How Long Does It Take Solar Panels to Pay For Themselves?

If you’re considering installing solar panels on your home, you likely have several questions. Many potential buyers will wonder if solar is worth it or will solar panels eventually pay for themselves. The answer to both questions is yes. However, there are many variables, especially regarding your specific house.

The idea of installing solar panels on your roof is likely exciting. A door-to-door salesperson will promise low monthly electric bills, tons of savings in the long run, and added value to your home. That said, it’s also a significant investment that’ll take years to develop fully.

So, how long does it take for solar panels to pay for themselves? Well, it’s complicated, but on average, it’ll likely take anywhere between 6-12 years for U.S. homeowners to recoup the costs.

What is Solar Payback?

Once you start researching home solar panels, you’ll see the term “solar payback” or the solar payback period. It’s basically a combination of the cost of solar panels, federal tax credits, and your energy usage. Solar panel payback calculators will give you a rough idea of what to expect.

The “solar payback period” is the time it’ll take for the savings on your energy bill to pay for the entire solar panel system. After you’ve saved money on your power bill for several years, you’ll break even, the solar system paid for itself, and everything else moving forward is pure savings.

Of course, how long it takes depends on how much money you spend on solar to start. The average price to outfit a home with solar in the U.S. is around $16,000. Some spend more, while others pay far less.

What is the Federal Solar Tax Credit?

An important aspect of paying off your solar panels is the federal tax credit and other state incentives to use renewable energy. The federal tax credit for solar started in 2006, and unless Congress extends it, it’ll expire in 2024.

In December 2020, Congress extended the credit through 2023, giving those in the U.S. up to a 26% tax credit for systems installed in 2020-2022. But that rate drops to 22% in 2023. So if you’re on the fence, you’ll want to decide sooner than later.

Those who take advantage of the federal solar tax credit can write off the cost of solar on taxes. This includes the cost of panels, labor costs, mounting equipment, assembly, and energy storage devices like a battery. You’ll get a $1 to $1 tax reduction of up to 26%. However, this only applies if you bought or financed the purchase. Those leasing a solar setup are not eligible for the credit.

Average Solar Payback Period in the U.S.

Now that you have a few more details, we want to go over the average time it’ll take for your solar panel system to pay for itself. Again, this varies based on the cost of panels, incentives, energy prices in your region, and how much electricity you use throughout the year.

According to most sites and calculators, the average U.S. homeowner can expect to pay off their solar panel system and get a return on their investment within 6-12 years.

If we haven’t said it enough, this can vary wildly depending on where you live and how much you spend. For example, many parts of California get much more sun than other states. Plus, California has expensive energy prices compared to the national average, so technically, you could pay it off faster as energy costs more in the state.

Some states, like Louisiana and Nebraska, have very affordable energy prices, around 7.5 cents per kWh, and it’ll likely take far longer to spend $16,000 on your energy bill to pay off your solar panels.

As we said earlier, many websites and solar companies have solar return on investment calculator tools to help you understand things. Make sure you know how much you plan on spending for a solar panel array on your roof, your average monthly energy usage, and any tax or state incentives available. Then, enter all that information into a solar calculator.

For example, here in my home state of Nevada, the average price of electricity is around $0.13 per kWh. Many Nevadans use around 12,900 kWh of energy per year. With a budget of $13,000 for solar, it’ll take me nearly six years to save enough on electricity to pay off the entire solar panel system. That’s better than the national average, and of course, your situation may differ.

You’ll also want to consider the equipment you use, like how efficient the panels are, the angle and location of your roof, and if you finance the solar panel system. Not everyone can afford to spend $10,000-$16,000 on solar, and many homeowners end up financing the setup. However, you’ll now want to factor in any fees or interest on that loan.

Can Solar Panels Pay for Themselves?

So, again, can solar panels pay for themselves? Absolutely. If you live in specific states, you could quickly pay off an entire home solar panel system in under five years. Or, in other regions, spend upwards of 12+ years before the system pays for itself. But once it does, everything else from that day on is nothing but savings and extra money staying in your bank account.

And even if you don’t live in the home long enough for that to happen, a solar panel system can still be a good investment as it adds value to your home. Well, as long as it’s not a lease, not every homebuyer will want to take over your lease.

How Long Do Solar Panels Last?

Last but not least, we wanted to quickly mention how long solar panels last. If you wait 10+ years before the savings on your energy bill pay for them, is it worth it? Well, that depends on your situation and how long you plan to stay in the home.

According to Energy.gov, most rooftop solar panels can easily last over 25-35 years. The most common type, photovoltaic (PV panels,) is very reliable and built to last. Many homes that added solar in the 1980s and 90s are still going strong.

Remember, though, energy production could decrease over time, especially without proper maintenance throughout the years. On the flip side, energy prices are slowly increasing, which may help you pay off your panels quicker down the road.

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These days, another way your solar panels can pay for themselves is if you buy one of the many exciting electric vehicles out or coming soon. Charging an EV from home with solar will save you from the gas pump, and you won’t need to use EV charging stations, effectively paying off the entire solar system even quicker.

At the end of the day, you will have to decide if solar is right for you by weighing the pros and cons, determining how long you’ll own your home, and finding the optimal setup for your family.