Solar energy systems save money on utility bills, paying for themselves over time. The solar payback period is the time it takes to make back your initial investment — or the amount of time it pays for itself. The average payback period for most solar buyers is between four to ten years, according to our energy advisor Kavya Kosana. Multiple factors can influence the payback period of your solar system, but you can see savings.

What is the average payback period for solar in 2023?

The average payback period for residential solar energy systems is between four to ten years in 2023. Kosana said the payback period can vary state by state. It’s important to realize that with solar projects, each installation is a case by case basis and your payback period could take more or less time. As you research, you’ll find different estimated payback periods. We trust EnergySage and CNET, which estimated the average payback period to be between 9-10 years. 

It’s important to realize that solar panels are warrantied for 25 years or more and last for 35+ years based on panels in space satellites or on roofs. And if they can pay for themselves in four to ten years, you can have over 20 years of profits from your solar investment. Even after 35 years, your solar panels will continue to produce electricity. Production decreases over time – approximately 15% degradation after 25 years for high quality panels. Over the solar panel lifetime, homeowners save thousands of dollars on utility bills. The level of savings seen is dependent on a few factors, especially the robustness of your home’s solar energy system.

How to calculate the payback period?

To calculate your individual payback period for your solar energy system, it’s important to know the up-front costs, incentives or rebates and solar benefits.

1. Determine combined costs: Take a look at the total costs of going solar for your home. This combines the cost of your solar panels, inverters, supporting equipment and potentially a storage battery. Add the cost of installation and inspections related to this figure.
   
2. Subtract incentives & rebates from the total combined costs. Incentives are available at multiple levels of government, but mostly from the federal government and state governments. These can be tax credits or rebates. Subtract these from the cost of your solar system. The number you’re left with is the true cost of your solar system and is important to remember.
   
3. Determine your annual solar savings, which can be calculated by multiplying your average monthly utility bill savings by 12 months or first year’s savings — remember this isn’t going to be exact, but an estimate
   
4. Determine other potential solar benefits such as Solar Renewable Energy Certificates or net metering benefits. Add this number to your utility savings.
   
5. Calculate your estimated payback period by dividing your after-incentives solar cost by your annual savings.

As an example, let’s assume a homeowner named Sofia purchases a solar energy system that costs $23,170 — the higher end of EnergySage’s average 2023 solar installation cost. 

The Federal Tax Credit is currently 30%, which means you can subtract $6,951 from the total costs. Sofia lives in Austin, Texas and her utility company offers a $2,500 rebate for going solar. The total incentives from the Federal Tax Credit and local rebate now total $9,451, which is subtracted from the $23,170 installation cost. Her combined cost after incentives is now $13,719.

Sofia calculated her average monthly savings at $125 per month. Multiplied by 12 months makes this $1,500 per year.

To calculate the payback period, Sofia takes the cost of her system after incentives and divides that by her annual savings. Sofia’s payback period is approximately 9.15 years.

Factors that affect the solar payback period

Cost of Solar Energy System

The cost of your solar energy system impacts the payback period. If the cost of equipment and installation increases, you could experience a longer payback period.

Value of Solar Incentives

The total value of financial incentives for your home’s solar system can impact the payback period. Both residential and commercial solar projects can qualify for federal incentives.

The Federal Investment Tax Credit offers residential solar buyers the ability to deduct 30% of the cost of their system from their taxes. Additionally, states, counties, cities, utility companies and even nonprofits offer incentives or rebates for going solar. The higher the value you’re able to take off of your solar cost, the shorter your payback period.

Electricity Use and Cost

When designing your solar system, you might be able to provide all or some of the energy needed to power your home. Your monthly electricity usage indicates the system size needed for your home and the amount of electricity that you can offset through solar. Higher electrical bills can potentially mean a shorter payback period if your solar system is able to significantly reduce or eliminate your monthly bills.

Solar Energy Generation

The size and ability of your solar system depends on your home, roof, location and other conditions. Some homes have limited usable roof space for solar panels, and therefore might not produce enough electricity to cover your entire utility bill. The more energy you’re able to generate through home solar panels, the less time it will take for your solar system to pay for itself.

See your return on investment through Enact

After going solar, Enact not only accelerates the transition to clean energy but we also empower clean energy consumers. Using the Enact Home digital platform, solar homeowners or businesses powered by solar can track their payback period over time. Users of the web app can see how much of their solar investment has paid for itself through an easy-to-understand visual dial graph.

Users can understand how much they’ve paid off their solar system

Enact Home is for homeowners or businesses with solar and/or energy storage systems. You can sign up for Enact Home on our website. All we need from you is your name, email address, utility data and solar data — your data can be connected in a secure transfer. Enact Systems values user privacy by protecting your personal information.

After starting your Enact Home account, you can login on our website and view how much you’ve paid off, as well as other key metrics. Users can view how much energy their solar energy system is generating and their monthly savings.

If you want to make the most of your solar investment and have peace of mind, sign up for Enact Home. Our platform will visually show you how your solar system is working for you.

Sign up here for a solar quote today.

Solar panels are a great addition to your home or small business, but you may be worried about the cost. The average cost of a solar system for a typical home is around $16,000 in 2023, according to Forbes. The good news is that not only do solar panels pay for themselves in 4-12 years, but there are a variety of financing options and incentives available.

For many homeowners, a cash payment for a solar energy system is unrealistic. Financing options make solar more accessible to homeowners, with the two major types being solar loans and solar leases. Through Enact, both homeowners and businesses have access to virtually every financing option under the sun. Enact offers a variety of solar loans with a wide range of down payment options, annual percentage rates and timelines.

Cash payments and solar loans can be eligible for both federal and state incentives. Federal and state incentives make solar more affordable for both homes and businesses. Incentives come in a variety of policies, including tax credit deductions, rebates and net metering policies.

What financing options are available for solar panels?

An Enact advantage is we have partnered with financing providers that offer almost any financing option available to consumers. Consumers can finance through the Enact platform or pursue their own separate financing options. However you want to pay for clean energy, Enact can work with you. Here are a few of the most common ways to finance your solar project.

What financing options are available for solar panels?

An Enact advantage is we have partnered with financing providers that offer almost any financing option available to consumers. Consumers can finance through the Enact platform or pursue their own separate financing options. However you want to pay for clean energy, Enact can work with you. Here are a few of the most common ways to finance your solar project.

Cash

A cash purchase is a straightforward solar payment. Cash is a great way to maximize savings by avoiding interest payments and loan fees. Another benefit of paying in cash is that you don’t need a credit score to go solar. It is also the quickest way to own your own solar panel system. Cash payments are eligible for the federal solar tax credit. The incentive could mean you could get thousands of dollars back for your solar installation in the next the tax season.

The downside is that paying in cash upfront can drain your bank account or sometimes be impossible. Most people don’t have a lump sum of cash lying around to cover the entirety of solar panel equipment and installation. People with stable income and a large amount of savings could consider making a cash payment for solar.

Solar Loan

The most popular option is using a solar loan. Solar loans are a great financing option because they allow homeowners to go solar without a heavy initial cost. At the end of the agreement, homeowners can own their own solar set up. There are zero money down options and solar loans can cost less than your monthly utility bill. Enact offers a wide variety of solar loans through partners with multiple down option and APR options. Solar loans are eligible to receive rebates and tax credits for your solar system.

We offer an all-in-one digital service that assesses your home or business, creates a custom design and coordinates the entire process. And can help compare loan options in minutes for you, e.g different term / APR and fees etc, on the impact of long term savings over 25 years

Solar Lease & the Power Purchase Agreement

A solar lease or a power purchase agreement (PPA) allows homeowners to enjoy the benefits of going solar without owning the equipment. A third party owns the solar system on your roof and sells you the electricity at a predetermined rate. The benefits of a solar lease include no upfront costs and even better, no maintenance required on your end. All maintenance is the responsibility of the company who owns the solar system.

When using the lease, the home or business owner can no longer claim the federal income tax credit, as that is now claimed by the leasing company that owns the asset.

Enact allows detailed financial analysis of solar lease or PPA offers for commercial projects on its platform. The use of Solar lease or PPA for homeowners has declined in recent years (compared to loans). While it is possible for homeowners, it is usually more advantageous to purchase your home’s solar energy system through cash or loan financing.

What to expect from our financial proposals?

Our energy experts understand the world of solar can be confusing, but we will explain every step of the process and answer any questions. We offer transparent, comprehensive financial proposals that you can review before the process. Consumers have access to almost any type of financing tool available — and can use third-party finance options. We offer a variety of loans through our partners, with differing down payments, APR and timelines. Every financial proposal will include complete investment cash flow over the next 25 years and thorough savings calculations.

Our estimated costs are shown upfront without hidden fees — if something unexpected pops up that incurs new costs, you have the right to withdraw from the contract. Enact also offers options to combine solar costs with any home improvement costs needed for solar, such as a new roof. Financing through Enact’s platform is the most seamless and convenient option. If you decide to finance through Enact’s network of financing providers, there is usually no prepayment penalties so you can pay off your solar loan early if possible to avoid additional interest.

Other options outside Enact

Homeowners or business owners looking to use Enact to coordinate their solar installation process are able to seek outside financing tools. Possible options include refinancing your home, a home equity loan or a home equity line of credit (HELOC) arrangement with your bank. Regardless of which option you choose, Enact Systems’ energy advisors will work with you to power your home through solar.

What incentives are available for solar panels?

Solar panels are an investment, but there are government incentives that makes clean energy more available to consumers. Government incentives are offered across the federal, state and local levels.

The Federal Solar Tax Credit

The federal government offers a solar investment tax credit (ITC) for both residential properties and businesses, but this article will focus on residential solar tax incentives. The ITC was expanded under the Inflation Reduction Act of 2022 — which incentivized solar panels, solar batteries and electric vehicles for consumers. Homeowners who purchase a solar energy system may be eligible to deduct 30% of the installation cost. The 30% deduction will be available until 2033, when it will drop to 26% of installation costs. The ITC has no set cap on the cost of solar energy installations. The solar tax credit is a dollar-for-dollar reduction on the amount of income tax a homeowner would otherwise owe the Internal Revenue Service. A great resource to see if you qualify for the solar ITC is EnergySage, which bullet points out the criteria for homeowners.

Homeowners can use the federal solar tax credit to deduct 30% of the following costs:

• Solar panel costs
• Solar equipment costs, including inverters, wiring, racking mount hardware and other necessary equipment
• Labor costs of installation, including inspection and permitting fees
• Storage batteries for solar energy
• Sales tax paid on solar cost (if you live in a state that has sales tax on solar systems)

Homeowners can download Solar ITC Credit Tax Form (5695) from the Internal Revenue Service website. After filling out the relevant information, homeowners can deduct 30% of solar installation costs.

State Solar Incentives

Chances are your state has at least one solar incentive for homeowners or business owners. Solar incentives are also available in Washington D.C. and U.S. territories — such as Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands and the Northern Mariana Islands.

Many states offer tax credits or rebates for solar expenses. These state tax credit programs only apply to state taxes and the amount varies among states that offer this incentive. Some states offer rebates for expenses associated with solar energy systems, but these may only be available for a limited time while funds are available.

Another form of state-level solar incentives includes Solar Renewable Energy Certificates (SRECs), which may also be called a Solar Renewable Energy Credit. After installation, homeowners can register their solar energy system with appropriate state authorities to track energy production. The state government will offer you SRECs based on the energy generated, at a predetermined rate. Homeowners can sell earned SRECs to their local utility company, but this income is typically taxable.

Local Incentives

Your local city, county or utility company may offer incentives to go solar. This varies location to location, but if you’re going solar it is a good idea to see what’s available in your area. The best resources for this may be your city or county government’s website or contact your local utility company.

Go solar with Enact

Enact offers a comprehensive digital service that coordinates the entire solar installation process from beginning to end, and integrated with top installation partners in every city. Unlike a traditional solar installation company, Enact provides homeowners access to unbiased options for their home. This includes hundreds of different solar panels and other equipment needed to power your home. And then once designed right, allows the best local installer to execute.

Enact works with local solar installers and utility companies to help you go solar. Based on the design you choose, we offer multiple payment options. Our mission is to accelerate the transition to clean energy, and financing options makes it easier. Beyond designing your solar energy set up and coordinating the installation, Enact helps residential and commercial energy consumers monitor their solar energy production, energy usage, storage battery and electric vehicle charging.

Homeowners or businesses can contact Enact’s advisors to start the journey to clean energy. After a short conversation, our advisors can design a solar proposal that will power your home for years to come. The benefit of using Enact is we coordinate the entire process from design to after-installation monitoring. We can design systems that include solar, storage and EV charging — or a combination — that can be monitored through our digital platform.

Solar Engagement for Beginners

If you are just starting out and are an enthusiast who is getting to know Solar Systems, then look no further than PVWatts. This is a good starting point. Or you can also look to Google SunRoof to get solar insolation based potential, which is useful to generate preliminary engagement.

Several companies have solar calculators on their websites to generate rough savings and generation estimates, all good ways to gather customer leads.

Software for Utility Solar Professionals

If you are a Solar Professional working on very large-scale Utility PV systems, you are probably dealing with complexities of acquiring land, getting quotes from manufacturers, getting financing closure, federal & local permissions to construct on the land, logistics and labor for execution, and then to ensure the upkeep of this system. Such projects take several months, and sometimes years to complete from concept to commissioning.

Solar Design here takes into account very precise estimates of Solar Generation, as getting it right is critical, as minor errors in modelling can result in large losses financially. These are modelled by Experienced Solar Designers, and the popular solar PV design and simulation software tools include PVSAM (which is popular in the USA), Helioscope, SolarGiS and PVSyst.

Note that these software options are focused on modeling solar generation accurately along with shading aspects. You would also need multiple additional systems to operate effectively, including AUTOCAD for final layout, project management tools as well as good cost tracking software.

Software for Commercial and Residential Solar Professionals

However, if you are a Solar Professional working on residential solar and small commercial solar systems, you are likely finding yourself busy in trying to explain the financial benefits of going PV to an end-customer. You need to speak the language of the end customer, so as to pitch the right story and not overcomplicate the messaging.

Each discussion is about getting your customer’s bills, doing a quick design with shadow analysis, calculating an estimation of the solar or solar plus storage savings, pricing the custom designed system, including any applicable incentives, making sure the price fits the customer’s budget, sending a solar proposal across the customer and completing a contract electronically.

Some customers need solar financing, and getting the best options compared quickly is also crucial. You are also likely to be doing these several times in a day, so automation is the key. These are a lot of steps, and using a single software is crucial for success – jumping from one software to another for each step is not scalable. If you ever wanted to do all of that in under 5 minutes each time, with the customer on the line during a live webinar call, look no further than ENACT SYSTEMS.

If you are a Solar Sales Team Lead for similar sized PV systems, and you are managing several sales personnel, you are likely dealing with assigning leads to the right team members, maintaining the lead aging in a CRM, managing Referral Partners and Lead Sources etc. Then again the inbuilt CRM in ENACT SYSTEMS is likely to be more than sufficient for you.

Finally, if you part of a Post-Sales Operations or Installation Team member, managing installations for multiple customers, you are likely to manage several steps to get the project completion, including site visits, getting final engineering design ready to the last feet of wire needed at site, ensuring compliance with local counties and local utilities, managing all documents related to commissioning. Then again, ENACT’s inbuilt workflow is likely help you stay on top of all tasks and emails and phone calls communication. ENACT offers the best solar software for installers working on Residential and Commercial solar projects.

Any questions? Feel free to contact us here.