All Efficient Products AEP Solar electric return on investment and pay back period

(954)474-9350

All Efficient Products, Inc.

Solar Contractor Serving South Florida Communities of

Palm Beach, Broward and Miami Dade

“Love is like the sun: has its inner energy source that shines on you”

- Helene Lagerberg

Energy Efficient

Green Contractor

Solar Electric Return on Investment & Payback Period

How to Calculate Return on Investment and Payback Period for a Solar Energy System

When people ask us our thoughts regarding the investment potential for a Solar Electric System for their home, we often walk through the situation to determine what a payback period and an overall project return on investment might look like. We also make sure to discuss the initial investment and current incentives that may be available.

To arrive at a simple payback period and return on investment figure for a Solar Electric System install project, you want to consider the cost (after all incentives) and the energy savings. Factors that can further complicate this calculation include the size and cost of the system.

So how do you figure out the payback period?
There are a couple ways to calculate. We’ll explain one simple one. You’ll need to find the following numbers:

· Total Cost of the System Installation

· Federal Credit (Calculate 30% of the total cost of the System)

· How much energy can your collectors produce

· Your cost per KWH

Now that you have all the information you need, you are ready to calculate how long you'll need to own your solar panels to break even. If you pay $0.125 per kWh and you collect 5 kWh of electricity a day, you are saving $0.62 a day - or approximately $19 a month.

To figure out how long it will take to break even, use the following Example:

Total Cost of System (1kw panel producing 5 kwh per day) $ 2,000.00

Less Tax Incentives 30% $ 600.00

Net System Cost $1,400.00

Divided by Total Savings per month, or $1400/$19 105 Months

The result is that it will take 105 months to break even on your purchase. Divide this by 12 (to see how many years it will take) and you will see that it will take you 8.7 years to break even on your purchase. Any energy that you produce after this is really a return on your investment!

Now let’s calculate the Return on Investment?

Now take the Savings per year and divide by the net install cost and multiply by 100 to change to a percentage.

$19.00/month x 12 = $228.00 divided by $1,400.00 = 16.2%