Yes, Your Solar Panels Can Make You Money

Solar panel installations set records last year, according to the Solar Energy Industries Association: Over 500,000 new residential solar systems were put on roofs. But supply chain issues and rising costs means the decision of whether or not to invest in solar might be a little trickier to make in 2022. 

Still, rooftop solar panels are likely to pay off in the long run. Purchasing panels outright will save the most money, but it's important to understand how long it will take to pay off the initial cost.

Residential solar electric systems cost an average of $20,000 to install, between the panels, related hardware, labor and more, although that number can fluctuate dramatically depending on location and the number of panels you choose. 

There are financing options that might make panels more affordable, too. So how long does it take to break even on that initial investment before you can start saving money for real? We'll show you how to estimate the payback period for solar panels.

A payback period is the amount of time it takes to earn back your initial investment. Solar panels can help you save enough money on energy bills over time to offset the upfront costs. 

How much you save per month depends on the size of your solar system, your home's energy consumption and other factors. 

Calculating the payback period will be unique to your circumstances due to the variability of the upfront costs, as well as the difference in energy costs based on your location. 

But here are some guidelines to help you estimate when you will break even. 

First, you need to estimate how much your initial investment will be. Along with the system costs, you should include potential installation costs and other fees as part of setting up your service. Check cost estimates in your area and go from there.

Homeowners can receive a one-time tax credit of 26% off the purchase price of a solar system. If the initial solar panel investment typically costs around $20,000 in your area, the tax credit would net you $5,200 when you next file taxes.

What's more, some utilities offer incentives and rebates for installing solar power. Check with your local energy supplier to see if they offer any incentives. 

This estimate assumes you will get all of your power from solar. While some homes will be able to get 100% of their electricity from solar, or even sell some surplus energy back to the grid, others will still have an electric bill to supplement usage. 

This will vary widely from home to home, depending on how many solar panels are installed, normal energy consumption and more. Get more tools to calculate your home's potential savings here.

Now you have a sense of how much energy you'll save, login to your electric utility company account and calculate an average of your last several electricity bills. 

Go back at least six months, if possible, to account for seasonal temperature changes and other fluctuations in cost. 

Let's assume you get 100% of your usage from the panels and currently pay an average of $125 per month in electricity bills, or $1,500 per year. Now you have the information you need to estimate the payback period for solar panels.

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