Solar Panel ROI: How to Calculate Your Return on Investment

How much does installing solar panels cost?

You won’t really be able to get through the grid-tied door without spending at least $5,000. Once you pay for the installation, permit, and labor cost, you could easily spend close to $25,000 or more.

However, unlike conventional power sources, your solar expenses will be completely upfront. You won’t have to worry about operational costs, and it really doesn’t matter how much you use the electricity.

What will your solar panel ROI look like? Read on to find out.

Solar Panel ROI vs Monthly Utility Bill

What does your monthly electricity bill look like? You’ll need to know to calculate your total solar panel ROI.

Utility companies will usually show your total energy usage for the month. If you’re not able to find this information on your paper bill, look at your online account.

The goal here is to find out how many kilowatts of electricity your house is using on a monthly basis. Once you know your total monthly kilowatt amount, you can divide it by the number of billing days.

Around 30 days is usually the typical bill cycle. The end number will let you know how many kilowatts you’re using a day. A good number to aim towards would be 20 kW a day.

If you notice you’re using 25 kilowatts a day or more, you’ll probably want to shave down your bill. Keep in mind that your solar system doesn’t cover all your electrical uses. Depending on the type of solar system you buy, you’ll probably be paying a couple of thousand dollars for every kilowatt-hour each day that you want to shave off of your bill.

Around $2,000 will account for the solar installation and the permits. However, this number is before any financial incentive like tax credits.

It’s only when you calculate the incentives that you’ll truly know what you’ll save monthly. You also have to consider whether you’re going for a battery-based system or not.

Battery Based System

If you’re using a battery-based system, you’ll probably pay a little bit more per kilowatt-hour each day. Remember that grid-tied solar systems and battery-powered solar systems work completely differently.

A good grid-tied system isn’t going to try to cover all of your home’s electric use. You could, but it will be way too expensive. Instead, you’ll be able to collect electricity credits and let any extra credits carry over month to month.

If you make more power in one month than you can use; you can save it up for the summertime. Direct grid-tied systems are the best way to get rid of expensive watt-hours. You can expect to have your grid-tied solar system produce anywhere from 30 to 70% of your home’s solar use.

How Much Real-World Output Can You Expect?

It only takes 8 minutes for the sun’s light to reach Earth. Your exact geographic location and climate play a big role in how much energy your solar system can produce.

To discover your real-world output, start getting solar quotes. Solar contractors will be happy to quote all sorts of numbers for you. You’ll get to learn about wattage, kilowatts, hours of daily sunlight, present to full sun, and more.

A South-facing solar array is going to be the most productive. It’ll be able to receive a lot of sunlight throughout the entire day and especially this afternoon. As long as there aren’t any serious shading or other performance-reducing issues, it’ll be easy for contractors to determine your real-world output.

Getting Financial Help for Solar Energy

Solar energy costs a lot, but there is help out there! There are so many different grants, rebates, bite-on programs, exceptions, and tax credits you can apply for.

There aren’t any blanket rules. Every state operates differently. How much you’ll be able to gather for your particular system depends on where you live.

Some of the programs will cover 50% of your solar panel installation cost! Sometimes the rebate programs will cover even more of a professionally installed system that’s complete.

There’s not a lot of Federal encouragement for getting solar out of the residential level. However, you’ll find a ton of State and city-sponsored programs. You’ll even be able to find utility companies that are offering their assistance.

We suggest reaching out to the database of state incentives for renewable energy. It’s an ongoing project to support the solar initiative. The organization has a ton of helpful information, and it should be your first place to check for financial incentives.

The database of state incentives for renewable energy will be able to give you simplified bullet points lists, access information for every program, and a complete summary. There isn’t a lot that escapes their database.

They’re able to take advantage of small local programs and make them known to the public. There are a few small city-based programs that might not make it onto the list.

But that takes you to your next step of finding financial help. Check out all of your local sources.

Vetting Local Sources for Solar Panel Savings

Another way to get the best ROI on your solar panel installation is to reach out to local solar installers. These are the individuals who are going to know the most about the local solar panel savings opportunities. Anyone who’s been working locally in the solar field will be well aware of the financial incentives their customers can use.

In fact, solar contractors will be eager to share these financial instances with you! You can begin by going to perform an online search for solar near me or looking at solar under the yellow pages.

If you live in a state that has an active rebate program, you’ll have a choice of installers. Take your time and shop around. Get firm quotes and compare them closely.

Be sure to ask solar contractors for local job references and follow through on checking them. Great solar contractors will have a ton of happy customers that they’re happy to let you know about.

Make Money and Save Money

As you can see, solar panel ROI pays off over time. As you’re willing to explore all of the financial incentives available, you can offset a lot of the installation costs.

Since local solar contractors are the best way to find out about incentive programs in your area, start making some calls. Get quotes from 3-5 solar contractors that are local to you.

Find out what financial programs you qualify for. Then decide if solar is right for you! For more ways to make smart choices, read another article.