Money on the Table

Investing In Solar Energy: What Is the Solar Panel ROI?

The solar energy system you install can become a significant investment, generating up to 30% annual return. The amount you save with your solar panel system varies depending on your location, the type of solar panel kits, and the available incentives. 

To understand the real gain when turning to solar energy, you should consider many factors, including the cost of the system and materials, installation cost, and other additional costs. 

Besides, the financial factor of solar return on investment is not the only advantage of solar energy. The climate changes, air pollution, reduction of fossil fuel usage make solar energy extremely attractive. 

Step-By-Step Calculations Of The Energy Invested

You should review two essential calculations before going solar: the annual return on investment (ROI) and solar panel payback period. The ROI indicator shows how much return on investment you will get annually. What for the payback period, it shows when your solar system will pay back for itself.

First of all, determine the total cost of the solar system installation (solar panel cost and solar panel kit installation costs, solar energy storage battery and inverter cost) and find out the amount of electricity your system will generate. Then compare to the electricity bills you pay to your utility company per kilowatt-hour (kWh).

Calculate Your Solar Panel Payback Period

The solar payback period is the timeline that takes you to earn back the money you have spent on your solar system. 

Solar Payback Period = Initial Net Investment / Yearly Benefit.

If you spend about $20,000 on installing your solar system, and you benefit yearly $5,000 with your solar panels, then your payback period will be four years. 

When calculating your solar panel payback period, it is essential to remember that in outputs (benefit) and inputs (investment), we do not consider system efficiency, roof orientation, possible shading on solar panels from trees, and more factors.

How To Calculate The Energy Invested For Solar Panel Systems?

After you have made it through your payback period and received your incentives and federal tax credits, you will start making money through net metering. You can easily calculate the ROI of solar panel kits, knowing your electricity usage and the electricity rates.

The average price for electricity in Texas in 2020 was $0.12 (11.86 cents) per kilowatt-hour ($/kWh). If you use 1,000 kilowatt-hours (kWh) of electricity monthly at $0.12 per kWh, then you will pay $120 per month without solar. So, after your payback period, you will pocket $120 monthly, and even more, as the electricity rates increase over time. 

So, calculating your solar investment, check out additional savings from future higher electricity rates as the more utility rates rise, the more value you will get from your solar panel system. At the same time, your payback period will decrease while the return on investment will increase yearly.

Furthermore, the electricity your solar energy system generates during the day will often be more or less than you consume. In case it is less, you can send it back to your grid system and save money. So, consider also the additional financial benefits and property value increase you will receive every year from your solar system. 

Home Energy Consumption

In 2020, the average annual residential electricity consumption in the United States increased from 90 billion kWh to 97 billion kWh, an 8% increase. 

Determining how much electricity your electronics and appliances use will help you understand whether you need to change them and invest in more energy-efficient appliances. Many appliances draw some amount of energy even when switched off, and by installing a home energy monitoring system, you will see the usage of each device that runs. So, you can unplug appliances to save money. 

Before switching to solar, thoroughly examine the solar market and get quotes from various solar panel companies. Moreover, make sure you consume as much solar energy your solar panel system generates as possible. In that case, the grid electricity you use and pay for will be minimal. 

Solar Income And ROI Calculator

With an ROI calculator, you will estimate the cost of a new solar panel system over the years, compare it to your existing system, and decide if it is less efficient and need to be upgraded.

For more information, contact our specialists, who will do their best to help you with advice, calculations, and future solar system installation.

Author of a publication: Irene Abgaryan 

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