Solar Payoff: How Soon Will You Breakeven?
Updated: Aug 31, 2018
When it comes to making a decision to go solar, more information is ALWAYS better than less. If that’s the case, why is it so hard to get solar representatives to explain the financials around ROI or break-even points associated with going solar? The truth is, most can’t be bothered learning it themselves. After all, they’ve got panels to sell!
Let’s talk “break-even” point first. When I say “break-even” I’m simply speaking of how long it will take to “break-even” on your solar purchase. You spend “x” and after a certain amount of time your system has paid you back that same “x”. Let me use a real-world example to illustrate this length of time.
An average Utah home uses approximately 10,000kwh a year of power, which equals approximately $100 a month or $1,200 a year. A 6.25kw solar system produces that same 10,000kwh of power and offsets that electricity bill by 100%. The cash price on this example system is $21,800. Well, that's Mobius Solar’s cash price. Your experience may vary depending on who you call. That $21,800 would earn $6,540 back in federal tax credits (30% of system cost) and $1,600 back in Utah state tax credits. Once those credits are received, the sunk costs on this system are $13,660.
So, how many more years will it take to put that $13,660 back in your pocket? Let’s take a quick look. Over the past 20 years Rocky Mountain Power’s energy costs have increased approximately 4% a year. This means this year’s energy bill of $1,200 will cost our example home $1,248 the following year, $1,297 the year after, and so on. Let me visually represent the “break-even:”
Starting Amount: $13,660
For this average example, in 9 years and 7 months this system will be paid back and producing free energy. For the remaining 15 years on the system’s 25-year warranty, the system will produce an additional $24,666 in free power (and with an actual average life of 40 years, a ton more). This speaks nothing of the increased property value the example solar system adds to the home. But that’s a topic for another day. Look to a future blog for that topic.
Hopefully, this example answers the basic questions you've had surrounding the cost and “break-even” of solar. Naturally, the economics and “break-even” points change when you factor in different length loans and leasing vs. owning. There is not enough space in this blog to approach each of these options separately. Feel free to drop me a line at firstname.lastname@example.org with your questions and I’ll be happy to dig into any other topic of interest on your mind.