Solar panels are increasing in popularity with both homeowners and commercial building owners. This is because they’re not only environmentally friendly but also because they can save building owners money on their energy bills. But do solar panels actually pay for themselves?
Can Solar Panels Pay for Themselves?
The short answer is yes. Solar panels can pay for themselves over time. The longer answer is that how long it takes for solar panels to pay for themselves depends on the amount of sunlight in your area and how much your energy bills cost.
How Long Does It Take Solar Panels to Pay for Themselves?
Homeowners can calculate how long it would take for solar panels to pay for themselves by gathering the following information:
- Cost of the solar panels
- Energy costs
How Do You Calculate How Long It Will Take Solar Panels to Pay for Themselves?
If you already have solar panels, you can divide the total amount you spent on your solar panels by the amount you spent on utility bills each month prior to purchasing the solar panels. If your solar panels can cover your entirely monthly utility bills, then the result will be how many months it will take for your solar panels to pay for themselves. If you don’t have enough solar panels to cover the entire cost of the utility bills, then you should divide the solar panel costs by the amount you’re saving each month instead.
What Can Affect the Pay-Back Time for Solar Panels?
The basic calculation involves dividing the total amount the solar panels cost by the amount your energy bills would have cost. Once the energy bill cost adds up to the cost of the solar panels, then the solar panels have paid for themselves. How quickly this occurs, however, depends on some additional factors:
- Amount of sunlight
- Cost of electricity
The more your electricity bills cost, the faster your solar panels will pay for themselves. It’s for this reason that some of the more popular locations for solar panels aren’t actually very sunny. San Francisco has a growing solar panel market, despite being known for its fog. This is because energy costs are high there and even though the total amount of sunlight is less, solar panels can still help to reduce those costs for home and building owners.
What Is the Average Pay-Back Period for Solar Panels?
Because the pay-back period for solar panels depends on the amount of sunlight you get and the costs of electricity, the average pay-back period depends on where you live. You can look up the average solar panel payback period for your area, but there isn’t a national average for the United States because it ranges from five years to sixteen years.
Hawaii, for example, has both high energy costs and a lot of sunlight, and so has a much shorter pay-back period of five years. North Dakota has lower energy costs and less sunlight and is therefore at the higher end of the scale at sixteen years.
What Is a Good Pay-Back Period?
Just because there’s no real average pay-back period for solar panels doesn’t mean there isn’t a pay-back period you should be aiming for in your calculations. Ideally, the pay-back period for your solar panels should be half the lifetime of the solar panels or less. If your solar panels have a life expectancy of 25 years, then 12.5 years or less would be the ideal pay-back period.
What Can Improve the Pay-Back Period?
If you’d like your solar panels to pay for themselves even faster, there are ways to reduce the payback period.
Apply for Tax Credits
Both the federal government and many state governments offer tax credits for homeowners who install solar panels. This is to encourage homeowners to invest in environmentally-friendly technology.
Federal Solar Investment Tax Credit (ITC)
The Federal Solar Investment Tax Credit (ITC) could earn you a 26% tax credit for solar panels installed in 2022 and 22% for those installed in 2023. This tax credit expires in 2024 unless it’s renewed by Congress.
For example, if you spend $10,000 on your solar panel system in 2022, you could get tax credits equal to $2,600. If you waited until 2023 to install solar panels, that tax credit would be worth $2,200. For 2024 and beyond, Congress will need to renew the solar tax credit scheme.
Florida Solar System Property Tax Exemption
Solar panels can increase the value of your home. Normally, the added value would be taxed but in Florida, there’s an exemption for property value that is from solar panels and other renewable energy sources. Homeowners are exempt from paying property taxes on 100% of the solar panel value while commercial building owners are exempt from 80%.
Home Solar System State Sales Tax Exemption
Florida also offers a 6% tax exemption on the sales tax from the purchase of solar panels.
Invest in Solar Batteries
On sunny days, solar panels can produce more energy than your home actually needs. Solar batteries can store that extra energy for later use, such as on cloudy days or during the night. Not having to pay for energy from the grid during these times can help you to pay off your solar panels more quickly.
Participate in Net Metering Programs
Another option for excess solar energy is net metering. This is the process of selling extra solar energy to electric companies, usually in exchange for credits that you can redeem later when you need to use energy from the grid or can be sold if you haven’t used them by a certain point in time, usually the end of the year.
Net Metering in Florida
In Florida, most energy companies offer net metering programs, including: