Estimate your savings and return on investment for a residential solar system.
Net System Cost (after tax credit):$0.00
Estimated Payback Period:0 Years
25-Year Total Savings:$0.00
25-Year Net Profit:$0.00
How to Calculate Solar Panel ROI
Investing in solar panels is one of the most effective ways to reduce long-term household expenses while increasing property value. To understand your Return on Investment (ROI), you must look beyond the initial sticker price. The true cost of solar is the Net Cost, which accounts for the Federal Solar Tax Credit (currently 30% under the Inflation Reduction Act) and local state incentives.
The Payback Period Formula
The payback period is the time it takes for your cumulative energy savings to equal the net cost of the system. We use the following logic:
Net Cost: Total System Cost – (Total Cost × Tax Credit Percentage)
Annual Savings: Monthly Bill × 12
Payback Period: Net Cost ÷ Annual Savings (adjusted for annual utility inflation)
Example Calculation
If you purchase a solar system for $20,000:
Apply the 30% Federal Tax Credit: $20,000 – $6,000 = $14,000 Net Cost.
If your monthly bill is $150, your annual savings are $1,800.
Without considering rate hikes, your payback period is $14,000 / $1,800 = 7.7 years.
However, utility rates typically rise by 3-5% annually. This calculator factors in that inflation, which usually shortens the payback period and increases the total 25-year profit significantly.
Factors That Affect Your Returns
Several variables can shift your ROI timeline:
Roof Orientation: South-facing roofs in the northern hemisphere typically generate the most power.
Local Electricity Rates: The more you pay per kWh to your utility, the more you save by producing your own power.
Net Metering Policies: Some states allow you to sell excess energy back to the grid at retail rates, while others use lower "avoided cost" rates.
Financing: Paying cash yields the highest ROI, whereas solar loans involve interest payments that extend the payback period.
function calculateSolarROI() {
var cost = parseFloat(document.getElementById("systemCost").value);
var taxCreditPercent = parseFloat(document.getElementById("taxCredit").value);
var monthlyBill = parseFloat(document.getElementById("monthlySavings").value);
var annualIncrease = parseFloat(document.getElementById("utilityIncrease").value) / 100;
if (isNaN(cost) || isNaN(taxCreditPercent) || isNaN(monthlyBill) || isNaN(annualIncrease)) {
alert("Please enter valid numeric values for all fields.");
return;
}
// 1. Calculate Net Cost
var netCost = cost – (cost * (taxCreditPercent / 100));
// 2. Calculate Cumulative Savings over 25 years (Standard solar warranty life)
var cumulativeSavings = 0;
var currentAnnualSavings = monthlyBill * 12;
var paybackYear = 0;
var foundPayback = false;
for (var year = 1; year = netCost) {
// Linear interpolation for more accurate payback year
var overshoot = cumulativeSavings – netCost;
paybackYear = year – (overshoot / currentAnnualSavings);
foundPayback = true;
}
// Increase savings based on utility rate hikes
currentAnnualSavings *= (1 + annualIncrease);
}
var netProfit = cumulativeSavings – netCost;
// Display Results
document.getElementById("solarResults").style.display = "block";
document.getElementById("netCost").innerText = "$" + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (foundPayback) {
document.getElementById("paybackYears").innerText = paybackYear.toFixed(1) + " Years";
} else {
document.getElementById("paybackYears").innerText = "Over 25 Years";
}
document.getElementById("totalSavings").innerText = "$" + cumulativeSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("netProfit").innerText = "$" + netProfit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}