Solar Energy Systems: Costs and Payback

Solar powered systems demand an higher initial cost than common gas or electric systems, and most homeowners and homebuilders choose conventional systems for that simple reason. However the payback of solar powered systems is relatively short in some cases. Solar options, namely solar hot water heaters, are environmental but also economical.

Paybacks & Types of solar applications

There are various types of solar powered systems, with different degrees of competitiveness and different paybacks.

Solar Water Heaters are a competitive technology with paybacks around 5-6 years in many climate zones, while Solar Electric PV systems, even with high rebates and financial incentives, aren't so competitive.

Payback & Climate & Prices & Other variables

There are many possible variables determining the final payback of an investment in a solar system.

If you live in a state like Florida, with short heating seasons, solar water heating systems are interesting and cost competitive, but solar air-space conditioning systems are far from interesting and competitive… Climate is important when calculating the payback of an investment in a solar system, all the more since it also determines the type of collectors, system, needs, etc.

Similarly, you may find cheap and efficient solar hot water systems for around $1000-$2000, but more complex systems for colder regions (with pumps, heat exchangers, controls...) may cost you something around $3,000-$4,000, or more... As to prices of solar electric photovoltaic solutions, they easily amount two or three times that values.

Paybacks depend on prices, and on the the type of system and the climate that are behind them.

For more detailed information on prices, see:

Prices of Hot Water Systems
Prices of PV Electric Systems
Types of solar heating systems

Payback periods

You can recover your initial investment on solar power systems in a short period, or in a much longer one... As said before, all depends on the type of solar power system and also on issues as climate, installation, uses, etc.

Below, we list some broad conclusions, based on average situations:

The payback period for solar hot water systems can be relatively short. In very favorable cases (closely related to good climate conditions) 3 or 4 years paybacks are possible. Average paybacks of 5-6 years are also common.

The payback period for PV solar electricity is much larger: more than 10-15 years in most cases, unless rebates and tax credits turns the investment more attractive.

The payback for solar space heating is also larger than that of solar hot water systems, though all depends on the type of system.

Financial incentive and tax credits

There are, in many states, financial incentives and tax credits, which may greatly reduce the final cost and consequently the payback period.