Understanding Payback Periods

With the cost of solar panels decreasing at a rapid rate, there is no better time than now to go solar and save thousands of dollars on energy bills.

But a big reason that some people choose not to go solar is that they worry about the time it will take for them to recoup their cost. This time is called a payback period. There is a common misconception that the payback period for someone that switches to solar is very long. But that is simply not true—in fact, with solar prices at where they are now, payback periods are at an all-time low. If you buy a system for your home today, you will fully recoup your cost in about 5 years. After purchasing your solar panel system, you will be able to crank up your AC for the next 35 years without paying a dime on your energy bills*.

So how come payback periods are so short? There are two reasons for this. First and foremost, solar panels are cheaper than ever. The second reason has to do with the fact that energy companies increase their prices by 3-5% every year. In other words, the cost of not going solar is constantly increasing. By purchasing a solar panel system, the amount you will be saving will increase each year as energy prices rise, and so your payback period will actually be a lot shorter than you may expect.

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Figure 1

To help you fully understand the concept of payback periods, let’s walk you through a hypothetical scenario. Suppose Bob’s monthly energy bill is $300 per month. He is currently paying $3,600 per year on energy. With the increasing energy prices, Bob would be paying almost $4,500 in the year 2020. This annual cost will continually increase at an exponential rate. With compounding, by the year 2050 Bob will be paying nearly $20,000 a year on energy bills. (See Figure 1)

 

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Figure 2

 

 

Now suppose that Bob makes the economically savvy decision to go solar. In the year 2017, he will pay $0. In the year 2020, he will pay $0. And even in the year 2050, he will be paying $0. **(Solar panels last 35-40 years). Over the life of the panels, he will have saved well over $300,000. (See Figure 2)

 

 

Suppose the solar panel system cost him $25,000. He will receive a 30 percent Income Tax Credit from the government, so he will only have to pay $17,500 for the system. By looking at Figure 2, we can see that Bob’s cumulative energy savings will surpass the cost of the panels in the year 2019. Therefore, we can conclude that his payback period will be about 4 years.

*Solar Panels last about 35-40 years; assumes your solar package is large enough to support your energy usage.

**Tax and delivery charges still apply and are minimal.

 

Testimonials from a few of our customers:

“The team at Aikyum is highly professional. They completed the jobs (installing solar panels at 3 different locations) in a timely fashion with the greatest satisfaction.”Orange County Solar Panel Installation | Aikyum Solar
– Vraj L.

“I have been very happy with the whole experience and Aikyum will get my unbridled recommendation in the future.”
– Arun Jain

“I reached out looking for someone to repair my system after a roof install and was incredibly impressed by how attentive Harina and her service tech Joey were in not only getting my system back in order but going above and beyond by contacting the manufacturer after the two inverters failed to operate.  I would absolutely use them again in a heart beat, for any future solar needs.  Thanks again Aikyum Solar.”
– Celso G.

“Harina patiently met with us several times to help me understand the details of solar and to suggest approaches that no other bidder had proposed.  Her installation team was punctual, courteous and efficient.”
– Carol R.

“Working with Aikyum was extremely easy and streamlined. Harina and her team took care of everything from permitting, to HOA approvals, to final notices to the city and HOA.”
– Apur L.