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What is a solar payback period?

The solar panel payback period is a calculation that estimates how long it will take for you to break even on your solar system investment. Increased utility rates and lower equipment costs are making it easier and less expensive for homes owners to own, rather than lease, their solar panel systems.

Calculating your solar payback is easy as 1,2,3

The following steps can be used to help you calculate your own solar payback period.

  1. Determine Combined Cost(CC). Subtract the value of up-front incentives ($12,000 from federal ITC) and rebates from the gross cost of your solar panel system ($30,000) e.g.
    1. $30,000 – $12,000 = $18,000
  2. Determine Annual Benefits (AB). Sum up your annual financial benefits, including avoided electricity costs and any additional incentives.
    1. $1,200 + $1,500 = $2,700
  3. Solar Payback Period (SPP) can be calculated by dividing your CC by your AB. The results 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!
    1. CC ÷ AB = SPP
    2. $18,000 ÷ $2,700 = 6.6 Years 
2019 is the last year for the full 30% of the Federal Investment Tax Credit.

2019 is the last year for the full 30% of the Federal Investment Tax Credit. After 2019 the ITC drops to 26% in 2020, 22% in 2021, and 10% in 2022 with commercial exclusivity. The Federal ITC allows customers to pay off their annual IRS bills using up to 30% of their solar installation costs. For example if your PV system costs $30,000, you can reduce your tax liability by $12,000.

Resources Used:
  • https://www.seia.org
  • solarreviews.com
  • https://news.energysage.com
  • https://www.bea.gov

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