Solar Payback Periods: Navigating the Financials for Cash and Financed Systems

Understanding Solar Power Payback Period

Solar payback is the time it takes for savings from a system to recover its cost. A lower monthly payment is a different measure. Compare both before choosing how to pay for solar.

For a cash purchase, compare the installed price with the electricity savings expected for your home. Sunlight, shade, roof orientation, electricity use and utility rates affect the estimate. Ask for the assumptions behind any quoted payback period rather than treating a fixed number of years as a promise.

For a financed purchase, review the loan amount, interest rate, fees, term and total payments. Compare the loan payment plus any remaining electricity bill with what you would otherwise pay for electricity. A loan does not make the system paid back on day one, and financing does not guarantee immediate savings.

Compare cash and financed quotes using the same system and energy-production assumptions. Keep projected monthly savings separate from the total cost over the period being compared. Read the contract and ask the installer or lender to explain costs that are not clear.

Source: U.S. Department of Energy, Homeowner’s Guide to Going Solar.