Solar energy systems are a fantastic asset for homeowners. When you invest in a solar system for your home, it’s only a matter of time before it pays for itself.
Solar energy systems in Pennsylvania are paying for themselves in record time due to falling equipment costs, rising energy prices, and rising SREC prices. For savvy investors who want to see a fast return on their investment, there’s never been a better time to invest in solar.
This article explains how solar energy systems pay for themselves in Pennsylvania, the incentives available to shorten the payback period, and why solar energy systems now pay for themselves faster than ever before.
Why Solar System Payback is “Better Than Ever”
When Exact Solar began installing solar systems in 2005, it took much longer for solar energy systems to pay for themselves in Pennsylvania. There weren’t as many incentives in the early 2000s, and solar equipment was much more expensive.
Even before the 2020s, it was normal to see 11 to 15-year payback periods in Pennsylvania.
Today, the Inflation Reduction Act is in place, the state government is actively working to update renewable energy policy in PA, and utility bills are set to rise dramatically.
Because of these factors, Pennsylvania solar energy systems now pay for themselves in 6 to 8 years.
Introduction to Solar Payback Period
The solar payback period is the amount of time it takes for your solar system to “pay for itself.” Here’s how it works: When you install solar panels, you’re making an upfront investment. After the system is running, it starts saving you money by reducing your electricity bills, since the energy it generates comes from the sun, not the grid. On top of that, many people qualify for incentives like tax credits or rebates, which further offset the cost.
Over time, these monthly savings and incentives add up. The payback period is the point when those savings equal the amount you spent on the system. For example, if your system costs $15,000 and you save $1,500 each year, your payback period would be about 10 years. After that, any savings you earn are pure financial benefits because the system has already paid for itself.
From the day your system is turned on, home solar systems save money through:
Each of these incentives contributes to the solar energy system paying for itself in different ways. We’ll explain each in more depth later in the article.
Once the solar energy system has saved and earned the homeowner more money than they spent on it, they own it outright. From then on, the homeowner owns the entire solar energy system and associated energy savings, net metering incentives, SREC credits, and raised home value.
Until recently, the average payback period in Pennsylvania wasn’t as competitive as in neighboring states like New Jersey. However, in the last few years, specific state policies and incentives, combined with falling installation costs, have dramatically shortened the solar payback period in PA.
Solar equipment costs have dropped significantly over the past decade, making installing a system more affordable than ever. According to the National Renewable Energy Laboratory (NREL), the average cost of solar has dropped by nearly 70% since 2010.
There’s never been a better time for Pennsylvanians to go solar!
“With the election behind us, there’s no reason to be on the sidelines with solar. 2025 is going to be a great solar year in Pennsylvania! Fundamentally, the solar payback period is better than ever. Projects that took 9-14 years to pay for themselves a few years ago are paying for themselves in record time. Lower installation costs, higher utility bills, and the state legislature government working to raise SREC rates have all contributed. If you thought about solar a few years ago but couldn’t quite make the numbers work, now is the time to get an updated solar quote.”
– Doug Edwards, President of Exact Solar
How Solar Energy Systems Pay for Themselves
In Pennsylvania, solar energy systems pay for themselves through raised home value, energy savings, the Federal Solar Investment Tax Credit, net metering, and SRECs.
Once a homeowner receives permission to operate (PTO) and turns their system on, they almost immediately reap the benefits.
Increased Home Value
According to a 2024 study by Solar Reviews (adding data to and updating a 2019 study by Zillow), homes with solar panels sell for 6.8% more than comparable homes without solar. If we take a hypothetical $500,000 house as an example, the homeowner would earn an extra $34,000 in equity just from this one home investment.
The reason for this is simple: who wouldn’t want to buy a house with drastically reduced electricity bills?
Energy Savings
Solar energy systems save money by allowing homeowners to generate their own electricity instead of buying it from the power company. Once installed, the system uses sunlight to produce electricity for your home, which can significantly reduce, or even eliminate, your monthly electricity bill. Over the system’s lifetime, this adds up to substantial savings. Depending on your energy usage, you could save thousands of dollars over the system’s lifetime by relying on the sun to power your home.
Federal Solar Investment Tax Credit
The Federal Solar Investment Tax Credit, or ITC, is a valuable benefit for homeowners who go solar. It allows you to deduct 30% of the total cost of your solar installation from your federal taxes. For example, if your solar system costs $20,000, the ITC allows you to subtract $6,000 from your taxes. This reduces your upfront cost and drastically reduces your solar system’s payback period.
Pennsylvania’s State Solar Incentives
In Pennsylvania, two key programs help make solar even more affordable: net energy metering and Solar Renewable Energy Certificates (SRECs).
- Net Energy Metering
Homeowners can think of net energy metering as “banking” power with the utility company. If your solar system generates more electricity than your home uses, the extra power is sent to the utility grid. Your utility company gives you credit for this excess energy, which can reduce your future electricity bills. It’s a simple way to ensure you get full value from all the energy your system produces.
- Solar Renewable Energy Certificates (SRECs)
There are seven eastern states, including Pennsylvania, that have SREC programs. The acronym “SREC” stands for Solar Renewable Energy Credit. For every 1,000 kilowatt-hours (kWh) your solar panels produce, you earn an SREC. These credits can be sold to utility companies, who need them to meet renewable energy requirements. This creates an extra income stream for you, further lowering the overall cost of your solar investment.
“Payback begins the second you flip the switch to turn on your solar system, and it does not stop for more than 30 years! Right now, you are shelling out dollars every minute of every day that goes right to the big utility companies. The minute you go solar, this does a 180-degree reversal, and you start taking in money (and it does not stop).”
– David Hammes, Sales Engineer at Exact Solar
Understanding Net Metering
During the summertime, solar energy systems often generate more electricity than homeowners need during the longer, sunnier days. In contrast, during the shorter, darker winter months, solar systems typically produce less energy, requiring homeowners to draw electricity from the utility grid to meet their needs.
Pennsylvania’s net metering policy ensures that homeowners with solar energy systems can make the most of their energy production year-round. When your solar panels produce more electricity than your home uses—like on a bright summer afternoon—the surplus energy is sent back to the utility grid. This extra energy is tracked using a bi-directional meter, which measures both the electricity you consume from the grid and the surplus energy your solar system sends back.
The benefit of net metering is that you earn kilowatt-hour (kWh) credits for this surplus energy. These credits are applied to your account and can be used to offset the cost of electricity you use later, such as at night, on cloudy days, or during the winter months. In Pennsylvania, these credits are valued at the full retail rate, meaning the energy you send to the grid is worth the same as the energy you use from it.
The bi-directional meter plays a crucial role in this process. When your system produces more energy than your home consumes, the meter “spins backward,” recording those excess kWh as credits. When your home uses more energy than your solar panels produce—like during the night—the meter “spins forward,” measuring the electricity you draw from the grid. This ensures that you only pay for the net amount of electricity used, if any, after your credits are applied.
Pennsylvania also allows meter aggregation for homeowners or businesses with multiple properties, which is especially useful. This policy lets you apply the surplus solar energy produced at one property to offset electricity use at another property, as long as both are within two miles and served by the same utility. This is particularly beneficial for entities with several buildings or operations nearby.
Net metering makes solar energy more accessible and valuable by ensuring you get full credit for every kilowatt-hour your system produces, helping you save on your electric bills and maximize your investment in clean energy.
Understanding Solar Renewable Energy Certificates (SRECs)
When a solar energy system generates 1,000 kilowatt-hours (kWh) of electricity, equivalent to one megawatt-hour, the system’s owner earns a Solar Renewable Energy Certificate (SREC). Each SREC represents proof that the system produced a specific amount of renewable energy, and the owner can sell these certificates for additional income.
In Pennsylvania, homeowners can sell their SRECs to utility companies, helping to lower their solar system’s payback period. This is possible because some states have Renewable Portfolio Standard (RPS) programs, which require utilities to source a portion of their electricity from renewable energy. Utility companies in states with SREC programs buy credits from solar system owners to meet their renewable energy targets.
Because the value of an SREC isn’t fixed, it depends on supply and demand in each state. For example, in Washington, D.C., where aggressive renewable energy goals create high demand, SRECs can sell for around $360 each. In contrast, Ohio’s market, with less demand, may value an SREC as low as $4. In Pennsylvania, SRECs currently sell for about $35 per credit. If you’re curious about up-to-date values in different states, websites like SRECTrade.com offer helpful resources.
Homeowners typically sell their SRECs through SREC aggregators, which are companies that handle the process of selling credits to utilities in exchange for a fee. While direct sales to utilities are possible, most utilities prefer working with aggregators to simplify the process.
The income from selling SRECs can add up quickly and significantly shorten the time it takes for a homeowner to recoup their solar system investment, making solar energy even more financially rewarding.
Case Study: A Homeowner Whose Solar System Has Almost Paid for Itself
Five years ago, one of Exact Solar’s customers in Pennsylvania installed a rooftop solar system. While writing this article, we checked in with him to see how it’s performing, and the results speak for themselves! Here’s a quick comparison of his energy costs before and after going solar:
Before Going Solar
He paid an average of $200 each month for electricity. Month after month, his money went straight to the utility company without any long-term benefit.
After Going Solar
Now, he only pays a small $10 monthly “connection fee” to stay linked to the grid. That’s just $120 a year! On top of that, his solar system actually earns him money.
Here’s a breakdown of the financial benefits he’s seen since installing his system:
- He claimed $12,000 back in the first year thanks to the 30% federal tax credit.
- His utility company sends him a check every year for the extra electricity his system generates, amounting to $300–$400 annually.
- Depending on the time of year, he earns $30–$90 a month by selling Solar Renewable Energy Certificates (SRECs), totaling $650–$800 a year.
In just five years, his solar system has earned him over $5,000 through surplus power and SREC income. On top of that, he’s eliminated his $200/month power bill, saving at least $12,000 so far.
Since installing his system only five years ago, it has already saved and earned him over $29,000 of the initial $40,000 cost. At this pace, the system will fully pay for itself in just over seven years. After that, he’ll enjoy more than 2 decades of free power!
Solar Loans and Financing Options
Solar energy systems are premium products that need to be custom-designed for each home or business. Like most significant investments, they often come with a higher upfront cost. However, financing options can help reduce that initial expense, making solar more accessible to homeowners.
We’ve partnered with Clean Energy Credit Union to provide our customers with the best possible financing terms. They specialize in offering solar loans with favorable conditions that help make solar energy more affordable. To learn more, check out our detailed guide on how to get the best solar financing: Why Clean Energy Credit Union is the Best Solar Lender.
Here are the three primary ways Pennsylvanians can finance their solar systems:
1. Cash Purchases
Paying for a solar system upfront is the fastest way to save money. With no interest charges or financing fees, cash purchases offer the quickest path solar payback. However, this option requires having the financial resources available, which many homeowners may not have.
2. Solar Loans
With solar loans, homeowners borrow money to cover the upfront cost of their solar system. The energy savings typically offset monthly loan payments, so many homeowners start seeing financial benefits right away. One of the advantages of a solar loan is that the monthly payment remains the same throughout the life of the loan. This means homeowners don’t have to worry about rising electricity rates, which can increase over time with traditional utility providers. Over time, once the loan is paid off, homeowners fully own their system and continue saving on electricity for decades.
3. Power Purchase Agreements (PPAs)
A Power Purchase Agreement (PPA) allows homeowners to lease a solar system and pay for the energy it generates, rather than the system itself. While this option eliminates upfront costs, it doesn’t offer the same long-term financial benefits as owning a system. For this reason, Exact Solar only offers PPAs in very specific circumstances where it makes the most sense for the homeowner.
How to Calculate Your Solar Payback Period
“Payback is a function of how much power is offset by the system. It varies based on how efficient the panels are, how much shading the roof gets, and several other factors. Let’s say you had a 10 kw system with un-shaded panels facing due south. That’s an optimal system. In that scenario, if you’re in Pennsylvania and you’re earning $35 SRECS, you’d pay for this in 6-8 years.”
– Michael Bloom, Sales Engineer at Exact Solar
Calculating the payback period for a solar system involves considering a few factors, and it can be a detailed process. In this section, we’ll walk you through how to calculate the solar payback period. Keep in mind that the numbers used here are hypothetical, and your specific costs and quotes will vary depending on the size of your system and the equipment you choose.
To calculate the payback period, we’ll need to gather a few key pieces of information. When you meet with one of Exact Solar’s experienced sales engineers for a personalized quote, they will clearly explain all of these details and walk you through the process step by step.
NOTE: The example below is for illustrative purposes only and may not reflect every customer’s experience. Calculating electricity usage and properly sizing a solar system involves several factors, and each home’s needs and system requirements will vary.
Utility Bill Cost
Utility bills can vary significantly from home to home. Homes that use more energy or face higher utility rates will typically see a faster return on their investment in a solar energy system. For this example, let’s assume the homeowner spends an average of $250 per month ($3,000 per year) on electricity, using about 10,000 kWh annually, which is around the national average for household energy use.
When sizing a solar energy system, the goal is usually to design it to offset as close to 100% of the customer’s energy usage as possible. In this case, we’ll design a solar system that generates 10,000 kWh per year, effectively covering the full amount of the homeowner’s electricity needs each year.
Initial Installation Cost
This is the total upfront cost of the solar energy system. After designing the system using our solar proposal software, we see that a system capable of offsetting 10,000 kWh per year will cost $32,526.
Tax Credit
As part of the Inflation Reduction Act, homeowners can receive a 30% tax credit on the total cost of their solar system the year after they receive permission to operate. For a system that costs $32,526, 30% of that amount is calculated by multiplying $32,526 by 0.30, which equals $9,757.70. This homeowner will be able to claim $9,757.70 as a credit against their tax liability.
Net System Cost
The net system cost is the amount the homeowner will actually pay for the system after applying the 30% tax credit. To calculate this, we subtract the tax credit value from the total installation cost. In this case, $32,526 minus $9,757.70 equals $22,268. After claiming the $9,757.70 tax credit, the homeowner will pay $22,268 for their solar system.
Energy Savings
Energy savings can fluctuate each month, depending on factors like system size, how much sunlight the home’s roof gets, and current electricity rates. A solar system typically produces more energy in the summer than in the winter. In the warmer months, the system may cover the entire utility bill, and even generate extra savings. In winter, the homeowner may need to pay a little more if the system doesn’t produce enough power to meet the demand.
For our example, the home solar energy system is designed to offset about $250 per month, or $3,000 per year, in electricity costs. However, since the system will likely not cover the small interconnection fees, we estimate the homeowner saves $2,600 each year.
Net Metering
Net metering helps reduce the overall cost of going solar by allowing homeowners to earn credits for any surplus energy their system produces. The credits accumulate when the system generates more energy than the home needs, such as on sunny days, and can be used to offset electricity consumption during times when the system isn’t producing enough, like at night or in winter.
For this example, we’ll assume that the homeowner’s system earns them $200 per year in net metering credits. This helps further reduce their overall electricity costs and shortens their payback period.
Solar Renewable Energy Credits (SRECs)
SRECs, or Solar Renewable Energy Certificates, are earned based on the amount of energy a solar system produces. For every 1,000 kWh (kilowatt-hours) of electricity generated, the system earns one SREC.
In this example, the homeowner’s system generates enough energy to earn them $25 per month, or $300 per year, through SRECs.
Calculating the Payback Period
Now, let’s put it all together!
The homeowner started with a $32,526 total system cost. After applying the 30% tax credit of $9,757.70, their net system cost is reduced to $22,268.
To determine the payback period, we need to calculate how long it will take for the solar system to save and generate $22,268 through available incentives.
Here’s how we do it:
- First, we add up the yearly savings and earnings from incentives:
- $2,600 saved annually on utility bills$300 earned annually from SRECs$200 earned annually from net metering credits
- Now, divide the system’s net cost ($22,268) by the total yearly incentives ($3,100):
$22,268 ÷ $3,100 = 7.18 years.
That’s even before considering the increased home value, which is much more difficult to quantify.
Remember, this is not something you’ll need to do alone. When you meet with a reputable solar contractor, they’ll walk you through the costs and explain every part of your payback period in depth.
Get Started With a Free Proposal Today
When calculating solar costs and trying to estimate incentives and pricing on your own, things can get tricky.
The best way to learn exactly how long a solar energy system on your Pennsylvania property will take to pay for itself is to talk to a reputable solar installer and let them review the numbers with you. If you’re ready to get started, reach out to Exact Solar today for a free consultation! Our team has over 20 years of experience in the solar industry, and we are ready to guide you every step of the way.