Solar Panel Payback & ROI Calculator
Net System Cost (after credits):
$0.00
Estimated Annual Production:
0 kWh
Estimated Annual Savings:
$0.00
Payback Period:
0 Years
25-Year Total ROI:
0%
How to Calculate Solar Panel ROI
Investing in solar panels is one of the most effective ways to reduce your carbon footprint while securing long-term financial returns. To understand the true value of your investment, you must calculate the Solar Payback Period and the Return on Investment (ROI).
The Payback Period is the amount of time it takes for the electricity savings generated by your system to equal the initial net cost of installation. Most residential systems in the United States currently see a payback period between 6 and 10 years.
Key Factors in Solar Math
- Total System Cost: This includes panels, inverters, mounting hardware, and labor.
- Incentives: The Federal Investment Tax Credit (ITC) currently allows you to deduct 30% of your solar installation costs from your federal taxes.
- Production Efficiency: Most systems operate at roughly 75-80% efficiency due to factors like wire loss, inverter conversion, and dust. Our calculator uses a standard 78% derate factor for accuracy.
- Peak Sun Hours: This is not just "daylight," but the intensity of the sun. Southwestern states may see 6 hours, while Northeastern states may average 4 hours.
Example Calculation
Imagine a homeowner in California installs a 6kW system for $18,000. After a 30% tax credit ($5,400), the net cost is $12,600. If the system produces 9,000 kWh per year and electricity costs $0.22/kWh, the annual savings are $1,980. The payback period would be roughly 6.3 years ($12,600 / $1,980).