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Solar Panels System ROI

Updated: Sep 17, 2019

What Returns Would I Gain If I Own Solar Panels System?


In many ways, your solar panels system is a financial product.Firstly, it is capable of generating annual returns ranging anywhere from 10% to more than 30%. The average Solar Era customers pay off their solar purchase in just 7 to 9 years and earns a strong solar ROI, receiving free electricity for the remainder of their solar panels system’s 25+ year lifespan.

You can calculate your annual returns by dividing the financial benefits you receive each year by your initial investment in your solar panels system. Many factors can impact your solar panel ROI, including:


1. Electricity Rates

How high are your current electric bills? This determines your savings over the life of your system. The higher your rates, the more you can save with solar.


2. Net Settlement of Energy Components

Do you know that the excess solar electricity sold back to the grid program? What kind of income can you earn by selling these to SP? New income from SP will help you break even on your solar investment more quickly.


3. Cost

Did you compare your options to find the right price? Were you able to take advantage of rebates offset the cost of your installation? Lower costs mean a shorter payback period.


4. Technology

How efficient is your system, i.e. is it producing electricity at optimal levels? A more efficient system will offset a greater percentage of your monthly electricity bill.


5. Property Characteristics

How sunny is it where you are? Which way does your roof face? What is the pitch of your roof? All of these factors can affect your production levels.


6. Property Values Increase

How much does the value of your property increase when you install a solar panels system? Solar panels system ownership tends to increase your property resale value, while third party ownership (e.g. leasing) does not.


7. Business Benefits

How much will your profits increase because of your lower costs? What is the value of the goodwill your solar panels system generated? What level of revenues is attributable to your green credentials? All of these factors can increase your company’s return on solar investment.


Solar Panels System Payback Periods = Solar Panels System ROI


Taking all of the above factors into consideration, you can get an idea for what your solar payback period might be, which is the best way to put a number on your solar panels system ROI. A solar panels system payback period is the amount of time it will take you to earn back the money you spend upfront on a solar panels system, usually in the form of avoided electricity costs.

 

For instance, if your solar panels system payback period is 7 years, after that length of time, you can easily calculate your actual monetary solar panel ROI by simply looking at your electricity usage and local electricity rates. If you usually use 1,000 kilowatt hours (kWh) of electricity a month at SGD$ 0.25 per kWh, that is SGD$ 250 you would spend on electricity per month without solar. With solar installed (and after your payback period is up), each month you essentially pocket $150. This money saved ends up being even more per month over time, as electricity rates historically rise over the years. 

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