How Do Solar Panels Pay Back Their Cost?
It’s well-understood these days that solar energy for homeowners pays dividends. A lot of homeowners who are considering converting to solar power have a common question: How do solar panels pay back their cost? Here are some answers.
Solar panel payback period
This calculation gives you an estimate on how much time it will take to break even on a solar panel installation. Various elements that result in savings to the consumer along the way go into making this calculation. When you consult with a solar contractor, you’ll be shown payback period estimates, which will help you make the best decision in choosing a contractor and give you a good idea of when your system will begin paying for itself.
Calculating the solar payback period involves specifying the total costs for the system and the financial benefits you’ll receive along the way.
Total solar panel system cost
This is a fairly wide variable as different sizes of homes and varying electricity needs of the residents will dictate the overall cost of the system. When you talk with a contractor about estimates, you’ll have some decisions to make in order to give him or her the data needed to provide an estimate.
Return on a solar investment starts with the financial incentives available for switching to solar. Your contractor can clue you in on those that apply to the region where you live. All homeowners can benefit from the federal solar Investment Tax Credit, which allows for a 30% credit on personal income taxes through 2019. The credit will drop to 26% in 2020 and 22% in 2021, the last year it is scheduled to be available.
Utility bill savings
In calculating the solar panel payback period, you’ll look at how much electricity you currently consume and what you pay for it vs. what you pay after switching to solar. Savings will vary from consumer to consumer depending on many factors such as the total electricity currently used and the capacity of the solar system. The payback period generally will be shorter if you have a higher electricity usage.
Solar contractors will attempt to recommend a solar system with a capacity that matches as close as possible your typical electricity needs. The output of a new solar system will be affected by the square footage of roof space you have available for the panels and where the sun is at different times of the year in relation to the panels.
You can estimate the payback period by first subtracting all financial incentives from the total cost of your system. Then determine your annual savings on electricity costs. Divide your cost minus incentives by your annual financial savings to arrive at the number of years after which your system will begin paying for itself.
If you want to understand more about solar payback periods or get information on a solar installation, Burlington Fireplace & Solar of Burlington, Wis., is here to help. Visit us at 857 Milwaukee Ave., or give us a call at (262) 763-3522.