Solar Panel ROI Calculator
Calculate your estimated payback period and 25-year savings.
How to Calculate Your Solar Return on Investment
Understanding the financial benefits of solar energy requires looking beyond the initial price tag. The Return on Investment (ROI) for solar panels is primarily driven by three factors: the net cost after incentives, your current electricity rates, and the annual increase in utility prices.
To use this calculator, start by entering the gross cost of your solar installation. Subtract any federal incentives, such as the Investment Tax Credit (ITC), which currently offers a significant reduction in system costs for eligible homeowners. Next, estimate how much of your electricity bill the solar panels will cover—most homeowners aim for a 90-100% offset.
Key Factors Influencing Your Payback Period
- Federal Tax Credit: The Residential Clean Energy Credit allows you to deduct 30% of your solar costs from your federal taxes.
- Local Utility Rates: Homeowners in states with high electricity costs (like California or Massachusetts) usually see a much faster ROI.
- Sunlight Exposure: The physical location and orientation of your roof dictate how many kilowatt-hours your system generates annually.
- Net Metering: If your utility provider offers net metering, you can earn credits for excess energy your panels send back to the grid.
Real-World ROI Example
Consider a $25,000 solar system. After the 30% federal tax credit ($7,500), the net cost drops to $17,500. If that homeowner previously paid $200 per month ($2,400/year) and solar covers 100% of their bill, the simple payback period is roughly 7.3 years. Given that most solar panels are warrantied for 25 years, the homeowner enjoys over 17 years of "free" electricity, potentially saving over $60,000 as utility rates continue to rise.