How Long Does It Take for Solar Panels to Pay for Themselves?

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  • Solar panels typically pay for themselves within nine to 12 years.
  • Solar panels reduce or eliminate the cost of electric utility bills.
  • Utilities may pay solar panel users through a process called net metering.

It’s like this: short-term pain for long-term gain.

The ultimate goal: to save money with solar panels. How much will you save? Your system size, roof orientation, sun exposure, and local utility rates influence your savings.

But heck, let's say you have a pretty average system, and you live in an area with decent sun exposure and reasonable utility rates. In that case, your solar panels might pay for themselves in about nine to 12 years, maybe less. States like Hawaii and Massachusetts offer payback periods as short as five years -- a relatively quick return on investment.

There are two main ways solar panels save you money. First, solar panels reduce your electricity bill. And second, if you have a grid-tied system, you can sell excess electricity back to the utility company (this is called net metering). Let's take a closer look at each of these:

Cheap electric bills

Solar panels produce electricity. Solar users can harvest their panels' energy instead of drawing their electricity from a utility company. Exactly how much they save will depend on things like how big their solar energy system is and how much sunlight it receives, but it's not uncommon for people to see savings of $50 to $100 per month on their electric bills.

If your solar panels pay for all your electric needs, then you’re in luck. The average American home spends about $125 on monthly electricity, according to Offsetting that would save a household a whopping $1,500 in electric bills yearly.

If your solar system engages in net metering, you stand to save even more.

Net metering

If you have a grid-tied system, any excess electricity your solar panels produce will be sent back to the utility company through the electrical grid. The utility company credits you for any unused power your system makes. You can use these credits to purchase free electricity from utilities.

Most states have some sort of net metering system. Check with your local utility to see what, if any, plans they have in place.

How much do solar panels cost?

Solar panels are a great way to save money on your electricity bill. But the upfront cost of installing solar panels can be high. Even with the 30% federal tax credit, the average solar panel costs about $3,500 to $16,000. When thinking about installing solar panels, it's a good idea to:

  • Research solar panel incentives that shrink the upfront cost of installing solar panels
  • Explore the best personal loans for financing your solar panels
  • Check out alternative ways to pay for solar panels

While upfront costs can be a large pill to swallow, solar panels typically pay for themselves within nine to 12 years -- meaning they're free energy for the rest of their 25+ year lifespan, maintenance costs aside. If you can comfortably afford the initial cost, installing solar panels is a long-term investment worth considering.

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