Solar Panel Payback & ROI Calculator
Estimate your savings and find out how many years it will take for your solar investment to pay for itself.
Net System Cost (After Tax Credit):
Annual Electricity Savings:
Payback Period:
25-Year Total Savings:
How to Calculate Your Solar Payback Period
The solar payback period is the time it takes for the energy cost savings generated by a solar power system to equal the initial cost of installing the system. For most homeowners in the United States, this typically ranges between 6 to 10 years.
To calculate this manually, we use the following steps:
- Gross Cost: The total price of the equipment, labor, and permits.
- Net Cost: Subtract the Federal Investment Tax Credit (ITC) and any local rebates from the gross cost.
- Annual Savings: Multiply your average monthly bill by the percentage your solar panels will cover (offset), then multiply by 12.
- Payback Calculation: Divide the Net Cost by the Annual Savings.
Example Calculation
If you install a system costing $15,000 and qualify for a 30% Federal Tax Credit, your net cost is $10,500. If your monthly electricity bill is $150 and your solar panels cover 100% of your usage, you save $1,800 per year. Your payback period would be $10,500 / $1,800 = 5.8 years.
Factors That Impact Your ROI
While the calculator provides a solid estimate, several factors can accelerate or slow down your return on investment:
- Electricity Rates: If utility prices rise (which they typically do by 2-3% annually), your payback period will shorten.
- Net Metering: Policies that allow you to sell excess energy back to the grid at retail rates significantly improve ROI.
- SREC Incentives: In some states, you can earn Solar Renewable Energy Certificates for the power you produce, adding a second stream of income.
- System Degradation: Most solar panels lose about 0.5% efficiency per year, which is accounted for in long-term savings projections.