Over the last two decades, the cost of solar energy systems has come down more than seven-fold. As the demand for solar power systems continues to rise and manufacturing volume increases, costs are further decreasing: from 2006 to 2016, the average cost of a system dropped from $9/watt to approximately $4/watt when professionally installed (source: NREL report) or $2/watt self-installed.
That’s great news for DIYers. By saving on installation costs and taking advantage of federal and state tax incentives, a self-installed solar system’s economic payback time is now shorter than ever before, typically around 5-7 years for most grid-tied solar systems.
Once you know your system price, any financing costs, and the value of the electricity generated, it is possible to estimate an approximate payback time on your investment and know the ROI on buying your solar panels. With a more detailed model, it's possible to get an even more accurate number.
This formula gives you a rough estimate of payback time for a grid-tied solar system:
(Total Installed System Cost - 30% Federal Tax Credit) ÷ Value of Electricity Generated ÷ Your Annual Electricity Usage = Payback Time
For example, using US national averages:
($10,000 total installed cost - $3,000 Federal Tax Credit) ÷ $0.13/kWh ÷ 11,280 kWh/year = 4.77 Years
That's assuming you bought the system from us and installed it mostly yourself, maybe hiring an electrician for the final hookup. That’s almost half off a professionally installed system.
A similar system from an installer would cost about $18,810 installed and the payback period is almost twice as long at 8.98 years. This is based on the average installed price of $2.75/watt (source: NREL’s Solar Industry Update for Q4 2017 / Q1 2018).
Going DIY on your solar installation can greatly decrease the time it takes to get an ROI on your solar panels and it adds value to your home.
Wondering what it takes to self-install a solar system? Check out our DIY Solar page. Many of our customers successfully do this. You can too, and we’ll help you figure it out!
The previous formula was a rough ballpark. We can get a more accurate payback time by incorporating more factors into our solar cost model for calculating if solar is a good investment for you.
The overall system cost consists of equipment, shipping, taxes, and rebates. Equipment costs vary depending on your specific needs. Use our Solar Cost Calculator to find an appropriately-sized system.
Shipping costs vary wildly depending on what you order and where it’s shipped to.
Hiring a professional installer can double your overall system cost. Many of our customers save money by choosing to self-install most of their system and hiring contractors for only part of the work, usually a combination of:
See our DIY Solar page to learn more about this process.
States and counties usually charge a fee to inspect and permit your new solar installation. This varies greatly between locations, but as a ballpark, they are usually less (sometimes much less) than $1000, but can still affect your ROI on your solar investment.
In California, for example, permitting fees are limited to $500 for systems smaller than 10kW (and increase only slightly after that). Some counties have special exemptions to this, though, so double-check with relevant agencies first. Other states like Colorado have varying prices by city, but also average out around $500.
How do you find out for sure? You must ask your local "authorities having jurisdiction," or AHJs. These typically include 2 to 5 separate agencies, such as:
A quick call to your city hall or county planning department can help you get started. You can also download our solar permitting cheat sheet.
Wholesale Solar does not recommend leasing a solar system: there are high lifetime costs that aren’t always clear upfront, and it could make selling your home more difficult. For more on this topic, see our article: "Is Solar Leasing Worth It?".
There are better financing options which allow you to own your system (rather than renting it from a third party) and keep a much higher percentage of the money you save on energy bills. Explore FHA Title 1 Home Improvement Loans, personal bank loans, and other credit options on our Financing Solar page.
Through 2019, the Federal government is offering a 30% tax credit off the entire cost of your system, including equipment, shipping, fees, installation, etc. The credit steps down in value starting in 2020, until the program expires in 2022. Learn more about the Federal Tax Credit.
There might also be state or county-specific rebates and grants for your area; check our State and Local Incentives page to find out.
Depending on your locality, you may be able to sell excess power from your system back to your electric utility. This is called "net metering" or "net energy metering (NEM)". In most cases, your electricity generation vs usage is tracked over a year, and any excess is returned to you as a refund check at the end of the year.
Net metering rules vary dramatically between utilities, so call your utility to find out what their rules are. Some examples are possible schemes are:
Sometimes, utilities can charge different rates for electricity depending on the time of day. For example, a utility might increase rates around noontime to accommodate summer air conditioning and then lower them later that night, once most people are asleep. This can have a big effect your your solar energy return on investment.
Utilities do this to better adapt to the hourly supply and demand curves they see, both for financial and practical reasons -- sudden spikes and dips in electricity usage can be hard for traditional power plants to keep up with, because it takes time for them to ramp their production up or down.
The benefit to the solar homeowner is that -- with the right equipment, in the right jurisdiction -- you can sell solar power back to the grid at peak daytime rates and buy it back at lower nighttime rates. For example, you might use this system to run your electric water heater at night instead of during the day, or to charge your home battery bank or Tesla Powerwall system. However, the marginal savings from time-of-use metering may or may not pay for the maintenance costs of a battery bank that you would otherwise not buy, so don't let this be the sole factor in deciding whether you need batteries.
If you're unsure about the math, first speak to your utility to get a clear picture of their time-of-use metering policies and then give us a call at 1-800-472-1142 for help designing your ideal system, with or without batteries.
Most customers won't need to worry about this. While most states offer Net Metering programs, a few also offer "feed-in tariff" schemes. This means the utility installs two separate meters, one for the power you use and one for the power you generate, and charges each at a different rate. Contact your utility to find out if this is applicable to you.
As a normal part of their lifecycle, solar panels very slowly lose performance over time, on the order of about 0.5% to 1% per year (source: NREL study). A good manufacturer warranty will include this degradation explicitly in their terms, and a typical guarantee is for panels to still produce at least 80% of their initial output 25 years later. This means a 300-watt panel today would be guaranteed to still produce at least 240 watts 25 years from now.
In the past, certain solar components (namely inverters) would wear out quickly and require periodic replacement before the system could pay itself back. However, solar panels have gotten drastically more efficient over time, and modern systems should see a complete payback long before any replacements are necessary. With an average payback time of 5-10 years and average warranties of 10-25 years, there should be little to no additional maintenance costs.
In an off-grid solar setup, eventual battery bank replacement can be a significant expense. As of 2016, our ability to store generated electricity hasn’t quite caught up to our ability to produce it. In battery-backup situations, batteries will last about 10 years with proper care. In off-grid or grid-assisted setups, where batteries are cycled daily, the heavy usage can diminish that to 5 years or less. Batteries wear based on the number and depth of discharge cycles, so more usage will wear them out more quickly.
For that reason, it is crucial to pick a properly-sized, high-quality battery bank and understand how to maintain it. AGM batteries are commonly used in battery backup systems, they’re maintenance free and stay in good shape as long as they are properly charged (the inverter and charge controller maintain this.) Flooded batteries are cheaper and tend to last longer but they also require equalization charges and regular maintenance by adding distilled water.
For more, see our Solar Battery Maintenance page.
Electricity rates have risen gradually over the past few decades, usually from 1% to 6% a year depending on area. On paper this may look like electricity is getting more and more expensive, but in practice, the annual rate of inflation must also be taken into account. In short, that means the "real", inflation-adjusted cost of electricity has decreased significantly since 1960 and risen only slightly since its lowest point in 2002 (source: EIA).
Nonetheless, this unpredictability in costs can be undesirable -- who wants an unpredictable power bill? A home solar system can partially shield you from future rate changes in the power industry. A properly-sized system can ensure that the majority (or all) of your electricity usage is covered by your solar panels so that you don't have to worry much about what the power company wants to charge 5 years from now beyond what they can offer you in a net-metering agreement. At the very least, you'll have the peace of mind knowing that your own household usage is accounted for by your own panels.
There is some early research showing that adding a solar system to a home can increase its resale value by $15,000 on average, and even more for larger systems.
Contrast this with the leased solar panels that many bigger companies offer, which can actually hurt your home’s resale when potential buyers don’t want to take over an existing lease that hasn’t been fully paid off or can’t qualify for the credit score required.
There are several geographical factors that affect solar panel performance (and thus payback), the most significant of which is simply the amount of sun an area gets in an average year.
This is a measurement of how much sun an area receives through the year. Colloquially called "peak sun hours", other synonyms are "average daily insolation", "solar resource", and "solar access". Higher is better, and 5.0 is a rough national average for the United States; the unit for that number can be either "5.0 kWh/m²/day" or "5.0 peak sun-hours/day" -- the units are equivalent ways of saying the same thing. Most of our website's calculations will assume 5.0 sun-hours per day in calculating monthly outputs.
To put it simply: Areas with more sunlight need fewer panels. If you teleported your house to Southern California, it will need fewer solar panels than if you moved it to Alaska.
For a more precise estimate for your area, call us or use our Solar Cost Calculator (which uses your location's specific insolation values to recommend appropriate system sizes).
Or if you just want to browse the raw data (for scientific research or educational purposes), use a tool like NREL’s Solar Prospector.
Even slight shading -- say, a shadow from a nearby tree branch -- can significantly affect your entire system’s performance.
Systems using per-panel optimizers (such as our SolarEdge Power Optimizers or Enphase Micro-Inverters) can help mitigate shading issues by limiting the negative effects of partially shaded panels.
For more on this topic, see our article on solar panel efficiency.
Proper orientation of your solar panels takes into account the sun’s path through the sky over a year (or more scientifically, the Earth’s motion around the sun through the year). This ensures that panels can receive the maximum amount of sunlight through a year.
Back when solar first entered the market in the 70s, solar panels were so expensive that squeezing every last bit of efficiency out of them was critical. However, with the price-per-watt now at $1/watt or less, many homeowners elect to save money by going with "good enough" placements and using the savings to buy additional panels instead. This saves them money on parts, installation time, and prevents future maintenance hassles by eliminating moving parts in your solar power investment.
While a perfectly oriented solar array can sound attractive in theory, in most situations a "good enough" orientation can actually be more cost-effective. Many of our customers' needs can be sufficiently met with south-"ish" roofs, or even an array split between east and west-facing roofs. It's a lot easier to buy a couple more panels than have to deal with reorienting your array multiple times a year. Optimal orientation does increase the ROI of your solar panels though.
Thus, the additional math described here is for educational purposes only and unnecessary for most of our customers. A quick discussion with one of our solar technicians can help you figure out whether your existing roof is good enough or whether you really do need to calculate some of these numbers and possibly add tilt legs, a solar tracker, or a ground mount. For many of our customers, a simple flush mount on your existing roof can be enough. The other options are only for buildings with severe shading or solar access issues.
At its simplest, the math is this:
"True south" means taking a compass reading and applying a "magnetic declination" correction factor to compensate for anomalies in the earth’s magnetic field. This gives you the correct "azimuth", or compass bearing, to face your panels.
Latitude is a measure, in degrees, of how far north or south you are from the equator. Conveniently, that same number can also be used as the optimal tilt angle for your solar panels. (The actual math is actually about 5% off, but it’s very very close, an easy rule of thumb to remember, and good enough for solar panel needs. In the industry, you often hear this as "tilt equals latitude.")
For example, a system installed in Mount Shasta, California (41.309875° N, -122.310567° W) should have panels tilted at 41.3 degrees from the ground. If mounting on a roof, make sure to take your existing roof angle into account as well.
This basic math is more than good enough for most grid-tied systems -- indeed, it’s often overkill for homeowners who already have mostly south-facing roofs pitched towards the sun. While there are small additional savings you could gain from carefully applying this math or using even more complicated formulas, the hypothetical gains are so tiny that they’re normally eclipsed by seasonal and weather variations anyway.
Some commercial/utility-scale installations use even more complicated setups involving mechanical solar trackers, but they’re not worth it for residential solar systems. Due to the ever-decreasing cost of panels (down to $1/watt in 2016), it makes more sense for the homeowner to just buy a few additional panels to make up for the difference. That way you get the same amount of usable power in the end without the installation and (especially) maintenance hassles later on -- no gears to grease or moving parts to replace.
If the basic math outlined here isn’t detailed enough for your needs, give us a call at 1-800-472-1142 and one of our solar technicians can help you figure out more precise numbers for your particular location and calculating your solar payback. Or if you prefer DIY research, try a purpose-built calculator like PVWatts or read an excellent, in-depth discussion on this topic at solarpaneltilt.com.
Last but not least, a well-designed solar system with a backup battery system (and maybe even a generator) can offer you reassurance that electricity will be available when you need it to be. No need to wait for someone to come and repair a downed line, no waiting for a blackout to end. The system’s completely in your control.
With a properly sized battery bank, you can also account for normal weather variations in your area by having enough batteries to last you through a typical storm or several days of cloudiness.
Add a generator to your system (with an optional auto-start!) for the ultimate in reliability -- with a supply of fuel on hand, you can charge your batteries and power your appliances even when the weather stays bad for extended periods of time.