What Is A Typical Return On Investment For Solar Panels?

Question: Solar energy has my attention, especially the part about having no electricity bill anymore. What is a typical return on investment for solar panels?

Answer: Solar energy systems usually have a hefty start-up cost, but you don’t have to wait too long before you pay off your initial investment with savings each month, and then are living “bill-free” using only the sun’s energy. So what is the rate of return, or put another way when is the breakeven point?

Let’s assume your initial investment is $2,500 and you have 5 solar panels. We’re going to calculate how long it will take to save $2,500 by using the solar energy those 5 panels provide.

We need to calculate how much energy your solar system will provide. A typical 1 square meter solar panel can capture a day’s worth of the sun’s energy and produce around 1 Kilowatt-hour (KWH), which is the amount of energy required to produce 1000 Watts steadily for an hour.

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On average in the US the cost of buying 1 KWH from the electric company is about $0.15. So your 5 solar panels will each produce 1 KWH a day, giving us 5 KWH per day. The electric company would charge $0.75 for the same 5 KWH you are now getting for free, which is around $22.50 per month. So you will be saving $22.50 per month on your electricity bill.

To calculate the breakeven point, we need to divide our initial cost of $2,500 by our savings per month of $22.50. So $2,500 / $22.50 = 111 which is around 9 years. So in this example your breakeven point is 9 years.

Be sure and look for tax credits the US federal government offers for the purchase of solar panels, which can reduce your initial start-up costs and thus speed up your breakeven point.

Keep in mind many solar energy systems are available as DIY kits, which can also reduce your initial costs.

Want to know the secrets of building your own solar system?

Then I strongly recommend that you check out the guide from Earth4Energy.

It's the best step-by-step guide that will show you exactly how to build and install your own solar panel system. Click here to learn more

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