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Solar Panel ROI & Payback Calculator

Typical home systems are 5kW to 10kW.
Gross price before incentives.
Look at your last electricity bill.
US average is roughly 4 to 5.5 hours.
Current Residential Clean Energy Credit.

Calculation Results

Net System Cost:

Annual Energy Production: kWh

Estimated Yearly Savings:

Payback Period: Years

25-Year Net Profit:

25-Year ROI:

function calculateSolarROI() { var size = parseFloat(document.getElementById('systemSize').value); var cost = parseFloat(document.getElementById('systemCost').value); var rate = parseFloat(document.getElementById('utilityRate').value); var sun = parseFloat(document.getElementById('sunHours').value); var credit = parseFloat(document.getElementById('taxCredit').value); if (isNaN(size) || isNaN(cost) || isNaN(rate) || isNaN(sun) || isNaN(credit)) { alert("Please enter valid numeric values in all fields."); return; } // Calculation Logic // 0.78 is a standard derate factor accounting for inverter efficiency, wiring loss, and dirt var annualProduction = size * sun * 365 * 0.78; var yearlySavings = annualProduction * rate; var netCost = cost – (cost * (credit / 100)); var paybackYears = netCost / yearlySavings; // 25-year calculation (assuming 0.5% annual panel degradation) var totalSavings25 = 0; var currentProduction = annualProduction; for (var i = 0; i < 25; i++) { totalSavings25 += (currentProduction * rate); currentProduction *= 0.995; // 0.5% degradation } var netProfit = totalSavings25 – netCost; var roiPercent = (netProfit / netCost) * 100; // Display Results document.getElementById('resNetCost').innerText = "$" + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resProduction').innerText = Math.round(annualProduction).toLocaleString(); document.getElementById('resYearlySavings').innerText = "$" + yearlySavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resPayback').innerText = paybackYears.toFixed(1); document.getElementById('resProfit').innerText = "$" + netProfit.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('resROI').innerText = Math.round(roiPercent) + "%"; document.getElementById('results').style.display = "block"; }

How to Calculate Solar Panel ROI

Switching to solar energy is a significant investment, but understanding the Return on Investment (ROI) helps determine if it's financially sound for your home. The solar payback period is the time it takes for the electricity bill savings to cover the initial cost of the system.

The Solar ROI Formula

To calculate your solar ROI manually, we look at the following components:

  • Net Cost: Total system price minus the 30% Federal Investment Tax Credit (ITC) and any local rebates.
  • Annual Production: Calculated as: System Size (kW) × Peak Sun Hours × 365 Days × Efficiency Factor (usually 0.75-0.80).
  • Annual Savings: Annual Production (kWh) × Your Utility Electricity Rate ($/kWh).
  • Payback Period: Net Cost ÷ Annual Savings.

Key Factors Affecting Your Savings

Several variables can speed up or slow down your return on investment:

  1. Local Electricity Rates: The higher your current utility rate, the more money you save for every kWh your solar panels produce.
  2. Sun Exposure: Homes in Arizona or California will typically see a faster ROI than those in Washington or Maine due to higher "Peak Sun Hours."
  3. Incentives: The Federal Tax Credit currently covers 30% of the cost. Some states offer additional SRECs (Solar Renewable Energy Certificates) or cash rebates.
  4. Degradation: Solar panels lose a small amount of efficiency each year (usually about 0.5%). Our calculator accounts for this over a 25-year period.

Example Calculation

Imagine a homeowner installs a 7kW system for $21,000.

  • After the 30% Federal Tax Credit, the Net Cost is $14,700.
  • If the area gets 5 sun hours per day, the system produces roughly 10,000 kWh per year.
  • At an electricity rate of $0.16/kWh, the annual savings are $1,600.
  • The Payback Period would be 9.2 years ($14,700 / $1,600).

Since most solar panels are warrantied for 25 years, this homeowner would enjoy over 15 years of "free" electricity, resulting in tens of thousands of dollars in pure profit.

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