Estimate the ROI and payback period of your photovoltaic system.
Please enter valid positive numbers for all fields.
Net System Cost (after incentives):
First Year Savings:
Payback Period:
Total Lifetime Savings (Projected):
Total Return on Investment (ROI):
Internal Rate of Return (IRR/Annualized):
function calculateSolarROI() {
var sysCost = parseFloat(document.getElementById('solarSystemCost').value);
var incentives = parseFloat(document.getElementById('incentives').value);
var monthlyBill = parseFloat(document.getElementById('monthlyBill').value);
var offset = parseFloat(document.getElementById('billOffset').value);
var inflation = parseFloat(document.getElementById('energyInflation').value);
var lifespan = parseInt(document.getElementById('lifespan').value);
var errorDiv = document.getElementById('errorMsg');
var resultsDiv = document.getElementById('results');
if (isNaN(sysCost) || isNaN(incentives) || isNaN(monthlyBill) || isNaN(offset) || isNaN(inflation) || isNaN(lifespan) || sysCost < 0 || monthlyBill < 0) {
errorDiv.style.display = 'block';
resultsDiv.style.display = 'none';
return;
}
errorDiv.style.display = 'none';
// 1. Calculate Net Cost
var netCost = sysCost – incentives;
// 2. Calculate First Year Savings
// Monthly Bill * 12 months * (Offset / 100)
var firstYearSavings = monthlyBill * 12 * (offset / 100);
// 3. Loop through lifespan to calculate Payback and Total Savings
var cumulativeSavings = 0;
var paybackYears = -1;
var currentYearSavings = firstYearSavings;
var inflationDecimal = inflation / 100;
for (var i = 1; i = netCost) {
// simple linear interpolation for fractional year
var prevCumulative = cumulativeSavings – currentYearSavings;
var remaining = netCost – prevCumulative;
var fraction = remaining / currentYearSavings;
paybackYears = (i – 1) + fraction;
}
// Increase savings by energy inflation rate for next year
currentYearSavings = currentYearSavings * (1 + inflationDecimal);
}
// 4. Calculate ROI Percentage
// ROI = (Total Savings – Net Cost) / Net Cost * 100
var netProfit = cumulativeSavings – netCost;
var roiPercent = (netProfit / netCost) * 100;
// 5. Estimate IRR (Internal Rate of Return)
// This is complex iteratively, but we can approximate or use a simplified CAGR based on total return
// CAGR = (End Value / Start Value)^(1/n) – 1
// Here Start Value is Net Cost, End Value is Cumulative Savings
var irr = 0;
if (netCost > 0 && cumulativeSavings > 0) {
irr = (Math.pow((cumulativeSavings / netCost), (1 / lifespan)) – 1) * 100;
}
// Display Results
document.getElementById('resNetCost').innerText = "$" + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resAnnualSavings').innerText = "$" + firstYearSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (paybackYears > 0 && paybackYears <= lifespan) {
document.getElementById('resPayback').innerText = paybackYears.toFixed(1) + " Years";
} else {
document.getElementById('resPayback').innerText = "Not reached in " + lifespan + " years";
}
document.getElementById('resTotalSavings').innerText = "$" + cumulativeSavings.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
document.getElementById('resROI').innerText = roiPercent.toFixed(2) + "%";
document.getElementById('resIRR').innerText = irr.toFixed(2) + "%";
resultsDiv.style.display = 'block';
}
Understanding Your Solar Rate of Return
Installing a solar photovoltaic (PV) system is not just an environmental decision; it is a significant financial investment. Unlike a car that depreciates or a kitchen renovation that offers subjective value, solar panels generate measurable cash flow in the form of electricity bill savings. This Solar Rate of Return Calculator helps you evaluate the financial performance of a solar installation by comparing the upfront costs against the long-term savings, adjusted for rising energy prices.
How Solar ROI is Calculated
To accurately determine the Return on Investment (ROI) for solar, several specific variables must be analyzed. It is not as simple as dividing the cost by the monthly bill, because electricity prices rise over time (inflation) and tax incentives drastically reduce the initial liability.
Net System Cost: This is the total invoice price of the installation minus any federal Investment Tax Credits (ITC), state rebates, or local utility incentives. The lower your net cost, the higher your rate of return.
Bill Offset: Most systems are designed to offset 100% of your usage, but some may offset less due to roof space, or more to account for future electric vehicle charging.
Energy Inflation: Electricity rates historically rise by about 2% to 4% annually. This calculator compounds your savings annually to reflect the avoided cost of future, more expensive electricity.
Interpreting the Results
When you run the numbers, you will receive three critical metrics that define the success of your solar investment:
1. Payback Period
The payback period is the time it takes for the cumulative savings on your electric bill to equal the Net System Cost. In many US states with high electricity rates, this is typically between 5 to 9 years. Once the payback period is reached, the electricity generated is essentially "free" profit for the remainder of the system's life.
2. Total Lifetime Savings
Solar panels typically have a warrantied lifespan of 25 years. This metric sums up every dollar saved over that period. Because utility rates rise over time, the savings in year 20 are significantly higher than in year 1. It is not uncommon for a system costing $20,000 to yield over $60,000 in lifetime savings.
3. Solar ROI and IRR
ROI (Return on Investment) represents the total percentage profit over the system's life. IRR (Internal Rate of Return) is the annualized effective interest rate you earned on your money. If your solar IRR is 10%, it is financially comparable to putting that money into a stock market fund that yields a steady 10% annual return, tax-free (since savings are not taxed income).
Example Scenario
Consider a homeowner in a state with average sunlight and electricity costs:
System Cost: $20,000
Tax Credit (30%): -$6,000
Net Cost: $14,000
Average Monthly Bill: $150
With a 3.5% annual increase in electricity rates, this system might achieve a payback period of roughly 7 years. Over 25 years, the homeowner could save over $50,000, resulting in an ROI exceeding 250%. This demonstrates why solar is often viewed as a low-risk, high-yield financial product.