Solar Panel Savings & Payback Calculator
Calculation Summary
How Solar Panel ROI is Calculated
Deciding to switch to solar is a significant financial decision. This calculator helps you estimate the Return on Investment (ROI) by looking at your local energy production potential and current utility costs. The math behind your savings involves several critical factors:
- Daily Production: We multiply your system size (kW) by the average peak sun hours in your area. We apply a standard 75% efficiency factor to account for inverter losses, wiring, and panel degradation.
- Net Cost: The total upfront cost minus the Federal Solar Tax Credit (currently 30% through the Inflation Reduction Act).
- Payback Period: The time it takes for your cumulative energy savings to equal the net cost of the system.
Key Variables Affecting Your Results
While this calculator provides a strong baseline, your real-world results may vary based on:
- Roof Orientation: South-facing roofs in the northern hemisphere typically produce 15-20% more energy than east/west configurations.
- Shading: Trees, chimneys, or nearby buildings can significantly reduce output even if only one panel is affected.
- Local Incentives: Many states and utility companies offer additional SRECs (Solar Renewable Energy Certificates) or cash rebates not included in this tool.
- Electricity Rate Inflation: Utility rates historically rise by 2-3% per year, which actually shortens your payback period over time.
Example Calculation
If you install a 7 kW system in a region with 5 sun hours per day, and pay $0.18/kWh:
Your system produces roughly 26.25 kWh daily (after efficiency losses). This saves you $4.72 per day, or about $141 per month. If the net cost after tax credits is $15,000, your payback period would be approximately 8.8 years. Given that most panels are warrantied for 25 years, you would enjoy over 16 years of "free" electricity.