Estimate your savings, payback period, and long-term return on investment for a solar PV system.
Net System Cost (after credits):
Estimated Annual Savings (Year 1):
Estimated Payback Period:
25-Year Total Savings:
25-Year Net Profit:
Understanding Solar Return on Investment (ROI)
Investing in solar panels is more than just an environmental choice; it's a significant financial decision. The Return on Investment (ROI) for solar determines how long it will take for the system to pay for itself through electricity bill savings and what your total profit will be over the lifespan of the hardware (typically 25 years).
Key Factors Influencing Your Solar ROI
The Federal Solar Tax Credit (ITC): Currently, the residential clean energy credit allows you to deduct 30% of the cost of installing solar panels from your federal taxes. This drastically reduces the "Net Cost."
Peak Sun Hours: This isn't just daylight hours. It refers to the intensity of sunlight. For example, Arizona has higher peak sun hours than Washington state, meaning the same size system produces more energy and pays for itself faster in sunnier climates.
Utility Electricity Rates: The more your utility company charges per kilowatt-hour (kWh), the more money you save by producing your own power. ROI is typically higher in states with high electricity costs.
System Degradation: Solar panels slightly lose efficiency over time (usually about 0.5% per year). This calculator accounts for standard efficiency loss in long-term projections.
Example Calculation
Let's look at a realistic scenario for a mid-sized home:
Gross Cost: $18,000
30% Tax Credit: -$5,400
Net Investment: $12,600
If this system generates $1,500 worth of electricity per year, the simple payback period would be 8.4 years ($12,600 / $1,500). However, as utility rates rise by 3-5% annually, the payback period often happens even faster.
How to Improve Your Solar ROI
To maximize your return, ensure your roof is in good condition before installation to avoid removal and re-installation costs later. Additionally, consider "load shifting"—running heavy appliances like dishwashers and dryers during peak sun hours to maximize the direct use of your solar energy.
function calculateSolarROI() {
var cost = parseFloat(document.getElementById("systemCost").value);
var taxCreditPercent = parseFloat(document.getElementById("taxCredit").value);
var size = parseFloat(document.getElementById("systemSize").value);
var sunHours = parseFloat(document.getElementById("sunHours").value);
var price = parseFloat(document.getElementById("elecPrice").value);
var hike = parseFloat(document.getElementById("annualIncrease").value) / 100;
if (isNaN(cost) || isNaN(size) || isNaN(sunHours) || isNaN(price)) {
alert("Please enter valid numbers in all fields.");
return;
}
// 1. Calculate Net Cost
var netCost = cost – (cost * (taxCreditPercent / 100));
// 2. Calculate Annual Energy Production (kWh)
// Formula: Size (kW) * Sun Hours * 365 days * 0.78 (Standard system derate factor for losses)
var annualProduction = size * sunHours * 365 * 0.78;
// 3. Year 1 Savings
var year1Savings = annualProduction * price;
// 4. Payback Period & 25-Year Projection
var cumulativeSavings = 0;
var paybackYear = 0;
var total25YearSavings = 0;
var currentPrice = price;
var foundPayback = false;
for (var year = 1; year = netCost) {
paybackYear = year – 1 + ((netCost – (cumulativeSavings – yearlySave)) / yearlySave);
foundPayback = true;
}
currentPrice *= (1 + hike); // Utility price inflation
if (year === 25) {
total25YearSavings = cumulativeSavings;
}
}
var netProfit = total25YearSavings – netCost;
// Display Results
document.getElementById("solarResult").style.display = "block";
document.getElementById("netCostDisplay").innerHTML = "$" + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("annualSavingsDisplay").innerHTML = "$" + year1Savings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (foundPayback) {
document.getElementById("paybackDisplay").innerHTML = paybackYear.toFixed(1) + " Years";
} else {
document.getElementById("paybackDisplay").innerHTML = "> 25 Years";
}
document.getElementById("totalSavingsDisplay").innerHTML = "$" + total25YearSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("netProfitDisplay").innerHTML = "$" + netProfit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Smooth scroll to result
document.getElementById("solarResult").scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}