Solar Payback Period

solar paybackSolar PV System is an investment and like any other investment, the key to its value is the size of its return and how quick it can recover its outlay.

This is one of the questions people often ask before investing in Solar PV.

 

Before Calculating the payback period, we first have to look into some factors:

  1. Total System Cost – It is actually dependent on the size of your system and the equipment that make it up.

The larger the system, the bigger the investment and the more power it is generating and the quicker you get the payback for your initial cost.

While this large system requires a bigger outright cost, it usually provides the greatest savings over time. It will also be the quickest return in investment as it gives you the possibility to sell excess power to the Grid which adds profit to your savings.

  1. Value of the Up-front incentives – STC and LGC Rebates and Tax incentives can significantly reduce the upfront cost of going solar.
  1. Average monthly electricity cost – The amount you are paying for your electricity monthly determine the size of the system you need and the amount you can offset monthly with solar.

The higher the bill you’re paying monthly, the shorter your estimated payback period will be, as you can reduce or totally eliminate this monthly bill once the panels are operational

  1. Estimated amount of Electricity Generated – The amount your system generates is very important too. It determines the monthly savings you receive.

Now to Calculate your payback period:

  1. COMBINED COST = Gross Solar PV Cost minus Upfront Incentives
  • Calculate the Gross cost of the system – this is the amount you pay to install your Solar PV System.
  • Deduct your Upfront incentives- Deduct the upfront incentives like STC’s, rebate and tax incentives
  1. ANNUAL BENEFITS = Annual Savings + additional Incentives
  • Compute your Annual savings – assuming you are paying a monthly electricity bill of $100 before solar you can sometimes eliminate your electricity bill completely, so you save $1200. Or if you reduce your monthly payments to 80% then you will only be paying $20 per month saving you $960 annually.
  • Additional Incentive – compute too your additional incentives like the amount of money you get from the excess energy you sell back to the Grid

PAYBACK PERIOD = Combined Cost / Annual Benefits

 

So, if you’re thinking about going solar and you wanted to know more about the size of the system you   need, Talk to Us Today!