Solar PV remains the most popular renewable technology in the world. The amount of money you save by investing in solar energy varies, depending on factors including where you live, the incentives available from your state government, and the type of system you install. To calculate the solar panel ROI you can expect, you need to get a customised quote for your specific installation. Regardless of individual circumstances, however, the savings are significant. For example, if one of the best-performing systems available, installing 5kW solar systems can save you as much as $350 per electricity bill cycle. However, your actual savings are more likely to be between $180 and $300 per cycle – more than enough to cover your household’s entire energy usage. While these are very different numbers, they still represent a remarkable solar panel return on investment.
Solar panels are expensive, but will they pay their own way and earn your money into the bargain? And will they affect the value of your home? Read on to find out more. Solar panels are often marketed as a way for you to make money, as well as to save on your electricity bills and reduce your carbon footprint. This is because you can get paid for the electricity that your solar photovoltaic (PV) panels produce. We can help you work out whether solar panels are a good investment for your money. Plus our unique survey of estate agents reveals the effect solar panels will have on the value of your home.
The benefits of solar panels
As solar panels are silent to run, unobtrusive, low maintenance, and flexible – being able to be fitted onto suitable roof spaces or into the ground – the enduring popularity of the technology is no surprise.
By using solar panels to generate low carbon electricity onsite and ‘behind the meter’, less power needs to be purchased from the grid, which can lead to significant savings on both energy bills and carbon emissions. When used alongside battery storage technology, the benefits can be increased even further.
For those with an existing solar scheme, or who are looking at investing in one, there are many reasons to consider battery storage.
A battery storage unit can be used to store electricity being generated by the solar panels, releasing it again when it is most needed; including at night when the panels are not generating. This can help maximize the return on investment achieved by a solar scheme by ensuring as much of the renewable energy is used as possible.
The flexibility batteries offer can also help reduce energy bills even further, while opening the door to new potential revenue streams. For example, energy can be stored in a battery and released when grid prices are at their highest, meaning peak tariffs are avoided and the cost paid for any energy bought from the grid is as low as possible.
Reasons for the best way to invest in solar panels
Even without the additional financial gains that the subsidies provided, the case for investing in solar PV still adds up. While the payback period maybe longer, the overall gains can still be significant.
- Smaller investment required: The cost to purchase a solar PV system has reduced dramatically in recent years.
- Solar panels are now more efficient: The solar PV technology itself has also improved, and solar panels are now far more efficient at converting sunlight into electricity, making the returns even greater.
- Protection against energy price hikes: The price of traditional forms of energy continues to rise and large price hikes are a regular occurrence. By using solar panels to reduce the amount of electricity that needs to be purchased from the grid, some protection can be gained against future price rises.
- Reduction in levies and other charges: For organizations, generating their renewable power onsite can also reduce the financial impact of other financial levies that are placed on commercial energy use, as well as their carbon emissions.
- The future is electric: With the use of electric vehicles growing and heat moving from gas to electric, demands being placed on the grid are increasing, along with energy costs. Generating renewable electricity for use onsite can effectively future proof a business or home against increasing utility bills.
- Maximizing efficiency: Solar can be a key piece of the puzzle when it comes to creating a smart energy network. When used alongside battery storage technology, energy can be generated and are used in an intuitive way that maximizes efficiency, reduces waste, and minimize energy expenditure.
- Achieving net-zero: To reach this target is going to take positive action by the individuals, as well as the public and private sectors. Solar and storage are a tried and tested way to lower emissions and can help enable a move away from fossil fuels.
- Financial Incentives: Are there local or state tax programs or rebates in your area that encourages solar adoption? Are you a business or other organization that can take advantage of depreciation tax benefits, including accelerated depreciation? Higher incentives mean lower upfront costs and a shorter payback period.
- Property Value Increases: How much does the value of your property increase when you install a solar panel system? Solar panel system ownership tends to increase your property resale value, while third party ownership (e.g. leasing) does not.
- Business Benefits: How much will your profits increase because of your lower costs? What is the value of the goodwill your solar power system generated? What level of revenue is attributable to your green credentials? All of these factors can increase your company’s return on solar investment.
Solar payback period = solar panel ROI
Taking all the above factors into consideration, you can get an idea of what your solar payback period might be, which is the best way to put a number on your solar panel ROI. A solar panel payback period is the amount of time it will take you to earn back the money you spend upfront on a solar energy system, usually in the form of avoided electricity costs.
For example, if your solar panel payback period is 7 years, after that length of time, you can easily calculate your actual monetary solar panel ROI by simply looking at your electricity usage and local electricity rates. If you usually use 1,000-kilowatt-hours (kWh) of electricity a month at $0.15 per kWh, that’s $150 you would spend on electricity per month without solar. With solar installed (and after your payback period is up), each month you essentially pocket $150. This money saved ends up being even more per month over time, as electricity rates historically rise over the years.