When it comes to utilizing solar energy in the U.S, residents of Arizona have the potential to gain the most. Not only is Arizona the sunniest state in the US with an average annual sunlight of 5,755 kJ/m², but Yuma remains the sunniest place on earth, seeing an average of 4,055 hours of sunshine per year.
But solar is a big investment that can cost around $20,000 on average. So, of course, many homeowners want to know how long the typical solar panel payback period is. In this article, we’ll explain how long it takes to pay off solar panels in the state of Arizona.
Determining Your Solar Panel Payback Period
It takes an average of 8 years for the average Arizona resident to pay off their solar system. But that number will depend on variety different factors, such as:
- The cost of your solar system
- The Incentives for Solar Panel Installation
- The Energy Savings on Your Electricity Bill
1. The Cost of Your Solar System
Your solar panel installation cost depends on the size of the solar system, the type of solar panel installation utilized (whether a string or micro inverter installation), and the installation company hired for the job, which determines your labor cost. On average, however, Arizona residents have a base estimation for solar panel systems at $19,380. How is this gotten?
Well, the average size of residential solar panel systems adopted in Arizona is 5.1 kilowatts, and the average cost of solar panels in Arizona per watt is estimated to be $3.8. You simply multiply these values to get your initial estimation.
2. The Incentives for Solar Panel Installation
The Federal government, in a bid to promote sustainable development through solar, introduced investment tax credits (ITCs) for solar systems in 2006. Known as the Federal Tax Credit for Solar Photovoltaics, these ITCs reduce the cost of your panel by thousands of dollars.
In August 2022, the federal government set new rates for the ITC at 30% of the system’s cost. With the rate applying till 2032, this means Arizona residents should expect to pay $13,566 for a 5.1 kWh solar system installation after tax credits of $5,814 (30% of the average system cost) have been deducted.
3. The Energy Savings on Your Electricity Bill
Solar panels help you save money on your monthly electricity bills, money that can then be redirected towards paying off your solar panel investment. On average, Arizona residents use 1,155 kWh of electricity monthly, which amounts to 13,860kWh yearly. With the average cost of electricity currently estimated at $0.137, Arizona residents can be said to save an average of $1,899 yearly.
Buying Solar Panels in Arizona
To estimate your solar panel payback period, you then divide the total cost of your solar system after ITC deductions by the average savings per year. For the more common 5.1 kWh systems, this would mean dividing $13,566 by $1,899, estimating the average payback period for Arizona residents at 7 years (7.14 years).
If you have to install a larger solar system, maybe a 10 kWh system for example, the calculations follow the same process. Your total initial cost is $38,000, while your final cost is $26,600 after deducting your ITC. Your payback period is then estimated at 14 years ($26,600/$1,899).
You can also redirect the incentives you receive for sending excess electricity to power grids toward paying off your solar panel investment. Arizona adopts a net billing framework that applies wholesale rates of $0.089 per watt, applicable till September 2023. With this, you pay off your solar panel investment even faster.
Start Your Countdown Now
The average lifespan of a solar system is between 25 to 30 years. For you, this means an additional 13 to 22 years of enjoying your savings on solar investment after full repayment. In financial terms, this means ultimately saving up to $38,400 on electricity bills.
Are you ready to start your journey toward solar-panel ownership? Solar Optimum can provide you with the financing and guidance you need to meet your solar investment goals. Contact us today to get started.
