The Magic Number for Solar

October 10, 2017

 

How long until my Solar energy system pays itself back? 

 

Before digging into your new Solar endeavor, this is one of the most common questions to understand, and we would like to help easily break it down for you. There are two main factors involved with figuring out your system’s payback period:

 

Total [Net Cost] of Installation  

and  

Annual Expected Revenue

 

Both values vary from year to year as solar equipment and utility rates continue to fluctuate. Your total install cost also depends on how you decide to cover the expense, whether through cash payment, loan, eligible grants or any combination of these. We are happy to help you navigate through your options, and you can learn more about them on our post about Financing Your Solar Energy System.

 

The Total Installed Cost includes any price reductions, such as depreciation, rebates, and tax credits. There is currently a 30% Federal Income Tax Credit for installing solar, which will turn an average 7.5-kilowatt (kW) system price of $15,000 into only $10,500, and that does not include any tax credits for businesses or SRECs. For this example, let’s stick with a total installed cost after tax incentives of $10,500 for a 7.5kW residential system.

 

Your Annual Expected Revenue can be calculated by combining the total annual cost you avoid having to pay the utility along with any additional income you may receive from Solar Renewable Energy Certificates (SRECs). With an average household using 10,800 kWh per year, that means your 7.5 kW system would be offsetting roughly 70% of your annual utility bill, not including additional SRECs.

 

 

Calculating your Payback Period:

 

 

 

$10,500                         $1,246.50

     ÷         

 Net Cost of Installation       Annual Expected Revenue

__________________________

 

8.4 years

 

 

 

 

 

 

 

 

 

 

With this being just one example, the possibilities are abound as panels become more efficient and affordable. Take charge in your energy today, and Contact Us to learn how you can lower your monthly bills and support your local economy with clean and renewable energy!

 

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