Anyone considering investing in solar panels will of course expect that it will be a while before they have paid for themselves producing valuable electricity. How long it will take to reach break even depends on many factors: The initial price of the system including full installation, the longevity of the hardware components of the system itself, the price rate structure of the utility energy provider including the grid operator, taxes on both sell and buy rates, whether you opt to include battery storage, and how much the system changes the value of the building on which the it is installed. Of course you could have a situation where panels are just installed and you pay on a monthly basis without actually owning the system in which case none of the following matters, except maybe the electric vehicle bits.
A Typical Solar Installation
To be honest, the overall question of this article is in reality impossible to answer accurately for any given system, but since I’ve had my solar panels for exactly 10 years know, I can at least provide some data for you to look at. These basic data of how much electricity is generated is useful for making more precise calculations for your local pricing structure, and thus help you forecast how long a given system you are interested in would be able to pay for itself. But first, some specifications on my system:
- 16 panels with a total peak capacity of 4 kWp (I have only come close to this output at noon on very cold and windy summer days).
- 2 inverters capable of 2 kW throughput each (at the time this was cheaper than 1 single 4 kW inverter and would make it easier to install an extra 2 kWp had I needed it).
- Price including all hardware, installation, and tax credit (in 2011 the labour cost was deductible in Denmark): 100,000 DKK ($16,000). A similar system price today 10 years later: 50,000 — 70,000 DKK ($8,000 — 11,000) depending on local tax credits.
- Geographical attributes: Panels facing south at a 30 degree angle, latitude and longitude (Decimal degrees): 56.3332, 10.3826.
Why not 6 kW, which is the largest allowed grid connected system on private property in my area? Well, although it would easily fit on my roof, I simply could not afford it at the time, and up until I got an electric car it would have more capacity than I needed all things considered.
Things to consider that can have a positive impact utilizing excess energy periods when not having opted for a battery as storage:
- Fridge and deep freezer with timer.
- Water heater with timer.
- HVAC system with timer and zone optimisation.
- Electric vehicle with timer and rate configuration of charge.
- Training you own sense of when to use electricity, like vacuuming and washing when the sun is shining.
Of the points above I have really only focused on the last two in my everyday routines, and when the electric vehicle came into play, it became a challenge to micromanage the system to optimize the utilization of the system. It just so happened that the local net metering scheme changed at about the same time I purchased my latest EV, and it actually resulted in choosing the larger battery option in the car than I had originally planned. I have described the detailed considerations in an earlier article, and it seems obvious now 2 years later that the larger EV battery was worth it.
My calculations at the time showed that a battery that was 20 kWh larger would pay for itself within 10 years if I could manage the charging just by prioritizing sunshine. Since then I have changed my electricity supplier to one that sells electricity cheaper when wind turbines produce more power, thus making me prioritize charging in windy situations too.
First and foremost let’s look at electricity consumption. On average I use 3,000 kWh of electricity every year in my household. I do not use electricity for heating or cooling my house which is why total consumption might seem low. I am connected to district heating, and in Denmark the average outdoor temperature is so low that use of air conditioning systems (HVAC) for cooling is rare.
In the graph below covering a decade of net electricity consumption I have highlighted 4 years:
- 2010 (blue): No solar panels and no EV. This represents my baseline electricity consumption in a typical full year.
- 2014 (yellow): Solar panels installed, but still no EV. From March through September I get a surplus of electricity production.
- 2016 (green): First full year of driving an EV, Nissan Leaf, 25,000 km/year (16,000 miles/year). Electricity consumption doubles to 6,000 kWh, and only in the summer is it possible to balance out consumption and production.
- 2021 (red): With a Tesla Model 3 long range 75 kWh driving 35,000 km/year (22,000 miles/year) and the yearly net metering out the window, I prioritize free referral code Supercharging in the winter when solar power is low.
When I bought my panels a net metering scheme based on yearly accounting was in effect, but 2 years ago it was replaced with hourly accounting, which left many private solar system owners angry and a class-action lawsuit was initiated but dismissed in court. For nearly 8 years I had conveniently been able to do the math once a year: Subtract kWh consumed from kWh produced and as it turned out the average 3,750 kWh produced each year covered with a comfortable margin the 3,000 kWh consumed.
Getting and EV in the household countered to some degree the disadvantage of net metering on a yearly basis to an hourly basis by making sure to charge as often as possible when the panel generated a surplus of electricity. As mentioned this is the reason I chose a larger range EV than I had planned for. The 20+ kWh of battery capacity in the long range Tesla Model 3 made it easier to charge less often in order to prioritize the sunshine. Not perfect, but still noticeable in terms of freedom of when to charge compared to the low range Nissan Leaf and BMW i3 I had been driving the years prior.
In order to get a sense of when an investment in a solar power installation will have paid for itself it is of course essential to pay close attention to how much electricity is being generated by the system.
In the graphs below it’s evident that I live relatively far north on the northern hemisphere. Note that this year in red actually deviates quite a lot from the yearly average since May and July usually are the best performing months due to slightly lower average temperatures than June. Solar panels perform best with clear skies and low temperatures preferably with a breeze cooling the panel even more. That’s why you see record outputs in May and July because June is often hotter and more humid. Except this year giving the exact opposite of the norm.
You might think that the sun is up the longest in June and thus should give more power, but since the panels are oriented south and given how far north I live, the sun rises in the north-east and sets in the north-west, sunlight in those very early and late hours do not fall on the panels.
What about degradation? Well, 10 years is of course not a lot to go by, but if the trend in the graph showing total year output persists there might be a couple of percent performance loss per decade. The big risk with panels is more in terms of build quality. If they puncture and moisture gets inside they will fail fast. I chose a high quality brand at the time, even though there where many much cheaper options available. In fact I could have saved 30 — 40% in total costs, but I figured that might cut the lifetime by maybe 50% thinking 4 decades out, and indeed I have spotted many solar panels of the same age and lower price beginning to deteriorate. Since production of silicon based solar panels is an energy intensive process, the longer they sit on the roof producing energy the better.
Note: In Denmark I pay roughly 2.2 DKK/kWh (35 cents/kWh) for grid electricity including taxes. When I sell surplus electricity to the grid I get paid a maximum of 0.3 DKK/kWh (5 cents/kWh) because taxes are not a part of it. No, this is not a typo, there is a lot of tax on energy in this country. This incentifies me to use my generated electricity rather than sell it, which is a challenge with hourly net metering. This is where a home battery and/or EV helps a lot.
So, when will the system have paid for itself? Well, in my situation, accounting for the many variable parameters, it looks as if it will be another 2 years before I can say the panels finally produces energy for free. That’s 12 years total, which is not bad considering the panels themselves has a 20 year warranty on construction defects. I expect no less than 30 years of operation.
Checking prices today, I find that an equivalent quality system would cost 60% of what I paid 10 years ago including installation, so investing in solar just makes even more sense now, and more so going forward. Solar panel prices has fallen almost 10× in the last 15 years!
However, it gets more complicated when an EV is included in the mix. You could argue that the EV is part of the system, and that you would now have to look at the combined cost of the solar system and electric vehicle as one single utility since they are practically dependent of each other. I save money on energy to move the car around, and I am able to soak up the surplus energy from the panels much more efficiently.
I could choose to ask the question of when the whole package has paid for it self compared to buying all the electricity from the grid or compare the payback time of the electric vehicle to an equivalent fossil fueled vehicle. In any case solar and EV is without a doubt a win-win.
The share of global solar energy will certainly accelerate with battery storage pricing plummeting. Will I invest in a home battery? I will consider it when energy arbitrage and virtual power plants becomes the norm. In such a scenario it might even be feasible to move the old panels over on top of my garage and replace my whole 50 year old roof with solar tiles. Who knows?
So, as I said, it’s no easy task to answer the main question of this article, and it is clear that the financial parameters change all the time, so maybe one should not spend too much time trying to calculate this to perfection, but rather just get on with investing in a solar system and rejoice over the savings from day one. It probably will pay off in the end no matter what.
And remember, it is clear that if you plan to include an EV into the mix sooner or later, a matching installed solar capacity could greatly lower the payback time for the combined financial expenditure, more so the more your driving needs.
Below is a few photos of the installation of my panels 10 years ago: