Keep in mind that there are a number of basic determinants that go into calculating solar payback periods, including installation costs, interest rates if you’re taking out a solar loan , applicable tax credits and solar rebates, and energy bill savings. The latter is always going to be relative to the costs of electricity in your region, so areas that have higher utility costs tend to have slightly shorter payback periods.
To put it a little differently, the solar payback period represents the time it will take for your utility savings to eclipse your initial investment cost. It is at this point that you might say the solar panel system has “paid for itself.”
Solar panel installations are often seen as an investment, so it’s no surprise you are probably wondering when would you see your return of investment (ROI) on going solar. For most homeowners in the U.S., it takes roughly 11 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).
In contrast, other installers can only offer similar financing through solar leases, PPAs or third-party providers (such as Mosaic or Sunlight). Third-party loan providers can complicate the process, while opting for a loan or PPA will disqualify you from some of solar’s biggest benefits (additional property value, federal solar tax credit and local solar incentives).
Eligible homeowners enjoy 18 months of solar power before having to pay their first bill. When coupled with the federal solar investment tax credit (ITC), the initial energy savings can offset more than a third of the overall cost of a system before requiring a dollar down.
For that reason, Blue Raven Solar developed an innovative solar financing plan that offers in-house, flexible, zero-money-down options. The results speak for themselves, as Blue Raven Solar is now one of the fastest-growing solar companies in the nation and was recently acquired by SunPower. Its BluePower Plus+ plan (exclusive to Blue Raven) mimics the flexible structure of a lease while still providing the greatest benefits of owning your system.
We like Blue Raven Solar because it understands that, for most homeowners, the cost of solar presents the biggest barrier to entry.
SunPower’s biggest downside? Its high-efficiency panels are considerably more expensive than most of its competitors’ products. However, its powerful panels are workhorses that make up for the initial cost with more backend production (think about this like spending more money for a car that gets more miles per gallon).
If that weren’t enough, SunPower systems come packaged with products all manufactured in-house by its sister company, Maxeon. This means that your panels, solar cells, inverters, battery and EV chargers are designed to work together and are all covered under the same warranty.
SunPower earns its position as the top national installer on our list for a handful of reasons: It installs the most efficient solar technology on the residential market, offers the most expansive service area and backs its installations with a warranty well above the industry standard. All the while, SunPower pioneers sustainability efforts within the industry.
SunPower designs and installs industry-leading residential solar and storage solutions across all 50 states. With a storied history of innovation dating back to 1985, no other company on this list can match SunPower’s experience and expertise.
Average Solar Panel Payback Period in the U.S.
Though the average solar panel payback period is somewhere in the eight- to 12-year range, this can vary quite a bit from home to home. For some, it may be as little as five years. For others, it may be as long as 15 years. Local electricity costs and state-specific financial incentives, such as tax credits, solar rebates or net metering programs, are determinative factors.
One way to determine whether you’re getting a good return on your solar energy investment is to look at the entire lifespan of your system. Most residential solar systems last between 25 and 30 years. If your payback period is 11 years, you’ll be “making money” on the system for 14 to 29 years.
Most solar industry experts say that if your solar panel payback period is less than half the life of your system, it’s a decent investment. Another thing to keep in mind is internal rate of return, or IRR. Basically, think about what would happen if instead of investing in solar power, you placed your money into a more traditional financial investment.
How well would that investment have to perform in order for it to be more financially advantageous than a solar system? Depending on your investment strategies, solar panel installations may or may not offer a higher ROI than purchasing stocks, real estate or other investments. It’s important to weigh IRR carefully to ensure the most prudent decision.
The best way to get an accurate assessment of your solar payback period is to connect with a solar provider near you and request an estimate. Get started below to connect with one of our preferred partners.
How to Calculate Your Solar Payback Period
While it is impossible to calculate your exact solar panel payback period, getting a quote from an installer will allow you to make a fairly accurate, well-informed estimate. Here’s how to do it:
The best way to get an accurate assessment of your solar payback period is to connect with a solar provider near you and request an estimate. Get started below to connect with one of our preferred partners.
The cost information presented in this article is derived from a comprehensive analysis, incorporating data from multiple industry sources. The average cost per watt per state was calculated based on figures from Consumer Affairs, Energy Sage, and Berkeley Lab’s Electricity Markets & Policy Department. Additionally, monthly energy consumption and the average monthly cost of electricity were sourced from the U.S. Energy Information Administration, ensuring a well-rounded and accurate representation of the information presented.
Installing a solar system pays off because it can save you anywhere from $20,000 to $97,000 over the lifetime of your solar panels, which is usually about 25 years. A home solar system costs on average around $20,000 - $30,000, and most homeowners who install one tend to break even on their investment in about eight to nine years.
You can typically expect to have no electric bill. In some cases, you may still have a minimal monthly bill if your solar panel system doesn’t cover 100% of your energy costs, which is sometimes the case if your roof is shaded or isn’t large enough to accommodate as many solar panels as you need to offset 100% of your electricity costs. Unless you choose to go completely off the grid, you’ll likely need to pay a small monthly fee – often as little as $10 – to remain connected to your local electric grid for times when you may need additional power, like at night or when it’s cloudy outside. If you live in a state where net metering is available, staying connected to the grid allows you to earn utility bill credits if you send any excess electricity your solar panels produce back to your local utility company, further reducing any minimal monthly bill you might have.
How much does solar save you each month?
A typical homeowner saves about $130 a month on average after going solar. How much you save varies depending on factors such as where you live and what percent of your energy needs are covered by your solar system panel.