Solar Panel ROI Calculator
Net Installation Cost:
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Annual Energy Production:
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Year 1 Savings:
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Payback Period (Break-even):
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25-Year Net Profit:
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How to Calculate Your Solar Return on Investment (ROI)
Switching to solar energy is a significant financial decision. Understanding your Solar ROI helps you determine how quickly the system pays for itself and how much you will save over the 25 to 30-year lifespan of the panels. The calculation involves more than just subtracting your bill; you must account for system degradation, rising utility costs, and local incentives.
Example Calculation:
If you install a 6kW system costing $15,000 and receive a 30% Federal Tax Credit ($4,500), your net cost is $10,500. If that system produces 9,000 kWh per year and your utility charges $0.15/kWh, you save $1,350 in the first year. Without considering rate increases, your payback period would be roughly 7.7 years.
If you install a 6kW system costing $15,000 and receive a 30% Federal Tax Credit ($4,500), your net cost is $10,500. If that system produces 9,000 kWh per year and your utility charges $0.15/kWh, you save $1,350 in the first year. Without considering rate increases, your payback period would be roughly 7.7 years.
Key Factors Affecting Your Solar Payback
- Sun Exposure: Areas like Arizona receive more peak sun hours than Washington state, meaning the same size system produces more energy and pays back faster in sunnier climates.
- Local Electricity Rates: The more your utility company charges per kilowatt-hour, the more valuable every watt your solar panels produce becomes.
- Incentives: The Federal Solar Tax Credit (ITC) currently allows homeowners to deduct a significant percentage of installation costs from their federal taxes.
- Net Metering: This policy allows you to send excess energy back to the grid in exchange for credits, effectively using the grid as a battery.
Understanding the Results
Net Cost: This is your out-of-pocket expense after applying the federal tax credit and any local state rebates.
Annual Production: Calculated by multiplying your system size (kW) by your daily peak sun hours and an efficiency factor (usually around 78% to account for inverter losses and wiring).
Payback Period: The number of years it takes for your cumulative electricity savings to equal the net cost of the solar system. Most residential systems in the US hit break-even between 6 and 10 years.