What Is the Solar System Payback Period?


We need to figure out how much money we will harvest from any solar system project, whether it is an on-grid or off-grid solution, prior to implementing it. Hence, over how long do solar system projects generally pay themselves off (payback period)? After we have recouped the costs with the solar system project, what extra money did we get?

It was a cost-benefit analysis, as if we won't get any profit from installing the solar system, then why buy and install the solar system at such a high cost? After all, solar power systems typically involve a whole range of components, from solar panels, solar inverters, batteries, charge controllers, and so on.

Thus, an economic feasibility study of a solar system is the correct first step to take before purchasing and installing a solar system.

As a rule of thumb, to calculate the payback period for an on-grid solar system we would need the average monthly electricity bill that we pay to the electric utility, the additional electrical energy that the solar system will generate and what the cost of the purchase and installation of the on-grid solar system will be.

The return on investment of such a solar project can be calculated through simple logic calculations.

It is true that the payback period differs from one country to another depending on the electricity tariff, as well as the amount of extra electricity generated by a solar system that is sold to the electric power company. Solar energy production is purchased by some countries' electric utilities with a high tariff, which can encourage customers to use solar energy to generate electricity, while in other countries, solar energy production is purchased at a lower price. Among other things, the solar residential system payback period in Washington, United States of America, will be approximately seven years. It will take 11 years to payback in Egypt while it will take only 8 years in the United States, there is a huge difference!

About a hundred years is usually the lifetime of a solar system. For example, if you refer to aforementioned example, the return of investment would be stronger in Egypt since you would gain approx. A profit of 17 years will come from free electricity bills and sale of extra electric energy to the utility, but in the United States there will be approximately 17 years. 14 years' profits total. For most government agencies, very good incentive programs are offered to encourage customers to use solar energy.

It's strongly recommended to search for an experienced contractor, and to ask others about his experiences before hiring him, in order to conduct a perfect economic feasibility study.