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Solar Power ROI: How Long Until Your System Pays for Itself

Feb 14, 2020

Installing solar panels on your home offers several important benefits, including:

  • Environmental savings in the form of carbon offsets.
  • Protection from blackouts (when using Ensemble technology).
  • True energy independence (also thanks to Ensemble technology).

But according to 40% of homeowners, the #1 reason for going solar is to shrink their monthly utility bills. By generating your own clean energy on-site, you can reduce your reliance on expensive grid electricity. And this leads to significant monthly savings that add up over time.

The question is – how long does it take for the cumulative savings to exceed the upfront solar installation cost?

The Payback Period of Residential Solar Power

Solar energy is a winning investment at any scale – and at any location. As long as the sun is shining, your panels will generate clean electricity to help offset your utility spending.

Those savings are guaranteed. And at some point within the 25 years of your panels’ warrantied lifetime, your system will pay for itself.

But it’s possible to dramatically shorten the payback period of your solar investment by:

  1. Investing in solar components that last as long as your panels do. For example, most solar inverters come with 10 years of warranty protection. And replacing them costs money, which merely delays the breakeven point of your system. At Enphase Energy, however, our microinverters come with 25 years of coverage – allowing your solar savings to flow uninterrupted.
  2. Installing high-quality solar panels. The cleaner solar power your system generates, the more money you save every month. This is why we encourage homeowners to install the best solar panels they can afford.
  3. Using incentives to reduce the total cost of going solar. The Federal Investment Tax Credit, for example, reduces the upfront cost by 26% (through the end of 2020). State-level rebates help bring the price down even more. And net energy metering allows you to sell excess solar electricity to your utility provider – in exchange for credits that you can apply to future bills. All of these subsidies help speed up the payback period of your solar installation significantly.
  4. Installing on-site solar storage. Adding batteries increases the upfront cost of solar. But they also remove the need to buy grid electricity at night. In fact, it’s possible to eliminate your utility bill completely if you install enough solar storage capacity.
  5. Making your home more energy-efficient. Installing ENERGY STAR appliances and LEDs, for example, can help reduce your overall power consumption. And this allows you to sell even more solar electricity to your utility provider. Those savings only increase when using smart technology like Enphase Envoy to help you intelligently and automatically manage your energy efficiency improvements.

When used together, all of the above strategies can help you break even in just 7 to 10 years, with an average return on investment (ROI) of 10% to 20% per year. And remember that all of this is at today’s utility rates.

As grid electricity prices continue trending upwards, the ROI of your clean power investment also increases too. This is because your solar installation shields you from these future rate increases. If grid electricity prices doubled tomorrow, for example, the payback period of your solar installation would be cut in half.

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