Solar panels generally pay for themselves between 3 and 8 years after purchase. There are several factors that influence this timeline including your utility rate, how much you pay upfront for the solar panels, how much sunshine your roof receives and any available government incentives.
Let’s use an example to illustrate this:
Let’s assume that your utility is charging you $0.25 per kilowatt hour (kWh) of electricity, and that you are consuming 750 kWh of electricity per month. With 750 kWh of electricity consumed per month at $0.25 per kWh, the average monthly electric bill is $187.50 ( = 750 * 0.25).
You now need to calculate how many solar panels are needed to supply 750 kWh of electricity per month. Let’s assume you live in California and you have a clear roof without any obstructions or shading, and 1kW of solar panels can produce 125 kWh of electricity per month. To produce 750 kWh per month, you will need 6kW of solar panels.
Let’s assume that you purchase solar panels from an installer that charges you $3,000 per kW of solar panels. So 6 kW of solar panels will cost $18,000 before any incentives are applied.
Luckily, there are several government incentives that are available for solar power. The Federal government provides a Investment Tax Credit (ITC) that is equal to 30% of the cost of the solar power system, which can be claimed as a refund on your income tax filing*. In this example, through the ITC you get $5,400 back (30% of $18,000). So, your net cost is only $12,600 for installing the 6kW of solar panels.
With these solar panels, you would now be saving $187.50 per month (the amount you were paying to the utility before solar panels). Your investment would pay-back in about 67 months ( = $12,600 / $187.50) or roughly 5.5 years.
Now, with the availability of many $0 down financing options for qualified homeowners, you can get solar panels without putting any money down and start saving from Day 1. With no upfront investment, your payback is immediate.
Since savings, ,utility rates, usable sunshine, and incentives varies by home, we recommend using PowerScout’s FREE instant Solar Calculator to check if solar panels are right for you and how much you could be saving by adopting solar power.
* Note: we’re a technology company, not tax experts, so please check with a reputable accountant to make sure you qualify!