What Is the Average Solar Panel Payback Period?

Switching to solar panels systems is a great financial initiative, and if you’re determined to install solar panels for home, you will also be concerned about when it will begin to save money. The average solar panel payback period is expected to be 6 to 10 years. However, the period can vary based on various factors, particularly your home size and energy requirements. This timeframe shows you how many years your solar panel system takes to save more money on energy bills than you invest on installing it.
In this blog, we will highlight the average solar panels payback period, how to calculate it, and all essential key facts. Let’s get into the specifics.

Understanding the Solar Panel Payback Period

The solar panel payback period is the time when the solar system starts generating savings to pay off the upfront cost of installation. An average countdown of solar payback generally falls between 6 to 10 years. However, the accurate payback period can depend on some specific aspects, such as electricity rates, the size of the solar system, and available incentives. Generally, high-quality solar panels for homes with 25 years lifespan or more can generate 15–29 years of energy savings after returning the solar panel installation cost.

Explaining Solar Payback Period by State

While considering solar panels for home, one of the main questions is, “How long will it take to pay back my upfront installation investment?” That’s why the concept of solar payback period comes in. The payback period is the time span it takes to compensate for the solar panel installation cost in terms of savings. After this, you’re effectively producing free energy to power your house.

Average Solar Payback Period in U.S. States for 2024

As of 2024, some states with favorable solar incentives and high electricity prices have substantially shorter payback periods than others. However, the average U.S. solar payback period varies depending on different factors, including local climate, available incentives, state electricity prices, and installation costs.

The following table shows the payback period across numerous U.S. states, estimating the federal solar tax credit, which is set at 30% by 2032.

State	Average Payback Period (Years)	Total Cost After Federal Tax Credit
Texas	8-10	$14,000
California	5-7	$10,500
Florida	7-9	$13,500
New York	6-8	$11,200
North Carolina	8-11	$14,800
Arizona	6-8	$12,000
Colorado	8-10	$13,700
Nevada	6-8	$11,000
Illinois	7-9	$12,900
Oregon	9-12	$15,000

This table gives you a general idea of the average payback periods across different states. For example, California tends to have shorter payback periods due to high electricity costs and abundant sunshine, while states like Oregon see longer payback periods. The federal tax credit is a significant factor in shortening your payback period, and specific state incentives can further reduce it.

Solar Panel Cost Breakdown

In the United States, solar panel costs vary, but before any subsidies, a home system usually costs between $15,000 and $25,000, or around $3 to $5 per watt. After applying federal tax, the solar panel cost can be around $18,000 to $38,000, which includes 30% of the system cost. However, the final cost can be based on the size of the system and local incentives.

How much does a solar panel cost for a house?

The average solar panel cost for a house can be around $15,000 to $22,500 for 6-8 kW before applying federal tax incentives. The 30% federal solar tax credit can be applicable to lessen the net price range between $10,500 and $15,750. Depending on the system’s size, location, and particular installation requirements, this digit can be changed.

How much does a solar panel installation cost?

Typically, The cost of solar panel installation ranges between $20,000 and $30,000, or $3.03 and $3.30 per watt. The size of the system, the kind of panels utilised, and the location can all affect its cost. The average cost can be between $16,870 and $23,170 once the federal solar tax credit is applied.

Solar Energy Savings Calculator- 5-step Installation Cost Calculation

The solar panel payback period and cost savings can be measured through the use of a solar savings calculator. To generate individualised savings estimates, these calculators take into account several variables, such as your location, energy use, power tariffs, and the size of the solar panel installation.
To figure out how much you’ll spend on a solar installation, there are a lot of things to pay attention to. Here are five key steps that help you calculate the solar panel installation cost for homes:

Step 1- Locate how much solar energy you requir

Home Size	Estimated Monthly Electricity Bill	Estimated System Size Required per kW
1,000 sq. feet	$77	3.2 kW
1,500 sq. feet	$115	4.8 kW
2,000 sq. feet	$153	6 kW
2,500 sq. feet	$191	7.6 kW
3,000 sq. feet	$230	9.2 kW

Step 2- Transit solar system size from kilowatts (kW) to watts (W)

Generally, solar panel costs are calculated in the price per watt of solar installed. However, the sizes of the solar systems are measured in kilowatts (kW). To count the entire cost of a solar system installation for a home, you’ll require the solar panel size in watts. To reform kilowatts to watts, you have to multiply the system size in kW by 1,000. Look at the example below to get an idea: 7.2 kilowatt system x 1,000 = 7,200 watts of solar installed

Step 3-Multiply the per-watt price by the system size to get the full installation cost

Now, you need to take the full size of the solar system in watts and multiply it by the per-watt price of solar in your state. You can get an entire list of the average solar panel prices per watt in each state in the above section. For instance, the average national price of solar panels is $3.03 per watt.7,200 watts of installed solar x $3.03 per-watt installed = $21,816 total solar installation price

Step 4-Apply for any solar panel installation rebate

Lukily, the US government has also launched a solar panel rebate program to make solar energy systems more affordable by reducing the initial cost of solar panel installations. If you qualify for solar rebates, you should apply for this aid! Check out your utility company and local government for available rebates in your state.

Step 5- Determine tax credits for the final effective solar installation cost

The 30% federal solar tax credit is available solar incentive today. It can help minimize thousands of dollars in solar costs. Simply, you have to multiply the price of the system after applying for 30% of any rebates to get your tax credit value. Then, deduct that from the solar system price to find out how much the installation cost will be. Let’s look at an example:
$19,816 installation price after rebates x 30% federal tax credit = $5,945 tax credit value
$19,816 installation price after rebates = $5,945 tax credit value = $13,871 effective solar system price
Moreover, it’s essential to acknowledge that the solar tax credit does not directly reduce the initial price of solar installation like rebates do. You have to pay the total cost of your solar system, subtract any rebates. When you file your taxes, you’ll see the tax credit savings.
Suppose you would pay $19,816 for the installation. While you file your taxes annually, your total tax bill will be minimized by $5,945. This means you can owe less in taxes and get back a bigger tax return!

How to install solar panels at home?

Installing solar panels at home usually involves some steps, like planning and design, purchasing equipment, and acquiring permissions. The solar system installation process includes wiring the electricity, mounting the panels, and connecting the inverter. To guarantee safety and compliance, a final inspection and utility hookup are also required.

Navigate the step-by-step solar panel installation guide:

Planning & Preparation

Evaluate energy needs: Consider the amount of energy you require to generate.
Property inspection: Select the optimal location for solar panels, determining essential aspects like shading, sunlight exposure, and roof space.
Select a solar kit: Choose a DIY solar kit or parts that fulfill your energy requirements
Get permission: Contact local authorities for essential solar installation permits.
Collect safety equipment & tools: Make sure you have safety gear and all necessary tools.

Solar Panel Installation Process

Setting up a board – Provide a safe working environment to installers.
Install mounts Secure the roof racking system, ensuring a stable and strong foundation for the panels.
Install panels Connect the solar panels to the mounts, ensuring a smooth alignment and safe attachments.
Wire the panels Link the panels in parallel, as required, using appropriate connectors and wiring.
Install the inverter Accurately place the inverter, which transmits DC power from the panels to AC power, in an appropriate location.
Connect to the battery (if applicable) If you are installing a battery storage system, attach the inverter to the battery.
Connect to the grid Attach the inverter to the power grid, letting excess solar power return to the utility.
Test & activate Test the solar system to make sure it’s working correctly, and then activate it to produce electricity.

Post-Installation

Schedule assessment – Align solar system inspection to ensure adherence with local regulations.
Final attachments – Complete the essential steps to interconnect your solar panel to the electrical grid.
Install monitoring system – Set up monitoring devices to track your solar system’s performance.

Solar Panel Maintenance

Do regular care of your solar systems to ensure they generate energy efficiently. Solar panel maintenance usually consists of nothing more than cleaning to get rid of dirt that might lower energy output. Professional inspections and repairs are frequently advised to guarantee appropriate system performance, even if some householders are capable of handling simple cleaning.

Explore Solar Panel System Performance Optimization

To optimize solar panel system performance, homeowners need to focus on minimizing shading, maximizing sunlight exposure, and ensuring efficient energy conversion and storage. By selecting high-efficiency panels, employing tracking systems, using bifacial panels, optimizing panel orientation and tilt, and considering MPPT technology, people can get the best results. Regular monitoring and maintenance are also essential to identify and address any performance issues to enhance the system’s efficiency.

Final Words

Hence, considering the solar payback period provides a clear snapshot of the time span it will take to pay off your upfront costs. This time frame indicates when you start the savings by cutting down electricity bills to cover the upfront cost of installing a solar panel. However, the payback period can vary depending on factors like system size, location, and incentives. Some key factors also contribute to its calculation, like current electricity rates, system costs, local climate, and panel degradation.
If you are a homeowner and want to install solar panel systems for residential homes, you need to get detailed quotes from a professional solar panel installer firm near you. At Nedes, our team guides you from an initial cost calculation to estimate the payback period. —The time when the solar panels have saved you as much as you invested. Contact us today to get the best output from the solar panel system.