Calculate Your Solar Panel ROI and Solar Panel Payback Period
Knowing how to calculate your potential return on investment from solar panels can make your purchasing decision easier.
When considering an investment in solar panels, it’s important to look at two calculations: Annual ROI and payback period. The ROI is how much return on your investment you’ll get each year. The payback period is the timeline for when your solar panels have paid for themselves.
Here’s a 6-step process for calculating your solar panel ROI and solar panel payback period:
- First, you’ll need to determine the total installed cost of a PV system. Your total installed cost factors in expenses (PV panels, installation costs, permits, etc.) as well as rebates, solar tax credits, and other incentives offered by manufacturers or federal, state and local governments. To request an estimate of installed costs, complete our FREE estimate request.
- Next, determine how much electricity your solar panels will generate. If you need help figuring out how much electricity you’ll generate, click here to get started.
- Third, determine your average electric costs. Look on a recent electric bill from your utility company to determine how much you pay per kilowatt hour (kWh). If you need help finding your electric rate, one of our associates can help you.
- Calculate the total financial benefit of your solar power system. This includes any SRECs you can sell to the utility company to help them meet their renewable energy requirements.
- Calculate your solar panel payback period and return on investment. Your solar payback period is the initial net investment divided by the yearly benefit. For example, if your installed solar panel costs were $15,000 and your yearly benefit was $3,000, your payback period would be five years.
A typical 5 kW solar PV system can easily see an ROI of 20% in the first year. To find out how long it will take solar panels on your home to pay for themselves, call us for a FREE personalized estimate:
Free Solar Estimate
Solar Panel ROI Worksheet
Disclaimer: The return on investment in solar panels varies depending on the installation costs of your system, incentives you receive, how much electricity you generate with your system, the electric rates in your area, and other factors.
|Solar Panel Installation Costs:||TBD $_________|
|30% Federal Incentive||-$6,000|
|MD State Incentive ($1000)||-$1,000|
|Local Incentives (vary)||-$1,000 (estimate)|
|System generates:||TBD (kWh) _________|
|Electricity Savings @ $.15/kWh||$ ____|
|Total Annual Benefit||$_____|
|Payback period on initial investment||_____ years|
|Year 1 Return on Investment (ROI)||_____%|
|Average Stock Market ROI||4.1%|