How Long Does It Take for Solar Panels to Pay for Themselves

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Going green is not only good for the environment – it can also save you money. Solar panels are a great way to reduce your carbon footprint and save on your energy bills. The initial cost of solar panels can be expensive, but the long-term savings and environmental benefits make them worth the investment. But how long does it take for solar panels to pay for themselves? 

The answer depends on a few factors, including the cost of installation, the amount of sunlight your area receives, and the type of solar panel you choose. However, most solar panels will begin to save you money within just a few years. On average though, it takes about 8-10 years for solar panels to pay for themselves. After that, they will continue to save you money on your energy bills for many years to come.

In this article, we’ll explore how long it takes for solar panels to pay for themselves and the factors that affect the payback period. 

What Is a Solar Payback Period?

how long do solar panels take to pay for themselves solar payback period

The solar payback period is the length of time it takes for the savings from a solar panel system to equal the upfront cost of the system. For example, if a solar panel system costs $5,000 and saves you $500 per year in utility bills, the payback period would be 10 years.

The solar payback period is determined by dividing the upfront cost of the system by the amount of money saved each year on utility bills and then multiplying by the number of years in the warranty period. The average solar panel system in the United States has a 20-year warranty, so that is the number of years used in this calculation.

Solar panels on average have a payback period of 10 years, but this number can vary based on the cost of the system, the amount of sun exposure, the location, and the utility rates. Solar panels in sunny Arizona will have a shorter payback period than solar panels in cloudy Maine.

What Factors Need to Be Considered to Calculate an Accurate Solar Payback Period?

solar payback calculator solar panels installation

There are many factors that need to be considered when calculating a solar payback period, including the cost of the system, the electricity rate, the amount of sunlight available, and the efficiency of the solar panels.

1. Cost of the System

The upfront cost of a solar panel system can range from $5,000 to $30,000 or more. The cost of the system is the biggest factor in determining the solar payback period.

2. Electricity Rate

The electricity rate is the second biggest factor in determining the solar payback period. The higher the electricity rate, the shorter the payback period. For example, if the electricity rate is $0.15 per kWh and the system saves you $500 per year, the payback period would be 10 years. However, if the electricity rate increases to $0.30 per kWh, the payback period would be 5 years.

When it comes to solar payback, the rate of increase in electricity prices is one of the most unpredictable elements. Rates in the United States have risen at an average of 3.5% per year over the past 25 years, although this rate varies considerably depending on location.

3. Amount of Sunlight

The amount of sunlight available also affects the solar payback period. Solar panels need sunlight to produce electricity, so the more sunlight available, the shorter the payback period.

4. Efficiency of Solar Panels

The efficiency of solar panels also affects the solar payback period. Solar panels that are clean with higher efficiency will produce more electricity and have a shorter payback period. The maintenance and operating costs of a solar panel system are usually very low, but they need to be considered when calculating the payback period. 

Also Read: How Often Should You Clean Solar Panels

5. Average Electricity Usage for Your Home

A key factor that will affect the solar payback period is the average electricity usage for your home. A home that uses more electricity will have a longer payback period because it will take longer to recoup the upfront cost of the system. So, the less electricity you use, the shorter the payback period.

6. Solar Incentives, Rebates, and the Federal Tax Credit

There are multiple solar incentives, rebates, and federal tax credit available that can significantly reduce the cost of a solar panel system. These incentives can shorten the payback period by thousands of dollars. Currently, the federal tax credit for solar is 26% of the cost of the system.

7. Energy Production from Your Solar System

The amount of energy that your solar panel system produces also affects the payback period. A system that produces more energy will have a shorter payback period. The best way to increase the energy production from your solar panel system is to make sure they are well maintained and always getting as much sunlight as possible at times during the day.

Once you know your system size, multiply the number of kW your solar panels can produce under full sun by the number of kWh that 1 kW can produce over the course of a year. Then multiply that by the price per kWh you pay from your utility.

Also Read: How to Calculate Solar Panel Power Output

8. Warranties

Last but not least, the warranties on solar panels also play a big role in the payback period. Solar panels usually come with a 20-year warranty, but some companies offer longer warranties. The length of the warranty will affect the payback period because it will determine how long you can expect the solar panels to produce the peak amount of energy and cover damage or repair costs.

These are just a few of the many factors that need to be considered when calculating a solar payback period. Ultimately, the payback period will vary based on each individual situation. However, with the current cost of solar panels and solar incentives, the payback period is getting shorter and shorter. In some cases, the payback period can be as short as 5 years.

What Is Considered a Good Solar Payback Period?

This is not an easy question to answer because there are so many factors that need to be considered. However, a good rule of thumb is that a solar payback period of 10 years or less is considered to be very good. Anything above 10 years is still considered to be a good investment, but the payback period may be too long for some people.

Of course, ideally you just want the panels to last forever and keep saving you money. However, the average lifespan of solar panels is around 25-30 years. So, even if the payback period is 10-15 years, you will still be saving money for many years to come.

Conclusion 

In summary, the solar payback period is the amount of time it takes for a solar panel system to pay for itself. The payback period is affected by many factors, including the cost of the system, the efficiency of the solar panels, the average electricity usage for your home, and solar incentives. A good rule of thumb is that a solar payback period of 10 years or less is considered to be very good. However, even if the payback period is longer than 10 years, you will still be saving money in the long run. Thanks for reading!

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