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Solar Panel ROI & Payback Calculator

Gross price before incentives.
Include 30% Federal ITC + local rebates.
Standard residential is 6-10 kW.
Check your utility bill for rate.

Investment Summary

Net System Cost

$0

Payback Period

0 Years

25-Year Net Savings

$0

*Assuming average sunlight of 1,450 peak sun hours per year and 0.5% annual panel degradation.

function calculateSolarROI() { var cost = parseFloat(document.getElementById('solar_cost').value); var incentives = parseFloat(document.getElementById('solar_incentives').value) || 0; var size = parseFloat(document.getElementById('solar_size').value); var rate = parseFloat(document.getElementById('solar_rate').value); if (isNaN(cost) || isNaN(size) || isNaN(rate) || cost <= 0 || size <= 0 || rate <= 0) { alert("Please enter valid positive numbers for cost, size, and electricity rate."); return; } var netCost = cost – incentives; // Average US production factor is roughly 1450 kWh per kW installed per year var annualProduction = size * 1450; var yearOneSavings = annualProduction * rate; var payback = netCost / yearOneSavings; // Calculate 25 year savings with 0.5% annual degradation and 3% electricity price inflation var totalSavings = 0; var currentRate = rate; var currentProduction = annualProduction; for (var i = 1; i <= 25; i++) { totalSavings += (currentProduction * currentRate); currentProduction *= 0.995; // 0.5% degradation currentRate *= 1.03; // 3% utility inflation } var net25YearProfit = totalSavings – netCost; document.getElementById('res_net_cost').innerText = "$" + netCost.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('res_payback').innerText = payback.toFixed(1) + " Years"; document.getElementById('res_total_savings').innerText = "$" + net25YearProfit.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('solar_results').style.display = 'block'; }

Understanding Your Solar Return on Investment

Switching to solar energy is one of the most significant financial decisions a homeowner can make. Unlike traditional home improvements, a solar photovoltaic (PV) system is a revenue-generating asset that pays for itself over time through avoided utility costs.

How the Solar Payback Period is Calculated

The "payback period" is the time it takes for the cumulative electricity bill savings to equal the net cost of the solar installation. To calculate this, we use the following formula:

Payback Period = (Gross System Cost – Incentives) / (Annual Energy Production x Utility Rate)

Key Factors Affecting Your ROI

  • Federal Investment Tax Credit (ITC): As of 2024, the federal government offers a 30% tax credit on the total cost of your solar system. This is a dollar-for-dollar reduction in your federal income tax liability.
  • Sunlight Hours: A 10kW system in Arizona will produce significantly more electricity than the same system in Washington state. Our calculator uses a standard average of 1,450 peak sun hours per year.
  • Utility Rates: The more you currently pay for electricity, the faster your solar system will pay for itself. If your utility company implements frequent rate hikes, your ROI increases every year.
  • Net Metering: This policy allows you to send excess energy back to the grid in exchange for credits on your bill. Without net metering, you may need a battery storage system to maximize ROI.

Example Calculation

Imagine a typical 8 kW system costing $24,000. After the 30% Federal Tax Credit ($7,200), the net cost is $16,800. If that system produces 11,600 kWh per year and your local rate is $0.18/kWh, you save $2,088 in the first year. This results in a payback period of approximately 8.0 years. Over a 25-year lifespan, even accounting for slight panel degradation, the total net profit can exceed $40,000.

Is Solar a Good Investment in 2024?

With electricity prices rising and the cost of solar hardware decreasing, the financial case for solar has never been stronger. Most systems are warrantied for 25 years, meaning after the initial payback period, you enjoy 15-20 years of essentially "free" electricity, shielding your household from future energy inflation.

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