Making solar panels ROI (return on investment) is something many Canadians are looking into financially. The cost of electricity in Canada can be more than a few loonies or toonies per day. After all, the Great White North is a vast country with many provinces and territories. So how can homeowners calculate a solar panel’s ROI to determine whether solar panel installation is worth the expense?
Let’s learn more about solar panels' ROI and how investing in solar in Canada can provide tax incentives and lower energy bills.
What Is the Average Cost of Solar in Canada?
There are two main factors to consider when calculating the average solar panel’s ROI in Canada. The first factor is the cost per watt installed, and the second is the size of the solar panel system your property would require. Once you know these two numbers (and your area’s peak sunlight hours), it’s easy to know if the solar panels' ROI is worth the upfront expense.
Cost Per Watt Installed
When all 13 provinces and territories are averaged out, the cost of installing a solar energy system in Canada amounts to just over $3 per watt or $22,500 for a 7.5kW system. The province with the lowest solar panels installation cost per watt is Ontario, ranging from $2.34 to $2.59, while Nunavut comes in at the most expensive with an average of over $4 per watt.
These numbers are averages per province or territory, with solar installers determining what they charge in each area. Most solar companies will charge less if you want a system larger than 7.5kW installed, while premium equipment will cost you more.
To know what size system your home needs, you’ll need to know how much energy you use in a year. That way, you can make sure to choose a system with enough energy output to cover your electricity bills.
If you glance over your utility bill, you should be able to find how many kWh (kilowatt-hours) you used that month. Now, if you want to be as accurate as possible, you’ll need to go back over the last 12 months of energy bills and add them all up to get a total. Otherwise, you could take just one month and multiply it by 12, but this doesn’t account for seasonal changes.
For Canadian homes with gas heating, your yearly total will likely be between 7,500kWh and 15,000Kwh. If you use electric heaters in your home, you’re probably going to range between 20,000kWh and 35,000kWh. If you feel like the calculations you’re making aren’t accurate, utility companies can provide better details for you if you give them a call.
What to Expect During Your Initial Consultation and Quote
To start this process, you will go to the contractor’s website. From there, it should be pretty easy to find a form or other contact information to set up an appointment with the solar installation contractor. This first meeting should be free and come with no obligations for you. During this consultation, your solar installation contractor may do any of the following:
Now, knowing your home’s yearly energy use is a must, but you’ll have to compare that to your location’s peak sun hours or full sunlight hours to calculate how much energy output your new system needs to generate. The average number of peak sun hours in Canada can range anywhere from 950 hours (Yukon Territory) to 1,330 hours (Saskatchewan), so it’s best to find this information for your exact location to get the best results.
At this point, they will also tell you how much a solar installation could potentially save you. If this number is disappointing to you, keep in mind that solar contractors must consider several factors. For example, a home may appear to have plenty of sun exposure in early spring, but significant shading might occur as nearby trees fill out over the late spring and summer. Your contractor will be able to predict these events and adjust your assessment accordingly.
Total Cost Calculation
With all of your data in hand, you can finally know the total cost of installing solar energy in your home and know if your solar panels’ ROI is worth it. To do this, use this equation:
Yearly energy use (in kWh) / annual average of full sunlight hours (in hours) = Size of system needed (in kW)
As an example, let’s say you live in Quebec, which receives an average of 1,183 sunlight hours annually, and you calculated your yearly electricity use to be 10,000kWh. That gives us the equation:
10,000kWh / 1,183h = 8.45kW
To install a solar energy system that produces at least 8.45kW per year, you would multiply the watt-hours by the average cost per watt installed for Quebec, $2.56 - $2.83, to get a grand total of:
8,450 watts x $2.56 - $2.83/watt = $21,632 - $23,914
That means your upfront cost of installing a solar panel system would range between $21,632 and $23,914. If doing all these calculations makes your head hurt, you can also check out Renogy’s solar panel calculator for assistance.
With this information, you can know your solar panels' ROI一once you learn a bit more about tax incentives and rebates along with net metering!
How Do You Financially Benefit from Solar Panels?
If you’re looking at the numbers above and thinking, “solar panels ROI? More like a solar money pit!” you’re not alone. Many people gawk at the initial cost of installing solar, and it puts them off. However, much like buying your home, investing in solar takes some upfront payments that can be hefty.
The way solar panels' ROI works, just like any return on investment, you have to put money into it to get money out of it. The two most financially beneficial ways solar panels' ROI increases are through offsetting your energy consumption and earning feed-in tariffs for excess energy.
Offsetting Your Energy Consumption
One of the significant advantages of going solar is that you start earning back your money as soon as you flip the switch. With this level of energy independence, you don’t have to worry about increasing electricity rates or monthly changes in your bill because you won’t have one! Under the right conditions, your solar energy system can completely eliminate your monthly electricity expenses, saving you hundreds or even thousands per year.
Feed-In Tariff for Excess Energy
Another financial perk to solar is potentially getting money back through a feed-in tariff offered by the local or provincial government. Governments are setting renewable energy goals and want to find ways to motivate residents to get on board.
For solar energy, governments will determine a preset amount to pay homeowners for any additional electricity their solar home produces. These payments are generally set up over 15 or 20 years and allow everyone to benefit. The homeowner provides additional energy to the grid and gets paid for it (you can store additional energy in solar batteries), and the government promotes renewable energy sources.
What Is the Average Payback Period for Solar Panels in Canada?
Now that we’ve covered some of the immediate financial benefits of installing solar panels, what about the average payback period? Figuring out your payback period helps you know your solar panels' ROI more accurately and can help convince you they’re worth it in the long run.
Most solar panels' efficiency lasts for at least 30 years, so they would need to pay for themselves in that amount of time even to be considered an investment. Thankfully, many systems have a payback period between 8 and 16 years, allowing them to double their payback period.
How Is the Solar Panel Payback Period Calculated?
As is the case with all solar panels' ROI calculations, knowing your estimated payback period is specific to your home’s energy usage and exact location. Some other factors play a role in your payback period, including:
Tax Credits, Rebates, and Incentives
On top of everything already covered, available tax credits, rebates, and incentives in your area can also affect your solar panels' ROI and the payback period. Unfortunately, Canada does not currently have a federal tax credit for solar energy, but some provinces, such as Ontario, do. Your local government may also offer rebates on equipment or installation costs, while some companies and organizations provide incentives for renewable energy use.
These certifications may not be available in every area. They may not be mandatory, either. However, they can be an extra indicator of quality and reputation. Additionally, this is another way to determine that your solar installation contractor has earned the trust of that certifying body.
For more details about what is available in your province or territory, click here
Like feed-in tariffing, net metering allows homeowners with a solar setup to sell electricity back to the main grid as a form of cost savings. The main difference between feed-in tariffing and net metering is that feed-in tariffing requires you to install an additional meter in your home’s system. Plus, feed-in tariffing is a long-term agreement between the homeowner and the government that all extra energy produced will go to the government for a fixed rate over many years.
With net metering, the rate is based on the current kWh rate of the utility grid, and programs use only one meter to measure the amount of electricity your home produces compared to how much gets sent back to the grid. The meter then subtracts the difference from your homeowner’s monthly utility bill.
To learn more about net metering in Canada, check out this page.
Any investment you make, whether it’s buying a home, paying into a retirement fund, or installing solar panels, ROI plays an essential role in deciding if it’s the right choice for you financially. Solar panels’ ROI currently makes them a medium to long-term investment, but with new technologies and more efficient designs continually coming out, staking a claim in the industry will fiscally benefit you sooner than you may think.