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How long does it take for solar panels to pay for themselves?

Avatar for Ben Zientara
Published on 04/26/2016 in
Updated 05/29/2020

If you’re shopping for solar panels you probably want to know three main things: how much solar panels cost, how fast they will pay back that cost, and how much money they’ll save over the long term. Here’s the good news: solar panels will save enough money to pay for themselves in every state of the country.

Here’s the more complicated version: Solar payback time depends on many factors, like:

  • Up-front cost
  • Available incentives
  • How much electricity your solar panels can make on your specific home
  • The cost of the electricity you would have bought without the solar

With these four variables and some assumptions about the future, you can make a pretty accurate prediction of how much money you’ll save on electricity every year, and how long it will take that to equal and exceed the initial cost of the system.

Example solar payback calculation:

In Massachusetts, you pay $18,750 for a typical 5-kW solar system. That’s the upfront cost. By the end of year 1, you subtract the state and federal tax credits for a total of $6,625 in savings, bringing the cost down to $12,125. Those are the incentives. Then you take the electricity savings and SREC payments into account, and you subtract another $2,895 from the cost, bringing it to $9,230.

With all those factors lined up, your entire system costs will be paid off in just 4 years—the fastest in the nation. Think about that. With incentives, savings and payments, an $18,750 investment is pays itself back in 4 years and keeps making you money for an minimum expected lifetime of 25 years. An investment in solar in Massachusetts has a 30.7% Internal Rate of Return (IRR). That. Is. Amazing.

Here’s the Massachusetts version of the image we put on every state’s page to show a summary of the costs, incentives, payback time, and IRR for a state:

As you can imagine, not all states offer the perfect mix of incentives and high electricity costs that lead to a 4-year payback. In fact, by the time you get to the end of the top 10 states, you’re in the 8-year payback range. That’s still great, considering a solar panel installed today will likely keep working for a few decades, but it isn’t bonkers like it is in Massachusetts.

No matter what state you live in solar is a great deal. The average payback time is 12 years with an IRR of 10.7%, which is better than almost any other investment you can make. You should connect with a solar expert today to get more information.

Without further ado, here are the solar payback times for all 50 states as of 2016, with IRRs listed alongside:

State NameYears to PaybackIRR
Hawaii435.1%
Massachusetts430.7%
Louisiana622.2%
Washington DC617.5%
New York719.8%
Rhode Island718.4%
New Jersey718.3%
Oregon715.2%
Connecticut815.6%
Illinois813.7%
North Carolina813.1%
New Hampshire914.3%
South Carolina913.6%
California913.4%
Maryland913.0%
Arizona1012.7%
Utah1012.5%
Delaware1011.8%
New Mexico1110.4%
Pennsylvania1110.0%
Minnesota119.2%
Vermont129.9%
Texas129.8%
Colorado129.5%
Iowa138.7%
Maine138.6%
Florida138.2%
Missouri138.2%
Wisconsin137.9%
Nevada137.5%
Kansas147.3%
Mississippi147.3%
Tennessee147.0%
Virginia146.8%
Ohio146.0%
Oklahoma156.5%
Alaska156.4%
Idaho156.4%
Michigan156.4%
Montana156.4%
Alabama156.2%
Georgia156.2%
Nebraska156.2%
Wyoming156.2%
South Dakota156.0%
Indiana165.6%
Washington165.2%
North Dakota175.0%
Kentucky174.9%
West Virginia174.5%
Arkansas183.9%

Last modified: May 29, 2020

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