Is Solar Worth It? Here is how to calculate your solar power ROI

Converting to solar energy is a major decision and with the initial costs, it is an even bigger decision. One of the most frequent questions that people ask is: “Is solar worth it?” It is usually based on your Solar Power ROI – or return on investment.

In layman’s terms, it is how many years it will take before the amount of money you have saved from your electricity bills match up to the cost of your solar system and how much money you will save over the years.

This guide describes how to determine how much you will pay off in solar power, the factors that influence it, and whether solar power will be a viable option for your home.

What Is Solar Power ROI?

Solar Power ROI is the indication of how soon you will recoup your cost of having a solar system. It is calculated by comparing the total cost of your system to the savings that you get in the form of low electricity bills, tax credits, and so forth.

The primary objective is to determine how many years it will take to break even and how much money you will save after the number of years.

Step-by-Step: How to Calculate Solar Power ROI

1. Determine Your System Cost

First of all, calculate the cost of your solar set up. Include the price of:

• Panels
• Inverters
• Mounting hardware
• Installation labor (if hiring professionals)
• Permits and inspections

As with most homes, the total system cost is between $10000 to $25000 without incentives.

2. Subtract Available Incentives

Usually, for businesses and individuals, the goverenment will provide some form of financial assistance such as rebates or tax credits. For example, the federal solar tax credit in the U.S offers anywhere upto 30% deductibles on tax returns based on system installation costs.

So, for example, if you incur expenses of 20,000 and under go installation of the system, the maximum return you would be getting back in form of credit would be 6,000 which in turn would reduce your overall expense to 14,000$.

Consequently, if you have a system cost of 20,000$, you are entitled to tax credit of not more than 6,000$ hence your actual cost reduces to 14,000$.

3. Estimate Yearly Electricity Savings

Open your monthly electricity bill and look at the average. Multiply it by 12 in order to get annual savings.

For instance:

• Monthly bill: $150
• Annual savings: $150 × 12 = $1,800
  

If your solar system supplies most or all of your electricity, this is the amount of money you will save every year.

4. Find Your Payback Period

Now, divide the net cost of the system by the annual savings.

Payback Period = Net Cost / Annual Savings

Example:
Net Cost: $14,000
Annual Savings: $1,800
Payback Period = 14,000 / 1,800 ≈ 7.8 years

This translates to the fact that your system will pay for itself in approximately 8 years. After that, the electricity that it produces is virtually free.

What Affects Your Solar Power Payoff?

Your actual savings can vary. Below are the major factors that determine how soon you will get your return.

1. Local Electricity Rates

If you reside in an area with a high rate of utilities, your savings will be higher, and return on investment (ROI) in solar power will be quicker.

2. Sunlight Exposure

More sunlight means the system will create more energy. Solar panels on houses in bright states, for example Arizona and California, will usually provide a quicker return on your investment than panels in cloudy or wintery regions.

3. System Size and Efficiency

The more panels you put, the more electricity you can get during the day. Although high-efficiency panels have a higher price tag, they can produce additional electricity from the same roof area.

4. Installation Type

One can save on labor cost by going for DIY solar installation. However, cooperation with a professional solar installation company might result in a better design and a faster approval process.

5. Net Metering Policies

You can send back the excess power to the grid with the help of net metering and get credit for it. This can assist you to keep your payback period minimal and maximize your ROI.

How Reliable Is Solar?

Solar reliability is a matter of concern to many people, especially in places where the weather is not consistent. That is what you should know:

• The modern solar panels are quite reliable and are designed to last for 25–30 years.
• Inverters tend to have a life span of 10-15 years and may have to be replaced once.
• Most systems have warranties, thus providing peace of mind.

With only little attention – cleaning panels and checking connections – solar systems can work efficiently for decades.

Is Solar Worth It for Everyone?

Not always. When it comes to solar power ROI, it can be excellent for a vast majority of homeowners, but it will vary depending on your situation. That is when solar makes the most sense:

Ideal for You If:

• You pay high electricity rates.
• Your house receives a lot of sunshine.
• Your roof is in a good condition and it is facing the right direction.
• There are local or federal incentives.
• You intend to live in your home for at least 8 – 10 years.

Maybe Not Worth It If:

• Your usage of electricity is already very minimal.
• There is a constant shade on your roof throughout the day.
• You rent a home and / or you are likely to move shortly.
• Your state does not provide for net metering or incentives.

Ways to Improve Your Solar ROI

Want to make the best out of your solar set up? Here are some tips:

• Choose quality equipment:It has a long run and it is better in performance.
• Monitor your system: Check daily performance with the help of apps.
• Reduce energy use: Reduce the total use if you wish to see the savings faster.
• Explore financing: Loans and solar leases can help solar to be affordable without too much money in advance.

Final Thoughts

So, is solar worth it? For a lot of homeowners, the answer is yes – particularly, if your home receives much sunlight and you are planning to stay there for a few years. By doing the ROI calculations for your solar power, you will get a real idea of your savings.

It’s not all about the money either. Solar is a value-added product to your house, gives you greater control over your energy consumption, and helps you minimize your carbon footprint. Whether you’re doing a DIY solar installation or hiring pros, getting the numbers affords you the control over your energy future.