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Calculating your Solar Installation Payback Period

More and more people these days are going green with the intent of living a more environmentally friendly lifestyle.

Aside from recycling and reducing your water use, one of the biggest ways that people are contributing to the environment is by investing in solar panels. Having solar panels installed in your home is a sizable investment, but it has significant paybacks for the environment and your wallet!

According to the Lawrence Berkeley National Lab, having solar panels installed in your home can increase your home’s overall property value. The 2015 report, which was built on earlier research, stated that homes in California that had solar panels actually had a higher market value.

The Solar Panel Payback Period: What Exactly is It?

A solar panel payback period is a calculation that estimates how long it will take for you to earn back the money you invested in your solar panels. One of the best ways to understand the financial benefits of solar panels and to calculate when your investment will start paying you back is to keep your solar panel installer options open. You want to look at and compare payback periods quotes from multiple solar panel installers, not just one; at least three to five.

In order to accurately calculate your panel payback period, you’re going to have to look at the biggest factors of going solar: annual benefits and combined costs.

The amount of electricity you use every month is what’s going to help you figure out what size solar panel you need as well as what type of system your home is going to need.

The total or gross amount of what you’re going to pay to have your solar panels installed is going to solely depend on how big your system is and the equipment that comes with that system.

There are various rebates and tax breaks you can look into that can significantly reduce the costs of going solar. Look into tax credits and local financial incentives to reduce costs. You can also look at additional incentives like solar renewable energy certificates.

Of course, these deductions can be higher or lower depending on which tax bracket you fall under. As an example, if you claimed a $1,500 deduction while also falling into the 10% tax bracket, then the deduction equates to a savings of $150. You can use a tax bracket calculator to simplify this process even more.

Step 1: Combined Costs

In determining your combined costs, you’re going to want to take any rebates and value of up-front incentives and subtract that from the total cost of the solar panel system you want to be installed.

Step 2: Annual Benefits

Take your financial incentives and benefits as well as any electricity costs that you’ll avoid, and add those up.

Step 3: Subtract Combined Costs From the Total of Your Annual Financial Benefits

Once you do this math, you’ll have your estimated payback period. This will be the number of years it will take for you to break even from your investment. And if you look at it the total investment and the payback period, you’ll see that it’s a realistic time frame to expect.


Nikki is an author and writer specializing in green living ideas and tips, adventure travel, upcycling, and all things eco-friendly. She's traveled the globe, swum with sharks and been bitten by a lion (fact). She lives in a tiny town with a fat cat and a very bad dog.

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