Solar panels can be a great tool and asset for your home, but how do you know whether you’ll save money on them?
Return on investment or ROI is a key measurement of how worthwhile an investment like solar panels can be. Here are some of the basics about the ROI on solar panels for you to consider.
What Is ROI?
Return on investment is an important metric when planning any financial decision. Basically, how much of your original investment will you get back over time? Will that gain outweigh the initial costs?
There are lots of uses for ROI, and while the full explanation can be helpful to know, it doesn’t necessarily assist you in planning your solar panel purchases.
If your ROI is negative, it means your costs are higher than your gains. If your ROI is positive, it means you’ve gained more than you’ve spent. A larger ROI is almost always better!
Costs & Benefits Of Solar
For solar power, you’re going to want to compare two main things: how much it costs to install your solar panels, and how much electricity they will produce for you. The benefits can be great as you start saving money and don’t have to rely on the grid, but you need to figure out how much it will cost initially.
For example, pretend you spent $1,000 on solar panels (not a realistic number, but useful for the illustration.) If those panels saved you $200 a year on electricity, it would take you five years to break even and get an ROI of 0. After that, each successive year will save you money on your solar panels!
You can also get federal tax credits for buying solar panels, which will defray some of your installation costs and get you on track towards a positive ROI just a little bit faster!
Measure Your ROI On Solar
Does solar save money? It depends! The actual cost of installing solar panels for homes can vary quite a bit depending on how large your panels are, where you are, and what kind of setup you’re installing.
Initial solar panel costs can be between $15,000 and $25,000. If you can, try to find a solar company that has lower costs, home solar panel installation and other cost-saving measures to help you improve your ROI. You want to save as much as you can on your installation!
Figure out your electricity bills for where you live, and find out how many watts you use per cycle (you can often see this on your bill or by calling your electric company.) How much of this can you shave off by going solar?
Also, figure out how much sunlight you actually get at your home. Do you live in a warm climate with year-round sun? Or are you living somewhere with harsh winters that last 18 months?
The available sunlight will heavily affect how much power you can get with your panels. This, in turn, will affect how long it takes you to make your money back and start saving. Calculate wisely!
With this basic understanding of ROI on solar, it’s a good idea to find some hard numbers for your particular situation, or maybe even call up a solar company to see what they can offer!
If you want to learn about more great home investments, be sure to check out the rest of our blog! And if you have any questions or concerns, feel free to contact us and we’ll do our best to help.