Solar Panel ROI: How Soon Will You Break Even?

Installing residential solar panels is an investment like upgrading your kitchen or installing a new HVAC system. But unlike most home upgrades, solar panels are an investment with a financial return. Over time, your solar panels will pay for themselves in electric bills savings. Once you break even, you’ll be making money. 

The time it takes to break even on your solar installation is known as the solar payback period. Keep reading to learn more about the payback period for solar panels and when you can expect to see a return on your investment in a solar panel system. 

Average ROI for Solar Panels 

It typically takes between 8 and 12 years to break even on a solar panel installation. But these numbers can vary significantly. Some homeowners break even in as little as five years.

The variation is extreme because there are so many factors that impact your solar payback time. 

• Initial investment - The cost of your solar installation has the greatest impact on your payback period. Large, complex solar panel and battery installations cost more than small, standard installations and will take longer to pay for themselves. But, a larger installation could also save you more money in the long run, depending on the amount of electricity you consume. We will size your system based on your electricity usage to optimize your savings and payback period. 
• Electricity costs - Solar is most valuable in areas where electricity is expensive. The more you pay for electricity, the more you will save with solar panels and the faster you will break even. 
• Incentives - Solar incentives like the federal solar tax credit can help speed up your return on investment. The solar tax credit reduces your solar installation costs by 30% which greatly reduces your payback period. Other incentives, like net metering, can also help you break even faster. 

What Is a Good Solar Payback Period? 

Solar panels last for a long time. The solar energy systems we install are warrantied for 25 years and will often last much longer than that. Given their long lifespan, most experts agree that as long as your payback period is shorter than half your system’s lifespan, you’ll see a good return on your investment in solar panels. If you break even in 8 years, you’ll have at least 17 years to “make” money with your solar panels before they need to be replaced. 

How to Calculate Your Solar Panel Payback Period 

It’s impossible to calculate your exact solar payback period due to a number of variables, but you can do some math to estimate how long it will take for your solar panels to pay for themselves. 

1. Get a solar installation quote. You can’t estimate your solar panel payback period until you know how much your system will cost. Boston Solar provides free estimates—call us today! 
2. Factor in the solar tax credit. You’ll save 30% with the federal solar tax credit, so you can subtract your savings when estimating your break-even point. 
3. Estimate your annual electricity costs. You can find out how much you spend on electricity in a year by adding up the past 12 months of your electric bills. Solar panels may not offset 100% of your electricity costs, but you can use this number to get a general idea of how much you’ll save by switching to solar.  
4. Consider rate increases. Electricity costs go up over time, but you’ll avoid these increases with solar panels. You can get a feel for increases by seeing how much your electricity costs have risen in the past few years. 
5. Do the math. To calculate your estimated payback period, divide the cost of your solar system (minus the 30% solar tax credit) by your estimated electricity bill savings.  

Boston Solar can do the math for you during a free solar consultation. We’ll take all the factors into consideration to provide an accurate solar installation cost estimate and payback period estimate. We’ve been empowering New England for over 11 years and have installed more than 5,000 solar energy systems. If you’re looking for an experienced local solar panel installer, give us a call today! 

Get a free solar estimate! Call 617-858-1645 or contact us online to get started.