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Solar Payback Times

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Current Solar Panel Payback/Break Even Times

The installation of a solar panel in a home is an investment. Just like any other investment, there has to be a return for it to be attractive to potential investors. One of the biggest concerns when it comes to solar panel installation is the time the investment takes to start earning you money – in other words, the break-even period. Just how long is it? Keep reading to find out.

Investing In a Photovoltaic System

Over the past couple of decades, solar panels have advanced in leaps and bounds. Currently, over 1.5 million homes in the UK have been connected to solar power, and the number is growing fast. By 2020, the number of houses connected to solar power is expected to be north of 10 million, which is one-third of the total number of households in the country. It means that in the next 2-3 years, about 40 percent of electricity generated in the UK will be solar power. Good news for the planet!

These are realistic targets. Last year alone, there were over 700,000 PV installations in the country. The installations were distributed across different environments including solar farms, workplaces, and homes. The UK is actually doing better vis-à-vis solar power generation despite the gloomy, rainy weather than southern European nations with better solar power potential. Sunny Spain, for instance, is ranked 5th — one place behind the UK — in terms of photovoltaic systems installed.

The Cost of Installing a PV System

The sun has been shining on earth for billions of years, for free. However, the cost of saving the planet is still high, which is why one of biggest challenges of going solar is the cost. You have to look at the nitty-gritty of the cost of going solar before you make any commitments – the cost of installing a PV system can never be an afterthought.

The cost of solar panels has reduced substantially in the last few years. On top of that, the UK government has been providing financial assistance to citizens wishing to install photovoltaic systems in their homes. Introduced in 2010, the Feed In Tariff (FiT) — a program that allows households to sell excess solar power generated by the PV systems back to the grid and offset installation costs — as well as other grants, have contributed greatly to the reducing costs of installing a solar power system in the UK.

Solar Payback Period

Even with the grants and the FiT, the cost of installing a PV system in your home is still relatively high. Acquiring the panels and installing them on your roof can cost you up to £9,000, depending on the size and specification of the system. Solar payback period — or the break-even time — is the measure of the amount of time it’ll take for the PV system to cover the installation costs and start earning you money.

So how long will it take for your photovoltaic system to break even? Well, that depends on several factors. These are:

  • Estimated electricity generation. Solar installation companies will recommend a system that meets your current energy consumption needs. However, there are certain practical constraints that may affect your on-site power generation capacity. For instance, seasonal weather variations and the size of your roof.
  • Average monthly electricity consumption. The amount of electricity your house consumes every month determines the size of the system you need and the amount of grid electricity you can forego each month. Remember that the higher your electricity bill, the shorter the solar payback period.
  • The total cost of solar installation. The higher the cost of installing a PV system, the longer the solar payback period. The cost of installing the system will depend on the size of the system, the components that constitute the system, as well as the financial benefits available.

To calculate just how long your solar power system will take to break even, determine the following:

  • The combined costs.
  • Annual benefits.

Take the figure you arrive at as the combined cost and divide it by the annual benefits. Whatever you get is the amount of time it’ll take your PV system to break even i.e. your solar payback period. Besides reducing your electricity costs to zero (potentially), going solar also increases the value of your home.

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