So When Does Solar Pay Off?

So When Does Solar Pay Off?

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We’ve already discussed maximizing the ROI on your grid-tied solar power system, but when does solar truly start to pay for itself?

At first glance, pricing your solar array and determining  cost-offsets, payback period, and overall ROI might seem like a complex formula, but we’re here to help simplify the process. After reading this article, you should have a clear understanding of how much to spend and when you should expect it to pay off.

To figure out when your solar power system will begin to pay for itself, there are a few things you must consider:

  • Gross cost of purchasing the solar panels and all equipment (racking, power center, inverter, battery bank, etc). This is the “up front” price.
  • Tax incentives and rebates which can save you money once you install a solar power system. These can save you a significant amount on the back-end, at state, local, and federal levels.
  • Your monthly wattage use. You should know this right away, using our solar power cost calculator online you can predict how much electricity you’ll need to produce with your solar array, based on the electronics you use in your home and your average power consumption per month. The higher your electricity bill, the shorter your overall payback time if you’re able to zero that bill out on a grid-tied solar system.
  • Average electricity generation is another important factor - it’s often beneficial not just to provide enough power to keep the lights on at home, but also providing over the amount you need. With grid-tied systems, over-production can be paid back to the utility company, which can yield credit paid to you. With off-grid systems that have a battery-backup, this can give your home extra power on-hand should an outage or mechanical failure occur, or provide some extra juice for unexpectedly high usage (say, having guests over).

These are the basic factors to consider when buying any solar power system, but now we’ll delve into the differences in payoff period between different types of solar. Grid-tied and off-grid systems both pay off in different ways and over a different time period, so understanding the specifics of your situation.

This helpful chart from Understand Solar visualizes all of this data into a helpful chart on a state-by-state basis. As you can see, ROI on a solar system is at its absolute peak in Hawaii due to the state's extreme cost for utilities. If you're planning a solar installation on your home, this chart can provide a very helpful at-a-glance analysis.

average solar ROI per state

As a rule of thumb - the higher the price of electricity in your area, the quicker your payoff period as you offset the cost of the monthly utility bill.

For more information on getting the best ROI for your solar array, Wholesale Solar has a dedicated information page to assist you. 

Grid-Tied Solar:

Most solar customers in residential areas choose grid-tied solar, for obvious reasons! With a return on investment of only 4-6 years, your grid-tied systems start paying for themselves in very short order. If you’re producing more electricity than you need and paying it back to the power company, you can pay back your investment even faster. Government incentives pay up to 30% back, so your barrier to entry is comparatively low, and you will start seeing the difference in your power bills almost immediately.

With grid-tied power systems, this short payoff period means a much greater boon for you long-term. Power companies’ prices are only getting higher, and since most panels and inverters have 10 to 25-year warranties, you’ll be living off essentially “free” electricity for the majority of that period.

Off-Grid System:

Off-Grid solar is a very different investment from grid-tied. Generally more expensive than their grid-tied counterparts, off-grid systems give you nearly double the investment, however, as they start paying off immediately - having no connection to the grid at all and providing 100% of the power for your home (with the slight downside that the system can’t be backed up by the local grid if it fails for some reason). This minor downside is of course compensated by having a battery bank to store excess power and keep the lights on even if something goes wrong with the main system.

Installing an off-grid array using a DIY solar power kit helps you save even more money - no need to pay for an electrician or professional installer when doing it yourself. You’ll still need to file for permitting your solar array, but beyond that it’s all up to you to purchase and install.

One of the main reasons off-grid solar yields such a high ROI is the cost of wiring. If you wanted to get grid-tied solar in an extremely rural area, the price to install wiring alone can cost upwards of $50,000 - an added expense you definitely don't want! By going off-grid, you save yourself a bit of time and a ton of money. 

The More You Know

So there you have it, the lowdown on getting the best return on your solar investement. Remember, the higher your utility costs without solar, the quicker your new array will pay for itself as it cancels those costs out once installed.

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