How to calculate solar panel payback time
Payback time is the length of time it takes for upfront solar investment to pay for itself through solar energy savings and it depends on number of factors.
Factors that can affect solar system payback time
- PV system size – this is due to up-front costs associated with solar system,
- Income and cost of financing – cost of energy purchased from utilities and the amount paid for surplus energy fed into the grid,
- All energy production-related factors, that is, weather conditions, roof orientation, inclination, amount of shadow, lifespan and efficiency.
Basically, payback time is reached when all costs and profits equalize in annual cashflow:
How to calculate solar panel payback time step by step?
- First, determine the total installed cost of a PV system – this will include PV modules, installation costs, permits, rebates and other incentives.
- Next, calculate the PV system production.
- Determine what is the price of electricity per kWh.
- Calculate the total financial benefit from solar system.
- After that, calculate solar panel payback period: divide initial net investment by the yearly benefit.
- If you want to make your analysis even more precise, you should also include inflation or depreciation, maintainance costs, project lifetime and other factors if they apply.
Instead of doing it yourself, you can perform all calculations using EasySolar app. An example is shown below.
Not sure how the app works? Join our free webinar.