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Photovoltaic Systems as an investment – Payback Period

In finance an investment’s payback period is the time it takes to recover the initial investment through the cash flows it produces. You can use this financial measure when considering an investment in solar energy. The non-monetary benefits of owning a renewable energy system (independence, environmental impact, etc.) are enough for some people but others will be financially motivated. Solar panels have an expected lifetime of 30-40 years meaning that the PV system will continue to deliver benefits long after it has paid for itself.

The following variables have an impact on the payback period of a PV system.

– System Type (Off Grid vs. Grid Tied)

– Cost of Alternative Power (utility power, generator)

– Installed Cost per watt of your PV system

– System Efficiency

– Peak Sun Hours

– Rebates and Incentives

 

Here are some examples of PV system Payback Periods

 

Example 1 – 10,000w Grid Tied system in Florida.

10,000w Grid Tied System
Cost of Electricity 0.117 /Kwh
System Size 10000 Watts
Peak Sun Hours 5 Hours
System Efficiency 83%
Installed Cost Per Watt $2.75
Rebate and Incentive % 30%
 
Initial Investment $13,750
Rebates and Incentives -$4,125
Actual System Cost $9,625
Estimated Annual Electricity Savings $1,772
Payback Period 5.43 Years

 

 

Example 2 – 5000w Grid Tied system in Kaui, Hawaii

5000w Grid Tied System
Cost of Electricity 0.55 /Kwh
System Size 5000 Watts
Peak Sun Hours 5 Hours
System Efficiency 83%
Installed Cost Per Watt $2.75
Rebate and Incentive % 30%
 
Initial Investment $13,750
Rebates and Incentives $4,125
Actual System Cost $9,625
Estimated Annual Electricity Savings $4,166
Payback Period 2.31 Years

 

 

Example 3 – 5000w Grid Tied system in Arizona.

5000w Grid Tied System
Cost of Electricity 0.111 /Kwh
System Size 5000 Watts
Peak Sun Hours 6.5 Hours
System Efficiency 83%
Installed Cost Per Watt $2.75
Rebate and Incentive % 30%
 
Initial Investment $13,750
Rebates and Incentives -$4,125
Actual System Cost $9,625
Estimated Annual Electricity Savings $1,093
Payback Period 8.81 Years

 

 

Example 4 – 8000w Off Grid System in Jamaica.

8000w Off Grid System
Cost of Electricity 0.39 /Kwh
System Size 8000 Watts
Peak Sun Hours 5 Hours
System Efficiency 75%
Installed Cost Per Watt $4.00
Rebate and Incentive % 0%
 
Initial Investment $20,000
Rebates and Incentives $0
Actual System Cost $20,000
Estimated Annual Electricity Savings $4,271
Payback Period 4.68 Years

 

 

Example 5 – 8000w Off Grid System in Roatan, Honduras.

 

8000w Off Grid System
Cost of Electricity 0.52 /Kwh
System Size 8000 Watts
Peak Sun Hours 5 Hours
System Efficiency 75%
Installed Cost Per Watt $4.00
Rebate and Incentive % 0%
 
Initial Investment $20,000
Rebates and Incentives $0
Actual System Cost $20,000
Estimated Annual Electricity Savings $5,694
Payback Period 3.51 Years

 

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