Solar-powered energy is one of the most popular renewable energy sources for homeowners. Every year, more families across the United States opt to install solar panels for their family homes. There certainly benefits to doing so. For example, you can get incentives from the government that can help pay for the installation and maintenance of your solar panels. If you play your cards right, you can have this new energy system pay for itself after a few years. See what steps you need to take to calculate the ROI (return on the investment ) of your solar energy system.
1. Check Your Electric Bills for Last Year
Before you get started, you need to know how much electricity you’re spending every month. It’s highly recommended to check the last 12 months, since your electricity use may vary depending on different seasons: less spending during summer because you travel for vacations, more spending during cold winter days because your family uses an electric heater, etc.
Talk with your electric company. They should be able to help you check your spending. Keep in mind that the average electricity consumption for a U.S. residential is around 877 kWh per month and that the national average electricity rate is $0.13 per kW. These rates may vary depending on your location.
2. Get a Quote for Total Installation Cost
Try to check with different installation companies for additional costs. Keep in mind that you need to consider PV panels costs and installation costs, and you may also need to pay for permits from your local government.
3. Determine How Much Electricity You Will Generate
Depending on your location, local weather conditions, and other external factors, your new solar energy system will generate different amounts of electricity throughout the year. Ask solar companies for an estimate. You can also use free resources like Google’s Project Sunroof to discover your potential solar savings by entering your home address.
4. Research Government Incentives
As mentioned before, governments provide financial benefits for households planning to install solar panels in their residence. Review which incentives you can take advantage of. For example, the Federal Solar Tax Credit might give you a 26% tax credit on your installation cost. Other local governments have different incentives.
5. Check Available Financing Options
Based on your needs, financial institutions should be able to provide different financing options for your project. Most solar panel companies will have different financing options available that adapt to your financial needs.
6. Estimate Your Payback Period
After you estimate your installation costs, check possible incentives, and calculate the yearly benefits of having a new solar energy system (how much you will save from the electric bill, how much energy you will generate, etc.), you will be able to calculate your payback period and your return on this investment (ROI).
To start, you can use this formula: Solar Payback Period = Initial Net Investment / Yearly Benefit
Most solar panel installations will return a 20% ROI in the first year. Not to mention, as more homeowners are looking at renewable energy sources, adding solar panels to your multi-family home might increase its value and desirability.
This article provides you with steps to calculate ROI for your solar home project but for an exact figure, always ask solar companies for an estimate as well.
If you have any questions or need your design requirements, contact us.
Geraldine Orentas is a writer from Happy Writers, Co. in partnership with Checkworks, a retailer for personal and business checks.