The solar payback period is the amount of time it takes for the savings on your electricity bills to equal the initial cost of installing a solar energy system. For most American homeowners, this "break-even point" occurs between 6 and 10 years after installation.
How to Calculate Solar ROI
To determine your solar return on investment, we use a multi-step formula that accounts for both initial expenses and long-term utility inflation:
Determine Net Cost: Subtract your Federal Solar Tax Credit (ITC) and local utility rebates from the gross installation price.
Calculate Annual Savings: Multiply your average monthly bill by your solar offset percentage, then multiply by 12.
Factor in Utility Inflation: Electricity rates typically rise by 2.5% to 5% annually. We compound your savings each year based on this rate.
Calculate Payback: Add the cumulative savings year-by-year until they exceed the Net Cost.
Realistic Solar Example
Factor
Typical Value
Average System Cost
$20,000 – $30,000
Federal Tax Credit (ITC)
30% of Gross Cost
Annual Electric Rate Increase
3% – 4%
Average Payback Window
7.5 Years
Key Factors Affecting Your Results
Several variables can speed up or slow down your solar payback period:
Local Electricity Rates: The more you pay your utility company per kWh, the more money you save by switching to solar.
Sunlight Exposure: Houses in Arizona will generally reach the break-even point faster than houses in Washington due to higher irradiance levels.
Financing: Paying cash yields the fastest payback period. If you take out a solar loan, interest payments will extend the time it takes to break even.
Net Metering Policies: If your state offers 1-to-1 net metering, you get full credit for the excess energy you send back to the grid.
function calculateSolarROI() {
var cost = parseFloat(document.getElementById('solarCost').value);
var rebate = parseFloat(document.getElementById('solarRebate').value);
var bill = parseFloat(document.getElementById('solarBill').value);
var offset = parseFloat(document.getElementById('solarOffset').value);
var increase = parseFloat(document.getElementById('solarIncrease').value) / 100;
if (isNaN(cost) || isNaN(rebate) || isNaN(bill) || isNaN(offset) || isNaN(increase)) {
alert("Please enter valid numbers in all fields.");
return;
}
var netCost = cost – rebate;
if (netCost <= 0) {
alert("Rebates cannot exceed the total cost.");
return;
}
var currentAnnualSavings = bill * 12 * (offset / 100);
var cumulativeSavings = 0;
var years = 0;
var total25YearSavings = 0;
// Calculate Payback Year
var tempSavings = currentAnnualSavings;
while (cumulativeSavings < netCost && years < 50) {
cumulativeSavings += tempSavings;
tempSavings *= (1 + increase);
years++;
}
// Calculate 25-Year Lifetime Savings
var lifetimeSavingsComp = 0;
var lifetimeAnnual = currentAnnualSavings;
for (var i = 0; i = 50 ? "50+" : years.toFixed(1);
document.getElementById('resSavings').innerText = '$' + total25YearSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}