What Is A Typical Return On Investment For Solar Panels?

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

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.

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