How to use the Solar Payback Calculator
Enter the installed price, any incentives you qualify for, your monthly electricity bill and how much of it the system will cover. The calculator grows the savings each year with power prices and finds the point where they add up to the net cost.
What sets your payback period
Three numbers do most of the work: the net cost after incentives, how much electricity the system replaces, and what you pay per kWh. The same system can pay back twice as fast in a state with expensive power as in one with cheap power, so use your own bill rather than a national average.
Rising power prices shorten payback
Each year solar saves you more if electricity prices keep rising. In the default example, a 20,000 system covering 90% of a 150 monthly bill pays back in about 10.7 years at a 3% yearly price rise, and saves roughly three times its cost over 25 years. Set the rise to 0% to see the cautious case.
Checking the share of your bill solar covers
Divide the system’s estimated yearly production in kWh, which an installer quote or a tool like NREL’s PVWatts gives you, by your yearly usage from your bills. Fixed connection charges stay on the bill even with solar, so the share of the bill covered is usually a little lower than the share of the energy.
The formula
Net cost = system cost − incentives. First-year savings = monthly bill × 12 × share covered. Savings in year n = first-year savings × (1 + price rise)^(n − 1). Payback is the year cumulative savings reach the net cost. ROI = (lifetime savings − net cost) ÷ net cost × 100.
Examples
- With the default values
Payback period: 10.66 years ROI over 25 years: 195.32% Net cost: 20,000 First-year savings: 1,620
- With system cost set to 40000
Payback period: 18.75 years ROI over 25 years: 47.66% Net cost: 40,000 First-year savings: 1,620
Limitations and assumptions
Assumes steady output and leaves out panel degradation (often around 0.5% a year), inverter replacement, maintenance, financing costs and how your utility credits power you export. Incentives change often, so check what applies where you live.
Frequently asked questions
How do you calculate solar payback?
Subtract incentives from the installed cost, then count how many years of electricity savings it takes to add up to that net cost. This calculator grows the savings each year with power prices and gives the payback to two decimal places.
How is solar ROI calculated?
Solar ROI = (lifetime savings − net cost) ÷ net cost × 100, over the life of the system you enter.
What is a good solar payback period?
Panels usually last 25 years or more, so a payback well inside that period leaves many years of savings. The shorter the payback compared with the system life, the better the investment.
Does this include battery storage?
Not separately. If you add a battery, include its cost in the system cost and only count the extra savings it brings, such as avoiding peak rates.