Saving money on your electric bills is one of the main benefits of installing solar panels. The amount of money you’ll save over your solar system’s lifespan will add up to a significant amount. At some point, you’ll save enough money for your home solar installation to pay for itself. The amount of time it takes for this to happen is called your solar payback period, and it’s one of the most important factors to consider when going solar.
What Is a Solar Payback Period?
Your solar payback period is the amount of time it takes for you to recoup your investment in solar panels in the form of electric bill savings. You can think about your solar payback period as the amount of time it takes for you to break even on your solar panel installation costs. Let’s say, for example, you spend $15,000 on a solar installation. Once your total solar electric bill savings add up to $15,000, you will have broken even. The number of years it takes to amass that $15,000 in electric bill savings is your solar payback period.
What Is the Average Solar Payback Period in California?
There are many factors that will impact your solar payback period, including your total solar installation costs, the solar tax credits and incentives you receive, how much electricity you use, how much electricity your solar system generates, and how much electricity costs in your region. Because there are so many factors at play, solar payback periods can vary widely, even in the same state. Solar payback periods in California tend to range from 5 to 11 years, with an average payback period of 8 years.
How to Calculate Your Solar Payback Period
To calculate your estimated solar payback period, use this formula:
total solar costs / annual solar savings = solar payback period
Step One: Calculate Total Solar Costs
To calculate your total solar costs in California, add up all of the expenses related to your solar installation, including materials, labor, permitting, and interconnection costs. Then, subtract your savings from tax credits and other rebates. Let’s return to our example of a $15,000 system. If you spent a total of $15,000 on your solar installation, and you claimed the 30% federal solar tax credit, your total costs would be $10,500.
Step Two: Calculate Total Annual Savings
To calculate your annual savings, multiply your monthly electric bill savings by 12. If your solar panels save you $150 a month on electricity, your annual savings would be $1,800.
Step Three: Divide Costs by Savings
Finally, divide your total costs by your annual savings. In our example, your solar payback period would be 8.33 years.
This example does not account for net energy metering, which can speed up your solar payback period. Net metering is a California solar incentive that allows you to earn credit with your utility for the excess electricity that your solar panels generate. It’s one of the best solar incentives available and part of the reason why California is the best state in the country for solar energy.
Find Out How Much You Can Save with Solar
With decreasing solar panel installation costs and fast payback periods, solar is worth it in CA! If you want to learn more about the financial benefits of solar panels, Premo Solar can help. We are a leading solar installer near you in Monterey Bay, and we help local homeowners get the most value possible out of their solar energy systems. We would be happy to provide a quote for your solar installation and an estimated payback period based on your specific situation.
