Solar Panel Payback Calculator
Calculate how long it takes for your solar investment to pay for itself through energy savings.
Total cost after tax credits and rebates
Estimated Annual Production:
0 kWh
Estimated Annual Savings:
$0.00
Payback Period:
0 Years
25-Year Net Profit:
$0.00
Understanding Solar Panel Payback
The solar payback period is the time it takes for the savings on your electricity bills to equal the initial cost of installing a solar energy system. For most American homeowners, this period typically ranges from 6 to 10 years, depending on location and local utility rates.
How to Calculate Your Solar ROI
To determine your payback period, we use a specific formula that accounts for system efficiency and environmental factors:
- Step 1: Determine Net Cost. Take the gross cost of your solar installation and subtract the 30% Federal Investment Tax Credit (ITC) and any local state rebates.
- Step 2: Calculate Annual Production. Multiply your system size (kW) by your average daily peak sun hours, then multiply by 365 days. We apply a 0.78 efficiency factor to account for inverter losses and wiring.
- Step 3: Calculate Value. Multiply your annual kWh production by your current utility electricity rate.
- Step 4: The Payback Ratio. Divide the Net Cost by the Annual Savings.
Example Calculation
Imagine a homeowner in Arizona installs a 7kW system. The gross cost is $21,000. After the 30% federal tax credit, the net cost is $14,700. With 5.5 peak sun hours per day, the system produces roughly 11,000 kWh per year. If electricity costs $0.14/kWh, the annual savings are $1,540. The payback period would be $14,700 / $1,540 = 9.5 years.
Factors That Influence Your Results
Several variables can speed up or slow down your return on investment:
- Electricity Rates: The more your utility charges for power, the more money you save by producing your own, leading to a faster payback.
- Incentives: State-level Performance Based Incentives (PBIs) or Solar Renewable Energy Certificates (SRECs) can significantly increase your annual income.
- Roof Orientation: South-facing roofs produce the most energy in the Northern Hemisphere. North-facing roofs may increase the payback period by 2-3 years.
- Financing: Paying cash results in the fastest payback. If you take out a solar loan, interest payments will extend the time it takes to break even.