How long does it take to recover my investment, or my Return On Investment (ROI) in my solar panels? A lot less than you may think, and it depends mostly on the size of your current electric power bill. The larger you power bill, the more your power costs per Kilo-Watt Hour (KWH) of power that you use and pay for. Southern California Edison has several cost Tiers and power in the highest Tier costs almost 3 times more than if you stay in the first “Baseline” Tier of services.
A typical home with an average monthly electric bill of $120, needing a 5,000 Watt solar power system, will have an ROI of 7 years, after the 30% Federal Tax Credit, excluding financing costs. A smaller system takes a little longer and a larger system is faster.
The Major Incentive currently available is the 30% Federal Tax Credit (“FTC”). This is tax credit for federal income taxes that would otherwise be owed. It is not a grant or subsidy. Many unscrupulous sales people mislead customers on this. The FTC is 30% of the cost of the solar power system, after any other rebates that may have been given, until 2019, then it is 26% until 2021, then 22% until the end of 2022. Then it is over. See: www.energystar.gov. Always consult your tax preparer on any tax related issue.
Some California rebates are still available, for example customers of Los Angeles Water and Power ($0.25 per effective watt), but are otherwise over. The Effective Watt is calculated by the direction and elevation that you solar panels point toward the sun, and whether there is any shade from trees, other buildings, etc. that may impact them. If you solar panels face south and there is little to no shade impacting your panels they are generally 86% effective from the DC rated power of the solar panels. If you panels face East / West, then the efficiency goes down to about 75%.
Your home equity will go up significantly, more than what you pay for your system. In California, with relatively higher home prices, higher priced electricity and with abundant sunshine, adding Solar increases your home equity. Our prices, along with the Federal Tax Credit, bring the cost of the solar power system to much less than what the appraised value the system adds to your home. So there is no bad time to add solar power to your home. See: . Zillow -Why You Need To Get Serious About Solar
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