Astrum Solar Blog

What Is the Average Payback Period of a Solar Installation?

By: Austin Brentley   |  08/11/14

Payback PeriodsAlthough installing photovoltaic (PV) panels offers a number of environmental benefits, the main reason customers go solar is because of the savings:

  • Whether you finance your PV system with leases, low-interest loans, or cash, solar panels reduce your monthly utility bills immediately (starting on Day 1).
  • With a large enough PV installation, it's possible to receive $0 electricity bills. Some solar customers even receive negative utility bills.

Because of this, solar energy is an investment – not a traditional expense. But what is the average payback period of a solar installation (i.e. how long until you break even)?

Average Solar PV Payback Periods

The exact payback period depends on a number of different factors, including:

  • The amount of clean energy that your PV installation generates. This output depends on the amount of direct sunlight your property receives and the quality of your installation (parts and labor).
  • The price of grid electricity in your region. In markets with expensive utility rates, the payback period is comparatively shorter.
  • The total cost of your installation, including incentives (i.e. net metering, tax credits, and rebates – most of which vary by region).
  • How you choose to finance your solar installation. Leasing (“renting”) your panels offers the most immediate savings. After all, you receive a brand new installation for free and still enjoy years of lower electricity bills. But if you own your PV system, your monthly savings will eventually exceed the upfront installation cost—many times over.

Payback Period FactorsBecause each installation and customer is different, no two payback periods are exactly the same. But we can still speak in averages. A state like California, for example, offers average payback periods of about 9 years. It takes as little as 7 years to recoup all upfront costs in New Jersey. Again, your payback period may be higher or lower depending on the specific circumstances surrounding your solar installation.

In both of the above examples, the financial returns exceed the S&P Index’s historic 9.9% rate. Unlike Wall Street, however, going solar is essentially a risk-free investment.

And here’s why:

  1. As grid electricity rates continue to rise with time, the payback period of your solar installation becomes shorter – and the ROI of your system becomes higher. No matter what your local utility company chooses to charge in the future, the sun will remain the same price forever (i.e. free).
  2. After reaching the payback period, you enjoy decades of free electricity for the remaining lifetime of your solar installation (most systems come with a standard 25-year warranty, but many PV installations last 40 years or longer).

Lower monthly bills, a smaller carbon footprint, and decades of free, clean electricity. Solar is a low-risk investment that offers unparalleled financial and environmental returns.

Solar is a Risk-Free Investment

To begin taking advantage of these terrific benefits, contact us today for a free quote. With Astrum Solar, you pay absolutely nothing to begin exploring your solar options.

Just click here to get started.