Payback Period of Rooftop Solar PV Systems
Payback period of a rooftop PV system can simply be defined as the time taken by which the initial investment made for the system will be recovered from the savings it makes.
Most PV systems come with a warranty period of 25 years. So while calculating the potential savings, we’ve to consider a span of 25 years.
Solar Energy Payback Period Illustration When you consider the above definition of solar energy payback period, upon some reflection it becomes apparent that the payback periods for solar PV systems can differ widely from one region to another.
Most PV systems come with a warranty period of 25 years. So while calculating the potential savings, we’ve to consider a span of 25 years.
Solar Energy Payback Period Illustration When you consider the above definition of solar energy payback period, upon some reflection it becomes apparent that the payback periods for solar PV systems can differ widely from one region to another.
Take the following steps to calculate your payback period:
- Determine combined costs. Subtract the value of up-front incentives and rebates from the gross cost of your solar panel system.
- Determine annual benefits. Sum up your annual financial benefits, including avoided electricity costs and any additional incentives.
- Divide your combined costs by your annual financial benefits. The result will be the number of years it will take for you to achieve payback. Every month of savings after that point in time should be counted as a financial gain!
Determine Your Combined Solar Costs
To understand your solar payback period, you must first calculate your initial system expenses.
This, of course, includes the costs of all of your equipment, including the photovoltaic panels, the inverter and mounting hardware. If your system is not grid-connected, you must also factor in the costs of your battery bank and charge controller.
And, of course, remember to add any installation charges to your total as well.
Now, subtract any financial incentives you received. Taking advantage of local, state tax credits and rebates can reduce your investment costs by up to 50 percent, bringing your combined costs down by thousands.
Determine Your Annual Financial Benefits from Going Solar
Your electric bills will be lower as a result of using solar energy — possibly much lower, depending on the size of your PV panel array.
If you are staying tied to the utility grid, multiply this average by the percentage of your home electricity the solar system will provide.
If your photovoltaic system generates more energy than your household consumes, you may even earn a profit through a process called net metering.
Net metering regulations require the utility company to pay you the retail rate for the excess electricity your solar array produces. Because this varies by location, check with your local electric utility provider to determine the current net metering rate.
Calculate Your Solar Payback Period
Now, armed with this information, you can estimate the payback period for your solar energy system.
Simply take your total combined costs and divide by your annual financial benefit amount. You’ll have an estimate of the number of years it will take to reach the point when your photovoltaic system has paid for itself.
Other factors, including solar radiation levels, the weather and the costs of financing can also affect your payback period.
INSOEN Power specializes in helping customers in their quest for cost savings and energy independence. Contact with INSOEN Power to arrange a complimentary consultation. We can help you identify the payback period for your solar energy system.
