Solar Panel Payback & ROI Calculator
Investment Summary
Net System Cost:
Annual Generation: kWh
First Year Savings:
Payback Period: Years
25-Year Net Profit:
Return on Investment (ROI): %
Understanding Your Solar Investment Return
Switching to solar energy is one of the most significant financial decisions a homeowner can make. Beyond the environmental benefits, the primary driver for many is the long-term financial gain. To accurately determine if solar is "worth it," you must calculate the Return on Investment (ROI) and the payback period.
Key Factors in Solar Calculations
- System Size (kW): The total capacity of your solar panels. A standard residential system usually ranges between 5kW and 10kW.
- Production Ratio: This represents how much electricity (kWh) your panels produce for every kilowatt (kW) of capacity. In sunny areas like Arizona, this might be 1,600, while in cloudy regions, it might be 1,100.
- Federal Tax Credit (ITC): As of current laws, the Residential Clean Energy Credit allows you to deduct 30% of your solar installation costs from your federal taxes.
- Utility Rates: The more you pay your utility company per kilowatt-hour, the more money your solar panels save you.
How to Use This Calculator
To get the most accurate result, look at your recent electricity bill to find your "Price per kWh." Then, obtain a quote from a local installer for the "Total System Cost." Our calculator factors in a 0.5% annual panel degradation—the standard rate at which solar panel efficiency slightly decreases over time—to give you a realistic 25-year profit projection.
Example Scenario
Imagine a homeowner in Florida installing a 7kW system for $21,000. With the 30% tax credit, the net cost drops to $14,700. If their utility rate is $0.14/kWh and the system produces 10,500 kWh annually, they save $1,470 in the first year. Their payback period would be roughly 10 years, and over 25 years, they could see a net profit exceeding $25,000.