6.60 Interest Rate Calculator

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Solar Panel ROI & Payback Calculator

Financial Summary

Net System Cost:

Annual Energy Production: kWh

Year 1 Savings:

Payback Period: Years

25-Year Total Savings:

Total Return on Investment:

function calculateSolarROI() { var systemSize = parseFloat(document.getElementById('systemSize').value); var totalCost = parseFloat(document.getElementById('totalCost').value); var utilityRate = parseFloat(document.getElementById('utilityRate').value); var taxCreditPercent = parseFloat(document.getElementById('taxCredit').value); var sunHours = parseFloat(document.getElementById('sunHours').value); var degradation = parseFloat(document.getElementById('degradation').value) / 100; if (isNaN(systemSize) || isNaN(totalCost) || isNaN(utilityRate) || isNaN(sunHours)) { alert("Please enter valid numerical values."); return; } // Calculations var federalIncentive = totalCost * (taxCreditPercent / 100); var netCost = totalCost – federalIncentive; // Typical system efficiency factor is around 0.75 to 0.80 var annualProduction = systemSize * sunHours * 365 * 0.78; var year1Savings = annualProduction * utilityRate; var paybackPeriod = netCost / year1Savings; var totalSavings25 = 0; var currentProduction = annualProduction; for (var i = 1; i <= 25; i++) { totalSavings25 += (currentProduction * utilityRate); currentProduction = currentProduction * (1 – degradation); } var netProfit = totalSavings25 – netCost; var roiPercent = (netProfit / netCost) * 100; // Display results document.getElementById('resultsArea').style.display = 'block'; document.getElementById('resNetCost').innerText = '$' + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resProduction').innerText = Math.round(annualProduction).toLocaleString(); document.getElementById('resYear1Savings').innerText = '$' + year1Savings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resPayback').innerText = paybackPeriod.toFixed(1); document.getElementById('resTotalSavings').innerText = '$' + totalSavings25.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resROI').innerText = roiPercent.toFixed(1) + '%'; }

How Solar ROI is Calculated

Investing in solar panels is a long-term financial decision. To determine if solar is right for your home, you must look beyond the initial installation price and focus on the Payback Period and Net Return on Investment (ROI).

Key Variables in the Calculation

  • System Size: Measured in kilowatts (kW), this is the power capacity of your panels. A standard residential system is usually between 5kW and 10kW.
  • Federal Solar Tax Credit (ITC): As of 2024, the federal government offers a 30% tax credit on the total cost of your solar system installation, significantly lowering the net cost.
  • Sun Hours: This isn't just daylight; it's the equivalent hours per day of "peak" sunlight. Southern states like Arizona have higher sun hours than northern states like Washington.
  • System Degradation: Solar panels lose a tiny bit of efficiency every year (usually 0.5%). Our calculator accounts for this to give a realistic 25-year savings projection.

Example Scenario

Imagine a homeowner in California installs a 7kW system for $21,000. After the 30% Federal Tax Credit ($6,300), the Net Cost is $14,700. If their utility rate is $0.20/kWh and they receive 5 hours of peak sun daily, the system produces roughly 9,960 kWh per year, saving them $1,992 annually. The payback period would be roughly 7.4 years. Over 25 years, even with panel degradation, the total savings would exceed $45,000, representing a massive profit over the initial investment.

Is Solar a Good Investment?

Generally, if your payback period is under 10 years, solar is considered an excellent financial investment. Beyond the direct utility savings, solar panels also often increase property value and provide a hedge against future utility rate hikes, which historically average 2-3% increases per year.

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