Solar ROI January 2019

If you buy a rooftop solar system, how long will it take for the savings you realize each month on your electric bill to equal the cost of the system? That’s called “return on investment: and it’s the kind of question financial consultants and accountants tend to ask. But if you are considering rooftop solar, you should be asking yourself the same question.

There are two reasons to install rooftop solar at your home. First, it’s the right thing to do. As the Earth gets warmer, we all owe it to ourselves and to our fellow humans to reduce carbon emissions as much as possible.

Second, it can save you money. Instead of paying a hefty utility bill each month, you can generate some of your own electricity and put the savings to work paying for your solar panel system. Once the system is paid off, the savings go directly into your pocket for as long as the system continues to make electricity. Most solar systems come with a 20 year guarantee, but a useful life of 25 to 30 years is common.

Let’s face it. We all want to be good citizens but it is the savings that inspire us to act. So how long will a solar system take to pay for itself? In other words, what will your return on investment be?

Here’s an example. Your savings will depend on the size of your system, which way your roof faces (south facing systems are most efficient), the incentives offered by your state or local government, and any rebates available from your utility company.

Let’s take a typical example. An average 6 kilowatt rooftop solar system consists of 24 solar panels and costs about $18,000 installed. But that’s not your final cost. After you deduct the 30% federal tax credit (other state and local incentives may apply), the net cost to you is about $13,000.

The average price of electricity in the US is 12 cents per kilowatt hour and each of those 24 panels will produce about 30 kilowatt-hours of electricity a month. That means each panel will save you roughly $3.60 per month. Multiply that by 24 panels and the total value of the system to you each month is $86.50.

Now we’re getting somewhere. Divide the net cost of your system -- $13,000 -- by $86.50 to compute your return on investment. In this example, that works out to 150 months or 12.5 years. If your system functions for 30 years. That means you could be saving money for up to 17 years after your system is paid off.

The higher the cost of electricity in your area, the sooner a rooftop solar system will pay for itself. In Hawaii, a kilowatt hour cost as much as 30 cents. That means that same 6 kilowatt system will pay for itself in just 60 months or 5 years. No wonder rooftop solar is so popular in Hawaii!

To get the most accurate estimate on what your return on investment for a rooftop solar system will be, consult with a reputable solar installer who is familiar with the solar business in your area.

To know more: Cost of Solar