Understanding Solar Energy Payback versus Your Return on Investment

Understanding Solar Energy Payback versus Your Return on Investment

Understanding Solar Energy Payback Versus Your Return on Investment

If you are considering installing a solar system at your home or office, you may have heard about solar energy payback and the solar system's return on investment. These two terms are often used interchangeably, but they are not the same thing. It is important to know what to expect regarding both the return on your investment when installing a solar panel system and how solar energy payback works.

Below we review each term and why it matters. Keep reading to learn more.

What Is Solar Energy Payback?

Solar energy payback refers to the amount of time it takes for a solar system to recoup the energy cost associated with manufacturing it. While a solar system uses no finite fossil fuels and doesn't emit greenhouse gases or pollution once it is up and running, there is an energy cost associated with producing the system itself. According to the National Renewable Energy Laboratory (NREL), the amount of time it will take a system to recoup the energy, pollution and CO2 costs associated with manufacturing depends on the type of solar panels.

The average time to achieve energy payback for various rooftop photovoltaic (PV) systems :

  • Current multicrystalline silicon modules – four years
  • Current thin-film modules – three years
  • Anticipated multicrystalline modules – two years
  • Anticipated thin-film modules – one year

As solar technology improves, it is expected that the time to reach solar energy payback will reduce by one to two years for anticipated modules. Additionally, with an expected lifespan of 30 years, this means that the majority of the solar system's lifespan will be free of any energy payback burden. It is also important to note that the NREL has factored in the energy costs associated with manufacturing all system components when calculating the time to energy payback, including the PV modules, their frame and the balance of the system.

Why Does Solar Energy Payback Matter?

There are questions regarding whether solar systems are a good investment and if they are truly better for the environment than traditional energy sources that are reliant on fossil fuels. Understanding solar energy payback helps home and business owners understand the benefits of installing solar systems beyond the individual savings on energy bills.

It can also help explain how installing solar helps the environment on a larger scale. According to NREL research, a rooftop solar system with a two-year energy payback that is used to accommodate half of an average household's energy needs will avoid a significant portion of an electrical plant's emissions. It is estimated that half a ton of sulfur dioxide, one-third of a ton of nitrogen oxides and 100 tons of carbon dioxide emissions would be avoided over the solar system's lifespan.

What Is My Return on Investment?

The return on investment (ROI) for a solar system, is the time it takes an individual solar system owner to recoup the monetary cost of the system - also known as solar panel payback. Currently, the average time to start seeing a return on investment on a $20,000 solar system is eight years.

Things that affect how long it takes to see a return on investment include:

  • The initial size and cost of the system
  • The amount of energy the system produces
  • The monthly energy usage
  • The area’s average energy costs
  • How much of the monthly energy usage is covered by the solar system
  • The lifespan of the system
  • Available financial incentives and energy buyback programs

It is projected that as solar technology improves and becomes more widely available, the ROI for an average system will be reduced. In California, where there are more sunny days than not, a consumer's return on investment is already likely to be fewer than eight years. Furthermore, living in an area where SRECs canbe sold or where the utility provider buys back excess solar power, a return may be even sooner.

Why Does ROI Matter?

Just as understanding solar energy payback helps us understand the long-term positive impact that solar has on the environment, understanding the personal return on investment for installing a rooftop solar system at a home or business can help determine if going solar is the right choice.

By speaking with one of our solar specialists at Valley Heating, Cooling, Electrical and Solar and calculating the expected return on investment, it may be determined that it is better to purchase the solar system outright rather than leasing.

At Valley Heating, Cooling, Electrical and Solar, we know that going solar is a big decision. Our goal is to provide customers with the information they need to choose with confidence. To speak with an experienced solar installation specialist today, send us a message online.

What's Happening at Valley in July

As the hot weather continues in San Jose and The South Bay, we take a look at how homeowners can prevent cooling loss and save money on their utility bills. The best way to avoid air loss in your home is to take care of your ductwork. From duct cleaning to duct balancing and sealing, ductwork that is in good repair not only supports your air conditioning system but also helps it run more efficiently. We also discuss how essential insulation will keep the heat out and conditioned air inside where it belongs.

Summer is also a time when many people tackle large home remodeling projects. Few jobs are as involved as kitchen remodels. Not only do you have new appliances, flooring and fixtures to select, but you may also be in a position where you need to overhaul your kitchen's electrical system. We provide some helpful tips on kitchen electrical design on the blog, including making sure you have enough circuits and keeping your kitchen up to code.