How Long Does It Take for Solar Panels to Pay ...

Author: Vic

Dec. 06, 2023



Tags: Lights & Lighting

If You Have a Wells Fargo Savings Account, You Should Switch ASAP. Here's Why

These days, storing your savings in a Wells Fargo account pretty much serves one purpose: Quick access to cash at brick-and-mortar banks or ATMs. But if you have savings you're not spending anytime soon, a Wells Fargo Way2Save Savings account ranks high in the worst places to keep your savings. No offense if Wells Fargo is your favorite bank, but it's time to stop leaving money on the table. Here's why. Wells Fargo can't compare to today's top high-yield savings accounts As of writing this, the Wells Fargo Way2Save Savings account has a 0.15% APY, which is not only lower than the national average (0.60%) but also several times lower than today's top-paying savings accounts. At 0.15%, you'll earn about $15 annually for every $10,000 you save. Not exactly the most exciting reward for saving money. By comparison, many of today's top-paying savings accounts have rates above 5%. Case in point: the Western Alliance Bank High-Yield Savings Account via Raisin. This account has a mouth-watering APY of 5.26%, no fees, and a low opening deposit of $1. At that APY, you'll earn $526 for every $10,000 you save. That's 35 times more than the $15 you would have earned in your Wells Fargo Way2Save Savings account. Of course, the major benefit of the Wells Fargo Way2Save Savings account is that you can access your savings at Wells Fargo branches or via ATMs. That's important if you withdraw cash frequently, as online banks will make you transfer the money electronically to an account with ATM access. But even if accessing cash is important to you, there are still better options than the Wells Fargo Way2Save Savings. For example, the SoFi Checking and Savings account gives you a cash back debit card and access to over 55,000-plus fee-free ATMs. Plus, it has a decent APY of up to 4.60%. That's not the highest APY I've seen, but it's not bad for an account that combines checking and savings into one. What about the Wells Fargo Platinum Savings account?Now, the Wells Fargo Platinum Savings account does have a compelling offer right now. New savings customers can lock into a promotional APY of 4.62% when they sign up for a new Wells Fargo Platinum Savings account before Jan. 9, 2024, and maintain a daily minimum balance of $10,000. The emphasis there is on "new." According to the fine print, this offer is for new savings customers who don't currently have a Wells Fargo savings account -- whether that's Wells Fargo Platinum Savings or the Wells Fargo Way2Save Savings. So if you're already a Wells Fargo client, the bank will likely assign you the account's regular APY, which ranges from 0.25% to 2.51%, depending on balance.Again, if you're saving money at Wells Fargo, there's no question about it -- you're missing out on higher interest rates. You may have good reasons for using Wells Fargo, such as having greater access to your savings. But if you're fine with online banking, then trust me -- you deserve better than a rock-bottom APY. Take a look at today's top-paying savings accounts and see how much more you could be earning for your savings. 

Have a Chase Savings Account? You're Probably Missing Out on $400-Plus per Year

Chase is the largest bank in the U.S., and one of the largest in the world. It has over 4,700 brick-and-mortar locations, more than 15,000 ATMs, and around a couple trillion in bank deposits. But for all this banking power, there's one thing Chase doesn't have: a savings account that can compete in today's high-rate environment. Seems as if a big bank like Chase would have at least one savings account that earned high interest, right? Truth is, banks lose money when they pay high interest rates and will forgo offering them if they don't need to attract customers. As the largest bank in the U.S., Chase is doing just fine and doesn't need high rates to bring in more deposits. But that leaves Chase clients in a bit of a conundrum. Just how much money are you missing out by keeping it in a savings account at Chase? Well, when you start to crunch the numbers, it can be a lot. The average American is probably missing out on $400 per year Today's most competitive rates on savings accounts are sitting at a two-decade high of about 5.25%. Most of these savings accounts are through the company Raisin, which is essentially a marketplace for finding high-yield savings and CDs. Last I checked, the highest rate on Raisin was 5.30% on a Customers Bank High-Yield Savings Account, followed by both VyStar Credit Union and DR Bank at 5.29%. How much could you make on 5.30%? According to a recent survey of U.S. Family Finances by the Federal Reserve, the median savings in 2022 was about $8,000. If you saved $8,000 in the Customers Bank High-Yield Savings Account powered by Raisin, you would earn about $424 within a year. In contrast, a Chase Savings Account pays out at a rock-bottom APY of 0.01%. At that rate, it's almost pointless to do the math but if you like your copper Abes, you'd make about $0.80 on $8,000 in 12 months.When is a Chase savings account worth it? I'm not going to lie -- I have a Chase account. I don't keep a lot of money in it, but I do keep some. The reason is that I live four blocks from the Chase bank in downtown Portland and like the security of having some money within reach. When I need to withdraw cash (rare but it happens), I can just go in person and use the ATM. And when I need to deposit cash -- birthday money, thanks Mom -- I can do it without jumping through hoops. If you want banking convenience like this, a high-yield savings account through Raisin or any other online bank will likely frustrate you. Raisin is a case in point: When you deposit money in a Raisin-powered account, you transfer it from an external account (which could be a savings account at Chase) into a service bank (Lewis & Clark Bank), which is then transferred into a custodial account at the bank account of your choice (a Customers Bank High-Yield Savings Account or a Western Alliance Bank High-Yield Savings Account, for example). If you want to withdraw this money, you have to transfer it back to your external account, which could take a few business days. For those who need cash fast, each nail-biting day might make that high yield not worth the stress. So you might have to diversify. Truthfully, it's best to keep a little money within easy access for emergencies, but not so much that you miss out on today's high rates. If you've engorged your Chase Savings Account, take a look at some other top-paying savings accounts to see how much you could earn in interest. If your savings is anywhere near the median -- $8,000 -- you could potentially pick up at least $400 on your savings. 

Are CDs a Good Investment for 2024?

Certificates of deposit (CDs) offer high guaranteed returns in exchange for locking your money up at a bank or credit union for a term that you choose. While lackluster in previous years, CD rates have taken off in 2023, aided in large part by the Federal Reserve's continued interest rate hikes. These days, it's not rare to find a short-term CD paying out at a rate above 5%, with some paying out as high as 5.70%.With only a few weeks left in 2023, many of these CDs look like good investments going into the new year. But are they? If you're thinking about investing in one soon, let's take a look at what we know.Short-term CDs could make great investments, but don't ignore longer termsRight now, you can find the highest rates on short-term CDs, like those ranging from three to 18 months. For example, on Raisin's CD marketplace, all the CDs paying above 5% are within that short-term range.This isn't a coincidence. Rather, it reflects the expectation that interest rates will fall sometime in the future. Banks want to keep their CD rates competitive, but if they're paying 5.70% for five years, they could end up losing money.If your goal is to earn interest at a high rate, a short-term CD could be a good investment, especially if you're hesitant to lock into a longer term. Now might even be the best time to build out a CD ladder, combining short and long terms to stretch out today's high rates for longer periods.That said, I wouldn't ignore long-term CDs on the grounds that their rates are lower today. It's possible the Fed could start reversing course in 2024, hiking down rates to a more sustainable level. If that holds true, today's short term CDs could very well mature at a time when CD rates are much lower. You might lock into a 5.70% CD for six months, but a 4-year CD at 4.50% could freeze an elevated rate for a few years longer.A no-penalty CD could make a good investmentA major problem with CDs is that they come with early withdrawal penalties. These penalties are often equal to a few months worth of interest, though some could be as high as six to 12 months. If you withdraw from your CD before your term is up, you'll pay this penalty, which could sometimes result in you losing money.One way around this is to get a no-penalty CD. These CDs typically have a very brief no-withdrawal period, usually seven days or less, after which you can liquidate your CD account with no penalty. Traditionally, no-penalty CDs have low interest rates compared with regular CDs with the same term. But in today's high rate environment, you could easily pick up a no-penalty CD with an APY above 5%.For example, Raisin has several no-penalty CDs on its marketplace. As of writing this, the highest paying no-penalty CD comes from Greenwood Credit Union with a 5.37% APY and 12-month term. Other close contenders include Technology Credit Union (5.36%, five-month term) and Mission Valley Bank (5.35%, three-month term).What's great about these CDs is that you could break your contract to capture a different APY or longer term at a later date. Let's say, for instance, that the Fed indicates it's going to start lowering interest rates in 2024. You decide you're going to lock into a 4% rate on a 3-year CD. If you have your money tied up in a no-penalty CD, you could easily navigate out of the contract and open a new CD account. Likewise, if you have emergency savings, a no-penalty CD could help you earn at a higher interest rate, though I would recommend you consider a high-yield savings account first.Will CD rates stay elevated in 2024?CD rates are at a two-decade high, but they won't stay this high for much longer. Once the Fed feels confident inflation is under control, it won't be long before rates start to fall. I'd say if you're in the market for a CD, now is a great time to lock into one of today's top paying CDs. Take a look at different terms and see how much interest you could earn in 2024.

What Happens if Someone Sues You for More Than Your Car Insurance Will Pay For?

Car accidents can be extremely expensive. In fact, according to the National Safety Council, the average economic costs of a fatal crash were close to $1.78 million, while the average costs associated with a disabling car accident were $155,000.Despite these huge potential costs, drivers aren't required to buy nearly that much insurance. In fact, depending on the state, drivers may be able to get away with having just $15,000 per person and $30,000 per incident in bodily injury liability coverage.With such low auto insurance limits, it's very possible a motorist could cause an accident and do much more damage than insurance will cover. The big question then is, what happens if a motorist causes an accident and is being sued for more than the insurance policy's maximum limits?Drivers could be sued personally for any extra losses insurance won't coverIf a driver is sued for more than the limits of their liability insurance policy, their auto insurer will only cover legal fees and damages up to the amount required based on the policy terms. So a driver who caused $155,000 in disabling injuries to someone and who had $15,000 in bodily injury liability coverage would see their insurer pay just $15,000 -- leaving $140,000 in uncompensated losses for the crash victims.These losses don't just go away, and in some cases, victims will decide to pursue a lawsuit against the at-fault driver personally. In other words, they will go to court and try to get a judgment that the driver would have to pay out of their own bank account. And, depending on the circumstances, courts could potentially enforce that judgment by ordering the at-fault driver's wages be garnished (a portion of them is taken) or by putting a lien on the at-fault driver's property (asserting an ownership claim to their home or other assets).Because of the risk to personal assets, having only the minimum auto insurance coverage is a huge risk.Be sure to buy the right auto insurance coverageDrivers should think very carefully about whether they will end up regretting purchasing only minimum coverage insurance. It's true that it is cheaper not to buy a ton of liability protection, but that's only if nothing goes wrong.Switching from a car insurance policy with a $10,000 per person and $20,000 per accident limit to a policy with a $250,000 per person and $500,000 per accident limit raises premiums by around $47 per month for a 40-year-old female SUV driver in Florida with a clean record purchasing coverage from a major insurer. That's a significant bump, but it's a lot less than getting stuck with a personal lawsuit that ends up costing tens or even hundreds of thousands or millions of dollars.Being sued personally after an accident and not having enough insurance could be a really devastating, frightening experience, and the only way to prevent this from happening is to have the right insurance in place before this occurs. Drivers should review their policies today to make sure they aren't at risk of huge losses if a crash occurs. Those who find they don't have enough coverage to protect their assets may want to act quickly by increasing their insurance coverage ASAP.

The 5 Best Men's Gifts to Buy at Sam's Club

If you're going to pick up a sweet deal from Sam's Club this holiday season, you're going to want to order it online, as many of the items featured in its catalog are not available in all stores. And if you're going to shop for, purchase, and wrap a gift, you want it to be "just right." Here are five gift ideas for the special men in your life that may fit the bill without totally draining your checking account. Prices are accurate at time of writing, but are subject to change.1. The Ninja Woodfire™ Outdoor Grill & Smoker: $300Why we like it: This grill and smoker may be small enough to sit on a picnic table, but it packs a powerful punch. You achieve all the performance of a full-size grill (including the char and searing) without the space-gobbling size of a large grill. If you know someone who's interested in smoking meats, all this foolproof system requires is 1/2 cup of wood pellets. Electronically powered with 120 Volts, it carries a 1-year limited warranty. Oh, and it's also priced $170 lower than the same model at Walmart. That's an extra $170 to put toward something less fun, like homeowners insurance.2. Chef iQ Smart Thermometer 3 Probe + Hub: $150Why we like it: This Smart Thermometer takes the guesswork out of grilling. If a man in your life considers himself quite the gourmet chef, he's going to love having such a sophisticated thermometer at his fingertips. Chef iQ uses an advanced algorithm to calculate the precise cooking time and temperatures, getting the meat just right every time. The fact that the probe is ultra-thin means meat is left intact and better able to hold in the juices. If you were to buy it on Amazon, you would pay $30 more.3. ProForm 25 lbs. Select-a-Weight Dumbbell Set: $30Why we like it: What's great about this dumbbell set is the revolutionary Easy-Adjust Weight Selection system. It takes just a moment for the user to modify the weight so their time can be better spent working out. The durable steel set stays secure in a storage tray that clearly shows the total weight of the dumbbell at each adjustment. A similar set goes for $100 on Amazon.4. Lee Men's Workwear Vest: $20Why we like it: If you haven't shopped for men's garments at Sam's Club lately, you might be surprised to learn how many brands the warehouse carries. This vest manages to look tough and stylish at the same time and comes in three colors: tobacco, black, and chocolate. If you're interested, you might want to pick one up while sizes small to xxx-large are still available.5. MSI 31.5" FHD Curved 250 Hz 1ms FreeSync Gaming Monitor: $199Why we like it: The FreeSync Gaming Monitor is built with a speedy 250 hz refresh rate + 1ms response time VA LED panel. It's great for fast-paced games like racing, sports, and fights. In short, if a game requires fast movements, this monitor can handle it. In addition to a multi-monitor 180-degree set-up, your gamer is sure to appreciate the way it syncs the refresh rate of the monitor with their GPU to eliminate the irritation of stuttering.As we're all looking for ways to save money this holiday season, it's good to know that Sam's Club has a wide selection of gift ideas at a reasonable price.

Adding solar panels to your home is the rare home improvement project that pays for itself. Once installed, solar panels make electricity that saves you from having to buy it from the utility company.

Depending on your utility cost, the time it takes to pay back the initial investment can be very short. In the United States, the average payback time for a home solar installation is about 10 years.

But the payback time and ROI is different for everyone. The time it takes an individual solar installation to pay back its cost depends on the size of the initial investment, the electric rate from your utility company, and how much sun the panels get.

Below, we’ll get into each of the things that goes into calculating the solar payback time, and then we’ll broaden the discussion to include the savings after payback. Solar panels on your roof should last for 25 years, and by looking at the total return on investment, they can be compared to other ways to invest your money.

If you’d rather skip the long explanations and math equations, you can calculate the payback period for your specific home now by using our solar panel payback calculator:

See the solar payback period for your specific home
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Key takeaways

  • Solar panels pay for themselves over time by saving you money on electricity bills, and in some cases, earning you money through ongoing incentive payments.
  • Solar panel payback time can range between 5 and 15 years in the United States, depending on where you live.
  • How quickly your solar panels pay back their cost depends on how much you paid, the price of electricity from your utility, and available upfront and ongoing incentives.

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    How is the payback period defined for solar panels?

    "Solar panel payback period" is the amount of time it’ll take you to completely pay off your solar power system through savings on your electric bill. 

    It is calculated by taking the total cost to install the system, then subtracting solar incentives and/or rebates, and monthly electric bill savings until the total cost has been paid off. 

    For example, if you spend $16,000 on a solar panel system, then get a federal tax credit of $4,800, the cost after incentives is $11,200. Then if the solar energy your panels make reduces your electric bill by $1,500 per year, your payback period would be about 7.5 years, assuming electricity rates don’t increase.

    Average solar panel payback period for homes in the US in 2023

    Most homeowners in the United States can expect their solar panels to pay for themselves in between 9 and 12 years, depending on the state they live in. 

    Some states, like Hawaii and Massachusetts, offer solar payback periods as short as five years, while payback time in states like Louisiana and North Dakota can stretch to 16 years or more. 

    The reason some states’ payback periods are worse than others isn’t just because they’re less sunny. It mostly has to do with the cost of electricity replaced by solar energy and the incentives available to help homeowners go solar. Other factors include roof composition and age, quality of equipment used, and whether you pay with cash or choose a solar loan.

    To get an accurate estimate of solar panel cost, incentives, and payback for your home, use our state-of-the-art solar panel estimator. It shows you how panels will look on your actual roof, and by using solar production data from the National Renewable Energy Laboratory, will give you utility prices from the U.S. Energy Information Administration, as well as live cost information from installers all across the country. 

    What is considered a good solar payback period?

    Photovoltaic solar panels are designed to last at least 25 years, and many modern brands will last much longer than that. When considering that lifetime, any payback period less than about half that time, or 12.5 years, can be considered “decent.”

    More important than payback time is a concept called “Internal Rate of Return,” or IRR for short. IRR is expressed as a percentage of return on investment, and answers the question, “Considering the estimated future benefits of this investment, what percentage return would you need to get from another investment to be equal to this one?” 

    In the solar industry, we use IRR to compare the return on an investment in solar with the returns of other popular ways to invest. 

    For example, long-term investment in a broad stock index fund has historically resulted in an IRR of about 8% per year. A home solar system in a state like Virginia, where the payback time of an investment in solar is around 12 years, has an IRR of about 8%.

    The good news is, there are many states with better IRR and payback time than Virginia, especially in the northeast and California, where electricity costs are very high. For example, people in Massachusetts, New Jersey, California, and New York can expect IRRs of between 16 and 20 percent—double or more of the average return of a long-term index fund.

    What factors need to be considered to calculate an accurate solar payback period?

    There are 5 primary factors influencing your solar payback period:

    1. Average electricity usage for your home, which determines how many solar panels you need
    2. Total system cost
    3. Solar incentives, rebates, and the federal tax credit
    4. Energy production from your solar system
    5. Cost of electricity and rate of increase in that cost

    Below, we covered each of these factors to show an example solar payback estimate for a house in Colorado served by Xcel Energy. 

    Step 1. Average electricity usage for your home 

    The first step toward determining solar payback is figuring out how big your solar panel system should be. To do that, you need to look at your average electricity usage, then design a solar system that makes enough energy to offset that usage over the course of the year.

    Example 1: 

    Let’s say our example home uses about 9,500 kilowatt-hours (kWh) of electricity per year. According to PVWatts, one kilowatt (kW) of solar panels in Arvada, CO can generate around 1,575 kWh per year. Divide 9,500 by 1,575, and you get a system size of about 6 kW.

    Learn more: Guide to watts, kilowatts, and kilowatt-hours

    Step 2. Total system cost before incentives

    The next step is determining how much your system will cost. This number represents the final price of a solar installation before considering incentives. It is the number we’ll use to begin subtracting savings from to determine the payback period.

    Example 2: 

    As of October 2023, the national average cost of a 6 kW home solar system is about $2.95 per watt, or $17,700, before incentives. The homeowner in our example will either need to pay cash or take out a solar loan for around that amount. 

    Step 3. Solar incentives, rebates, and the federal tax credit 

    The great thing about installing solar panels is that it earns you a big tax break at the end of the first year. You can claim the federal solar tax credit equal to 30% of the total installation costs.

    Many states offer additional solar incentives like rebates and performance-based incentives, as well.

    Subtracting the dollar amount of available incentives from the total system cost gives you your net cost of solar panels.

    Example 3:

    Our friend in Arvada is in a great place for solar. Despite what you may think of Colorado as a snowy place, it actually gets as much sun as parts of east Texas, Louisiana, Mississippi, and Alabama.

    The 6-kW system in question would earn its owner a tax credit of $5,310 based on our estimated upfront cost of $17,700. That means the net cost of the system is just $12,390. That’s the number we’ll use to start subtracting energy bill savings from.

    Step 4. Energy production from your solar system 

    This step is pretty simple but very important. 

    Once you know your system size, multiply the number of kW your solar panels can produce under full sun by the number of kWh that 1 kW can produce over the course of a year. In the next step, multiply that number by the amount you pay for every kWh from your utility.

    Example 4:

    We mentioned above that each kW of solar panels in Arvada can produce about 1,575 kWh of electricity per year, on average. So take that number and multiply it by the 6 kW of our system size, and our friend can expect their panels to make about 9,450 kWh per year.

    Step 5. Cost of electricity and rate of increase in that cost 

    Here’s where the rubber meets the road. In a state with net metering, you can take the number of kWh your system will produce in a year and multiply it by your per-kWh rate from the utility. That number will equal your annual solar savings. 

    To get a simple solar payback time frame, just divide the net cost from Step 3 by your average annual savings to get the number of years it will take for your solar savings to equal the net cost of the system. 

    Unfortunately, however, it’s not always that easy. Why? Because electricity rates increase over time, and some states do not offer net metering. 

    Example 5:

    Here’s where our friend in Arvada finally learns their solar payback period!

    Colorado's net metering law is nice and simple, with the utility required to provide a 1-to-1 credit for every kWh of solar electricity sent to the grid. Each kWh from Xcel costs around $0.143, meaning that 9,450 kWh of solar production will save them around $1,350.

    Dividing $12,390 by $1,350 gives a solar payback period of about 9.2 years, even with no electric rate increases between now and then.

    If their solar panels were fully connected by July of 2024, they’d be paid off before the holidays of 2034 and will keep making electricity until at least 2049. That’s what we’d call a great deal!

    Electricity rates increase over time 

    The rate of increase in electricity rates is the most difficult thing to predict when it comes to solar payback. Over the past 25 years, rates in the United States have increased by an average of about 2.5% per year, but that rate varies widely based on location.

    States like California have seen their rates increase by as much as 10% per year, while others like Minnesota have been increasing at closer to 1-2%. The best predictor of future changes in the history of your own utility company’s rate increase requests. This is one area where it pays to do your research before buying. 

    Some states don’t offer net metering

    In a state without net metering, excess solar energy is usually credited to your bill at what’s called the “avoided cost rate.” That’s basically the utility’s wholesale energy price; usually just a couple of pennies per kWh. Some of the solar electricity your panels make will still save you the retail rate because you’ll be using it to power your home’s appliances and devices. 

    If this sounds confusing, don’t worry. It is confusing! Luckily, our solar calculators are built to handle the difference between net metering and alternative compensation. Begin by entering your ZIP code and electricity bill, and we can determine your usage, system size, payback time, and more. 

    Get accurate solar savings estimate based on your utility’s exact rates and your specific roof
    Calculate Now

    How to calculate ROI for solar panels

    Things to know about solar panel ROI:

    • The average ROI on solar panels in the United States is about 10%
    • Solar panel ROI varies widely based on location and the specifics of your home
    • If you have a solar estimate with cost and savings projections, you can use modern spreadsheet programs to make ROI easy to calculate

    The ROI of solar panels can be calculated by taking net installation cost after one-time incentives versus expected electric bill savings and ongoing incentives over time.

    Let’s be clear here that solar ROI is not the same thing as payback time. Knowing how long it will take for solar panels to pay back their cost is only half the information necessary. The other half has to do with the rate of return you can expect, based on average expected savings over the lifetime of your solar system.

    This is where the internal rate of return, or IRR, comes in. According to Investopedia, IRR is “a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis”.

    That’s a complicated way of saying “it’s the rate you’d need to earn on an investment to match the return you’d expect to get from what you’re considering now (in this case, a home solar energy system).”

    The formula to calculate it looks like this:

    Image source: Investopedia

    Fortunately, you don’t need to use that complicated formula to figure out solar panel IRR, because the SolarReviews solar panel calculator can do the work for you. Here’s a video that explains how to use our calculator to determine the IRR of your solar system based on the numbers in an installer’s quote:

    However, if you’re the kind of person who likes to do the math yourself, you can figure out IRR by putting all the variables into a modern spreadsheet program.

    The IRR function in spreadsheet programs

    Thanks to programs like Excel and Google Sheets, calculating IRR is actually pretty simple.

    First, lay out a column with 25 cells that represent each year (most solar panels are warrantied for 25 years).

    In the first cell, start out with system cost after upfront incentives, which represents the amount you invested. Subtract from that all first-year tax incentives and savings on electricity costs (kWh produced multiplied by your retail rate in net metering states). The result should be a negative number that represents the net first-year investment in your solar panel installation.

    For each of the next 24 years, the cells should contain positive numbers equal to the value of ongoing energy bill savings and incentives. Expect solar energy production to go down by about 0.5% per year, and the cost of electricity from the utility company to increase by around 2.5% per year (electricity cost increases could be more or less depending on where you live).

    If your PV system will be using a central solar inverter, expect to replace it somewhere between Year 10 and 15, and reduce that year’s profits by about $1,500.

    On the other hand, if you’ll be using microinverters, they should last 25 years (and come with warranties for that period), so you don’t have to add that additional expense.

    For example, let’s say the values you’re looking at here are in cells C2 through C26 in your spreadsheet. In cell C27, type “=IRR(C2:C26)”. The program will do the rest, and will output a percentage.

    Here are the calculations for a home solar panel system in Colorado:

    This is how to represent the annual and cumulative savings of solar

    The image above shows how a 6-kW solar system starts at an estimated total cost of $17,700, which is then reduced by $5,310 because of the federal tax credit and $1,351 in electricity bill savings over the first year.

    The savings add up over 25 years, resulting in $33,545 total profit and an IRR of 14%.

    Comparing the ROI of solar energy to other investments

    So is that 18.64% IRR any good? In order to determine what IRR means you have to compare it to your next-best investing option.

    Putting money in your sock drawer returns 0%, because you don’t earn any interest on money that’s socked away (ba dum tss). Open an online savings account and you might get 3.5% back per year. But the benchmark financial experts usually use to compare investments is the historical return of the stock market.

    The S&P 500 has returned about 8% per year over the past 90+ years. That means, instead of purchasing solar panels for your home, you could buy shares in the SPY index fund that tracks the performance of the S&P 500, and probably earn about 8% over the next 25 years.

    Considering that our sample calculations for Colorado showed an estimated 14% annual return, we estimate that an investment in a solar installation there is nearly twice as good as a similar investment in a broad index fund like SPY.

    Why does SolarReviews claim to have the only truly accurate solar panel payback calculator?

    Our site can claim to have the only truly accurate solar panel payback calculator because we use customized local and home-specific information, whereas other sites simply use generic assumptions for some or all of these things. 

    Specifically, our calculator:

    • Uses the exact solar production from your local weather station
    • Adjusts solar production estimates to the direction and tilt angle of your roof
    • Applies the exact electric rate structure charged by your utility to calculate accurate savings, instead of just a generic rate for power
    • Checks current local solar offers from solar providers near you to calculate a realistic cost to use in your payback calculation

    Final word on solar panel payback period and ROI

    Now that you’ve read through the steps outlined in this article, you can calculate the estimated solar payback period and ROI if you’ve received a quote for home solar panels. If you haven’t yet received solar panel quotes, you can start the process by using our solar panel calculator and learning about offers from solar providers in your area.

    Remember, the method above just results in a simple payback estimate, without accounting for increases in electricity costs over time, solar panel degradation, or any other factors. 

    In addition to electric bill savings, there are other benefits of solar panels which aren’t as easy to put a value on. The most important of these is an increase in home value, estimated to be about 4% of the pre-solar value of your home. 

    On top of that, there are environmental benefits of renewable energy and, if you add batteries to your solar installation, the peace of mind that comes with being more resilient if the power goes out.

    Adding solar panels to your home truly does add value in many ways. 

    See how much you can save with solar panels for your home
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