As the popularity of the new energy industry grows, many families are choosing to install solar panels as a way to power their homes. This is not only because solar energy is a clean energy source that reduces the carbon footprint of everyday electricity use, but also because the investment in solar panels will pay for itself in the long run for decades to come.

1. How do solar panels pay for themselves?

1.1 Saving household electricity expenses

The main need for most families to install solar panels is to generate electricity through solar power to reduce household electricity expenses, which is also the main way to recover the upfront investment in solar panels. Depending on the amount of electricity a household uses and the size of the solar panels installed, a solar system can save a household $100-$300 per month. Over the decades-long lifespan of the solar panels, it can save your family thousands of dollars in electricity expenses.

1.2 By taking advantage of solar incentives offered by the government

In order to popularize and promote solar energy as a clean, new energy source and to encourage people to install solar panels, the government offers a number of incentives for purchasing solar panels, which reduces the upfront investment required to purchase solar panels. The most important of these is the government tax credit, which can be 25-35% of the purchase price of solar panels, depending on the government’s policy. There are also other incentives that can help recoup the up-front investment cost of solar panels.

1.3 Increase Property Value

In addition to saving money on home electricity, increasing the value of a property is one of the reasons why many homeowners choose to install solar panels. According to statistics, installing solar panels can provide a 5-8% increase in the value of a home. For most homeowners, installing solar panels not only saves a lot of money on electricity over time, but also allows them to get a higher offer on the sale of their home because buyers will be more inclined to buy a home with solar panels and will be willing to pay a higher price for such a home, considering the returns that solar panels will bring in the decades to come.

1.4 Revenue from excess electricity produced

In addition to the above ways of recovering the upfront investment costs of solar energy system, there is a more direct way. Some regions and some energy companies offer net metering programs for solar panels, which means that when your solar panels produce much more electricity than your family needs, the energy company will buy your excess electricity directly and provide you with credits to use when your solar panels are unable to supply your family with regular electricity.

2. What is the payback period for solar panels?

The payback period for solar panels is the time it takes to recoup the upfront investment in solar panels after installation. The solar payback period is an important figure to consider when purchasing solar panels, but the exact payback period can be affected by a variety of factors.

3. How to Calculate the Payback Period for Solar Panels?

The payback period for solar panels is calculated by subtracting the total cost of installing the solar system from the incentives offered by the government to purchase solar energy and the buybacks, and then subtracting the time it takes for the monthly savings in electricity consumption and the revenue generated from the sale of the excess power to result in a final result of zero.

4. Factors affecting the payback period of solar panels

4.1 Local electricity prices

The increase in local electricity rates is one of the most important reasons that affect the payback period of solar panels. Depending on the location, each utility company will have its own pricing and conditions of electricity usage. If you live in a place where electricity prices are higher, meaning that you will have to bear more of the monthly electricity expenses, you will have a shorter payback period for your solar panels. For areas with low electricity prices, although you will still be able to get savings from your solar panels, the slow build-up process will lengthen your payback period.

4.2 Local sunshine hours

The location of the sunshine time and the peak time of sunshine will have a great impact on the efficiency of solar panels. If your location can ensure a long time, high intensity sunshine level, your solar panels will produce a lot of power, these power can not only offset your entire household electricity, and even have surplus power for sale to the energy company, in the multi-faceted profit, your payback period will be shortened to a very substantial time. But when you are located in the shorter sunshine hours, the peak time of daylight is also relatively short, your solar panels may not be able to meet the power produced by your daily electricity needs, which will greatly extend the payback period of your solar panels.

4.3 Maintenance and repair of solar panels

In addition to considering the normal power generation of solar panels, solar panels and their supporting components in the next few decades may occur in the event of failure, as well as late maintenance, repair and bring the late cost should also be considered in the payback period. If you choose to install solar panels and supporting inverters, battery packs, charge controllers and other important accessories of poor quality, will not only largely reduce the use of the system sold for a long time, but also produce a large number of late costs, which will have a great impact on the payback rate of the solar panels, and may even result in the cost of the situation can not be recovered because of the system’s service life is too short. Therefore, when choosing a solar system one should pick a reliable supplier who can offer a longer warranty period, which will reduce most of the post costs.

4.4 Total cost of the solar system

Determining the payback period of solar panels needs to take into account the upfront cost spent on installing the solar panels, which largely depends on the size of the solar system installed. Firstly, you need to know your average electricity consumption and the size of your roof, and based on these two points, you will be able to design a comprehensive design of the size of the solar panels that need to be installed. The size of the solar system will play a decisive role in your upfront investment cost. The higher your upfront investment cost, the more time you need to recoup your upfront investment, and the longer the payback period will be.

5. What is the payback rate of solar panels?

The payback rate for solar panels is the ratio of the amount of revenue your solar panels can bring you to the amount of money you pay for your solar system.

6. How to Calculate the Payback Rate of Solar Panels?

The payback rate for solar panels can be calculated by subtracting the upfront cost of the solar panels, minus government incentives and rebates, and subtracting the savings in electricity costs and profits from selling the excess electricity at a later date.

Overall, however, calculating the payback rate for solar panels is more complicated than calculating the payback period, and it requires knowing exactly what the average savings on electricity bills the solar system will generate for the homeowner over the life of the system. Therefore, when performing solar panel payback calculations in the field, we use professional calculators as well as use functions into the calculation formula substitution as a way to get more accurate results. The specific calculation process is as follows:

Create a form in Excel, in accordance with the life of the installed solar panels to set up the number of forms. Fill in the first cell with the upfront cost of the solar panels minus government incentives and rebates, and set this value to a negative number to represent the cost of the first year’s investment in the solar system.

Next, fill in the remaining dozens of cells with the annual electricity bill savings that the solar system will generate for the household and the revenue generated from the sale of excess electricity. Here you need to take into account the yearly decrease in the production of the solar system and the yearly percentage increase in the price of electricity from the energy company, which can be seen in the values of the solar panels and the increase in the cost of electricity in the local area. Here the results are established as positive.

Finally, it is necessary to take into account whether other parts of the solar system need to be replaced and repaired during the lifetime of the solar panels, which is counted as another expense, recorded as a negative number, directly at the end of the table can be expressed.

7. Factors affecting the payback rate of solar panels

The factors affecting the payback rate of solar panels are similar to those analyzing the payback period of solar panels, and depend mainly on the upfront investment costs, the energy expenses that can be saved, and the additional investment that needs to be paid for maintenance and repairs at a later stage.

It is important to note that before installing solar panels, some local governments require homeowners to have relevant permits, including: an electrical permit, a building permit, and a license for the use of solar photovoltaic panels. In order to meet this requirement, it can add hundreds of dollars to your upfront investment costs. Secondly, solar panels generally have a lifespan of about 25 years, and in the course of decades of use, solar panels will need to be inspected from time to time for display, which, depending on the cost of labor in the location, can add up to an additional $100 or so per year in inspection expenses. These need to be considered within the calculation of solar panel payback.

8. Issues related to solar panel payback period and payback rate

8.1 Impact of access to solar panels on the solar panel payback situation

8.1.1 Purchasing solar panels at your own expense

If you purchase your solar system entirely at your own expense, this means that you will be able to take advantage of government incentives as well as various recycling policies, which will largely reduce the upfront costs you invest in your solar system. Typically the payback period for solar panels in this case will be around 5-7 years. The payback period will be even shorter if your roof is oriented perfectly and the installed solar panels perform well.

8.1.2 Obtaining solar panels through solar financing

If you get your solar panels through a solar financing program, you won’t have to pay a high upfront cost, although this means you won’t be able to take advantage of government subsidies for solar panels. If the angle and orientation of your roof is good, the solar panels perform well, and you are able to save more on your monthly energy bills than you need to pay your energy company for the lease, you will realize the payback period instantly after installation.

8.1.3 Through DIY Solar Panels

If you opt for DIY solar panels, while this may save you a third of the upfront investment cost, it also means that you won’t be able to take advantage of the solar panel incentives offered by the government. Secondly, the installation of solar panels generally takes 2-3 people to complete, meaning that the cost of hiring an installer also needs to be factored into the investment cost. It’s worth noting that if your DIY solar panels fail to achieve good power generation, this could further extend your payback period, and based on tests of DIY solar panel performance, this exercise could extend your payback period by anywhere from 3-5 years.