Solar Panel ROI Calculator
Net System Cost:
Estimated Annual Production:
Year 1 Savings:
Payback Period:
25-Year Net Profit:
Understanding Solar Return on Investment (ROI)
Investing in solar panels is not just an environmental choice; it is a major financial decision. To accurately calculate your ROI, you must look beyond the sticker price and consider the "Net Cost" after incentives, the production capacity of your local climate, and the rising cost of grid electricity.
Key Factors in the Calculation
- The Federal Solar Tax Credit (ITC): As of 2024, the federal government offers a 30% tax credit on the total cost of your solar installation. This is a dollar-for-dollar reduction in your income tax liability.
- Peak Sun Hours: This is not just "daylight." It is the intensity of sunlight that reaches 1,000 watts per square meter. Most US states range between 3.5 and 6.0 peak sun hours per day.
- System Derate Factor: No solar system is 100% efficient. Energy is lost through wiring, inverters, and dust. Our calculator uses a standard 78% efficiency factor to provide a realistic production estimate.
- Utility Inflation: Traditionally, utility rates increase by 2% to 4% annually. As grid power becomes more expensive, your solar savings become more valuable over time.
Example ROI Scenario
Suppose you install a 6.0 kW system costing $18,000. After a 30% federal tax credit ($5,400), your net investment is $12,600. If you live in an area with 4.5 peak sun hours and pay $0.16 per kWh, your system will generate roughly 7,686 kWh per year, saving you approximately $1,230 in the first year. In this scenario, your system pays for itself in roughly 9 to 10 years, leaving 15+ years of pure profit during the remaining lifespan of the panels.
How to Increase Your ROI
To maximize your return, ensure your roof is clear of shade, keep panels clean from debris, and shift high-energy tasks (like laundry or EV charging) to the middle of the day when production is at its peak if your utility uses "Time-of-Use" (TOU) billing.