system with cash," Jones-Albertus said.
- Solar loan:Some banks offer loans specifically for financing solar installations. Ask your installer or lenders to see what your options are.
- A home loan or line of credit or HELOC:in general,using equityhome improvement financing can be a good idea – especially since solar panels will increase the value of your home.
- Rental or energy purchase agreement:If you want to minimize your initial solar investment, you can actually lease the system from an installer. Thatthe developer would own the panels, and would sell you the generated electricity at a discounted price, essentially negating the idea of a "payback period" altogether.
More sun tips
- Save on your next home energy upgrade with these incentives
- Do solar panels save money? Yes. Here's how you do it
- How many solar panels do you need to power your home?
How long does it take to save money with solar panels? ›
The most common estimate of the average payback period for solar panels is six to ten years. This is a pretty wide range because there are many factors that will influence the number of years it can take to pay off your panels and the monthly savings you can expect.How long does it take for solar panels to save you money? ›
For most homeowners in the U.S., it takes roughly eight years to break even on a solar panel investment. For example, if your solar installation cost is $16,000 and the system helps you conserve $2,000 annually on energy bills, then your payback period will be around eight years (16,000/2,000 = 8).Do you actually save money going solar? ›
Besides the federal tax credit, solar panels increase property values while lowering utility bills. Compared to gas or electric heating systems, solar panels save you much more in the long-run. Your solar panel system can pay for itself in three years!How long does it take to make money on solar? ›
Solar panels typically pay for themselves within nine to 12 years. Solar panels reduce or eliminate the cost of electric utility bills. Utilities may pay solar panel users through a process called net metering.How much money do you save a month with solar panels? ›
The average 5 kW residential solar system can save $100 to $150 monthly on electric bills. The actual savings depends on various factors, including solar array size, energy usage, and electricity costs in your area.Can switching to solar panels save me money? ›
Yes. solar PV systems can most definitely save you money. The real question is, how much exactly? Well, that figure is based on a number of factors such as your exact location, (see a list of the best US states to go solar in), your roof, your electric bill, size of the system and several other factors.What happens when you pay off solar panels? ›
Once you pay off your loan or buy your system outright you will essentially be getting energy for free. When it comes to payment, those who are using solar energy will still get a monthly utility bill. This will show how much energy you produced versus how much energy you used for the month.Why are my solar panels not saving me money? ›
Many homeowners use more power after going solar
If you start using more power after going solar than you were before going solar, you may not be saving money on electricity. Keep in mind that your solar system is designed to produce the amount of electricity your household was using before you went solar.
Disadvantages of solar energy include a high initial cost, an inability to work on every roof type, and sometimes difficulty in finding a reputable and local installer (depending on where you live).What is the main downside of solar energy? ›
Solar energy systems can generate electricity in any climate. One of the disadvantages of solar energy is that it's subject to temporary weather disruption. Cloudy days reduce the amount of electricity you produce. Cold, however, doesn't affect productivity.
Do solar panels work during rain? ›
Photovoltaic panels can use direct or indirect sunlight to generate power, though they are most effective in direct sunlight. Solar panels will still work even when the light is reflected or partially blocked by clouds. Rain actually helps to keep your panels operating efficiently by washing away any dust or dirt.Does a solar battery pay for itself? ›
Depending on the rebates and incentives available to you, your electricity rate plan, and the cost of installing storage, you can expect to see a range of energy storage payback periods. On the low end, you can expect storage to pay for itself in five years or so if you have robust state-level incentives available.How much money can solar panels make you? ›
How Much Solar Farm Income Per Acre Per Year Should I Expect? On average, you can expect a return on investment of $21,250- $42,500 per acre every year.Can solar panels work with AC? ›
Yes, you can run an air conditioner with solar power.
Be that as it may, you may be connected to the grid or be completely off-grid. Both of the systems will allow you to power an AC with solar energy. It will reduce electricity costs rapidly.
- Save On Your Electricity Bill With A Solar Loan. ...
- Save On Your Electricity Bill When Buying Solar Panels With Cash. ...
- Use Less Electricity. ...
- Install Battery Storage. ...
- Shift Usage to Strong Solar Hours. ...
- Sign Up For Net Metering (If Available) ...
- Optimize Your Time-of-Use.
|Advantages of Solar Energy||Disadvantages of Solar Energy|
|Decreases use of non-renewable resources||High upfront costs|
|Reduces power bill||Sunlight dependent|
|Energy independence||Space constraints|
|Long-term savings||Environmental impact of manufacturing|
Solar panels will make your home more affordable to maintain over time and energy efficient, and they can positively impact your property's value. Depending on your location, the quality of the installation and local market conditions, the impact solar panels will have on property value will vary.Has solar panels gotten cheaper? ›
Since 2009, the price of solar energy has come down by 90 percent. That's no accident. It's the result of policy interventions from the US to Germany to China.Are solar panels cheaper than ever? ›
The cost of solar panels has decreased by more than 80% in the past 20 years. Each year, it is becoming slightly cheaper to buy solar panels. Here is what a solar energy system could cost your household in 2022.What credit score do you need for solar panels? ›
What credit score do I need to get a personal loan for solar panels? The minimum required credit score for a personal loan depends on the lender. In general, you'll need a credit score of at least 580 to get approved. Borrowers with high credit scores tend to get the best rates and repayment terms.
How often do solar panels need maintenance? ›
Solar panels only need maintenance two to four times a year, but check your solar companies manual for panel specific maintenance care. Fall and spring serve as good times to perform maintenance work because panels can need cleaning following winter where dust and debris can accumulate.What is the solar tax credit for 2023? ›
The tax credit for solar was originally scheduled to decrease to 22% in 2023. With the recent signing of the Inflation Reduction Act of 2022, not only will the credit still be available, but it will also increase to a 30% credit effective until at least 2032.Why is my solar true-up bill so high? ›
If your electricity use increased from that initial 12-month usage estimate – for example, maybe you've installed a pool or switched from working in an office to working from home – you may be surprised with a larger True-Up Bill as a result.
Can a House Run Completely on Solar Power? The short answer: Yes, you can use solar energy to power your entire house. In fact, some people have used expansive solar panel systems to go off the grid completely, turning their homes into self-sustaining ecosystems (at least as far as energy is concerned).What is a true-up bill for solar? ›
The True-Up statement reconciles all the cumulative energy charges, credits and compensation for the entire 12-month billing cycle. If you have a balance due after all charges and credits are reconciled, that amount will appear on the last PG&E bill of your 12-month billing cycle.Do solar panels cause roof leaks? ›
Solar panels, by nature, disrupt the flow of water along your roof, which can create leakage issues over time. If panels are installed incorrectly, leakage can also occur around the areas where the panels were bolted in and attached to the roof.
If you live in an area with high energy rates and a suitable solar rating, and if you can afford the initial investment, it's worth installing solar panels on your home while the 30% tax break is in place — for the good of the environment and your wallet.What are 5 bad things about solar energy? ›
- Solar Panel Installations Can Be Expensive. ...
- Solar Energy Doesn't Work at Night. ...
- Solar Energy Storage is Expensive. ...
- Solar Panels are Difficult to Move Once Installed. ...
- Some Solar Panels Use Rare Earth Metals.
An average home needs between 17 and 21 solar panels to fully offset utility bills with solar. The number of solar panels you need depends on a few key factors, including your geographic location and individual panel specifications.Do solar panels fail in hot weather? ›
Heat can “severely reduce” the ability of solar panels to produce power, according to CED Greentech, a solar equipment supplier in the United States. Depending on where they're installed, hot temperatures can reduce the output efficiency of solar panels by 10%-25%, the company says.
Do solar panels work with moonlight? ›
Electricity Generated by Your Solar Panels at Night Is Minimal. Seeing as moonlight is just sunlight reflected off of the moon, you will be happy to hear that the answer is yes: solar panels do technically work with moonlight.Do solar panels work in snow? ›
Researchers at the test centers have shown that solar can still successfully generate electricity in snowy areas and other harsh environments. A dusting of snow has little impact on solar panels because the wind can easily blow it off.What is the average cost of a solar battery? ›
The solar battery system itself costs between $4,000 and $7,500 on average, while labor accounts for another $2,000 to $3,500.Is it better to have more solar panels or more batteries? ›
More panels means greater square footage of solar cells exposed to the sun, resulting in higher efficiency and longer runs times into the earlier morning and later evening when very little sun is available. If you're needing just an hour or two of longer run time, try adding another line of panels.Do I need a battery bank for solar? ›
Can I use solar panels and inverters without battery? Yes, if you are connected to an electrical grid, you can use solar panels and inverters without battery storage.How much do you save a year with solar? ›
The average 6 kW solar panel system installed anywhere in the country will save you about $1,500 on your electricity bills annually. Solar savings are very real, but exactly how much you save depends on the availability of local, city, and state incentives.Can you use mirrors with solar panels? ›
Capturing lost energy
Working with a team in Canada, my group has shown that using mirrors to shine more sun on the panels can significantly crank up their output. The reflectors are placed opposite the solar panels to send more light toward the modules in front of them.
Here's how NREL describes it: A large fixed tilt solar PV plant that generates 1 gigawatt-hour (GWh) per year requires, on average, 2.8 acres for solar panels. This means that a solar plant that provides all the electricity for 1,000 homes would require 32 acres of land.How many solar panels do I need to run my house with AC? ›
|Air Conditioning Unit||Number of Solar Panels Required|
|Central air||30 x 100W solar panels|
|Large window unit||20 x 10W solar panels|
|Medium window unit||10 x 10W solar panels|
|Small window units||5 x 10W solar panels|
For residential panels, the highest wattage solar panels available are around 500W, which is more than enough for residential use. The wattage for residential panels is limited to 500W due to the need to ensure that the panels' size will fit on most rooftops.
How many solar panels does it take to run an AC unit? ›
To completely power the air conditioning in your home, you should install 20 x 100W solar panels. Medium window unit: The medium window units draw between 1,000 and 1,800 watts per hour, showing you need to install at least 1kW of solar panel energy to cool your home.Does solar always save money? ›
According to the U.S. Energy Information Administration, the average household uses around 893 kilowatt-hours (kWh) per month. A residential solar setup produces anywhere from 350 to 850 kWh per month. Therefore, you can save as much as 95% off your utility bill.Does cleaning solar panels save money? ›
Yes, dirty solar panels are less efficient than clean ones. Dust, bird droppings, and leaves hinder the solar panels to operate at maximum efficiency.  The efficiency rating of the panels is based on the optimal performance of these panels which are adversely affected by general uncleanness.Does solar still work when power goes out? ›
If you have solar panels installed on your roof or property they will continue to generate electricity during power outages, as they do every day because the panels still absorb sunlight and solar energy.What is the lifespan of a solar panel? ›
The estimated operational lifespan of a PV module is about 30-35 years, although some may produce power much longer. While few systems are entering the waste stream right now, more systems will come to the end of their useful life in the next few decades.Is solar better than Electric? ›
Although solar equipment can be more expensive initially, the main reason that people choose solar power instead of electricity is the cost savings. Solar energy is very efficient and able to pay back the cost of installation over a number of years.Will solar panels be cheaper in 5 years? ›
Solar costs are very likely to decrease in 2023, making rooftop renewables affordable for more homeowners. In November 2022, the National Renewable Energy Laboratory (NREL) published its analysis of the cost of solar and energy storage (battery) system installations for the first quarter of 2022.How much can you save a year on solar panels? ›
But just how much money can solar panels save homeowners each year? You could save around $1,346 on annual energy bills — based on a 6 kilowatt (kW) home solar system generating 9,000 kilowatt-hours (kWh) of energy and the average national electricity price of 14.96 cents per kWh.Will solar prices drop in 2023? ›
In 2023, solar panels in the U.S. cost about $20,650 on average down from more than $50,000 10 years ago. In this article, we'll break down the cost of solar by system size, state, and panel brand, all of which can significantly impact the final number you pay.Is solar worth it long term? ›
Electricity Bill Savings
Most Californians pay around $116.94 each month for power, so you'll save just over $1,400 annually if you can eliminate your energy bill. The average lifetime savings enjoyed by California solar customers is around $29,734, and that's after the upfront expenses of going solar are recuperated.
Why go solar in 2023? ›
When you install home solar panels in 2023, you can claim the Investment Tax Credit, otherwise known as the ITC or federal solar tax credit, on your 2023 taxes. The ITC is the best solar incentive of 2023. It allows you to reduce what you own in federal income taxes by 30% of your total solar installation costs.