Solar Panel ROI & Payback Calculator
Estimate your potential savings and return on investment for a home solar installation.
Net Investment Cost:
$0.00
Year 1 Savings:
$0.00
Payback Period:
0.0 Years
25-Year Net Profit:
$0.00
Return on Investment (ROI):
0%
How to Calculate Solar Panel ROI
Understanding the financial viability of solar panels requires looking at three core factors: the net cost of the system, the annual electricity production, and the local utility rates. Our calculator uses these variables to determine exactly how long it will take for the system to pay for itself.
Key Variables in the Calculation
- System Size: Measured in kilowatts (kW), this is the total capacity of your panels. A standard residential system is usually between 5kW and 12kW.
- Gross Cost vs. Net Cost: The gross cost is the total price paid to the installer. The net cost subtracts the Federal Investment Tax Credit (ITC)—currently 30%—and any local state rebates.
- Solar Yield: This is how much energy each kW of installed solar produces annually. In sunny regions like Arizona, this might be 1,600 kWh/kW, while in cloudy regions, it might be 1,100 kWh/kW.
- Payback Period: The number of years it takes for your cumulative energy savings to equal the net cost of the installation. Most US homeowners see a payback between 6 and 10 years.
Example ROI Scenario
Let's say you install a 10kW system for $30,000. After applying the 30% Federal Tax Credit ($9,000), your net investment is $21,000. If your system produces 14,000 kWh per year and your electricity rate is $0.15/kWh, you save $2,100 in the first year. Without considering utility rate hikes, your payback period would be exactly 10 years ($21,000 / $2,100).
Why Utility Inflation Matters
Electricity prices historically rise by about 2.5% to 3% annually. This means every year you own your solar panels, the energy they produce becomes more valuable. This calculator accounts for that inflation, which typically shortens the payback period and significantly increases the 25-year lifetime ROI.