Calculating Solar Panel Return on Investment

February 10, 2010


If you are considering purchasing a solar panel (especially a large one), you probably want to know your solar panel ROI (return on investment). Just how soon will your panel pay for itself?

There are various factors that need to be considered in order to properly calculate the return on your investment with solar panels. One of the most important factors is the geographic location of your home. The same solar panel will produce three times more power and pay for itself three times faster somewhere in California’s Mojave Desert than it will produce somewhere in the New York area.

Let’s calculate the numbers for a panel that would meet the power needs of an average home located in Philadelphia. An average home in the US consumes about 10,000 kWh of electricity annually (to calculate your home’s energy consumption, add together the monthly kWh values from your last twelve power bills). A 10 kW solar powered system installed somewhere in Philadelphia can produce around 12,000 kW/h yearly, meeting and exceeding the needs of an average home.

How much money would a 10 kW array save in Philly?
It would save up to $1,500 on electric annually.

How much will it cost?
A commercial unit like that will cost around $40,000 ($30,000 after rebates).

How long will it take for it to pay for itself?
Dividing $30,000 by $1,500 equals 20 years.

The very same system could produce three times more electricity and pay for itself three times faster, if it was located in the Mojave


Note that the system’s power output will lower as time goes by. Therefore, you may want to add a couple of extra years to the numbers from above. Therefore, its ROI may be 33 years in Philadelphia, and 8 years in the desert.

The panels will typically last for at least 40 years, and have a 25 year warranty. If the system in your area will pay for itself in two decades, you will be able to use it for another decade or two. What happens after it pays for itself? It will start generating profit, i.e., you will start to get an actual monetary return on your investment. As soon as the system pays for itself, it will start to generate 100% free electricity that you can use for your needs or sell to your utility company (depending on your state).

Another essential note: you can save a lot of money and increase your solar panel ROI, if you dedicate time to learning how to build the system with your own two hands. To save more (as much as a few thousand dollars), you may also want to consider learning how to install it yourself.

The governmental incentives for clean energy keep on rising, and the costs of the system’s keep on falling. Moreover, the cost of regular utility electricity is continuously rising. That’s why hundreds of thousands of people have chosen to stop using grid-generated electric and switch to solar-generated electric.

Jakob Jelling is the founder of which focuses on solar energy. Please visit his web site to learn more about solar panel return on investment.

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