Estimate your potential savings and payback period for a residential solar installation.
Net System Cost:
First Year Savings:
Estimated Payback Period:
25-Year Total Savings:
How to Calculate Your Solar Panel Return on Investment (ROI)
Investing in solar panels is not just an environmental decision; it is a significant financial strategy. To understand the true ROI, you must look beyond the initial price tag and consider the long-term energy savings against the net installation cost.
The Core Factors of Solar ROI
Net Installation Cost: This is the gross cost of panels, inverters, and labor minus the Federal Solar Tax Credit (ITC) and any local utility rebates.
Payback Period: The time it takes for your cumulative energy bill savings to equal the net cost of the system. Most US homeowners see a payback between 6 to 10 years.
Utility Inflation: Electricity rates typically rise by 2-4% annually. Solar locks in your rates, meaning your savings actually increase every year as utility prices climb.
Example Calculation
Imagine a system costing $18,000. With a 30% Federal Tax Credit ($5,400), your net cost is $12,600. If your monthly electricity bill is $150 and the solar panels cover 100% of your usage, you save $1,800 in the first year. Without considering rate hikes, your payback period would be roughly 7 years. However, when factoring in a 3% annual electricity price increase, that payback period often drops by several months.
Maximizing Your Investment
To get the best ROI, ensure your roof is in good condition before installation and choose high-efficiency panels that offer a lower degradation rate (the speed at which panels lose efficiency over time). Most modern panels are warrantied for 25 years, providing decades of "free" energy after the initial payback period is reached.
function calculateSolarROI() {
var systemCost = parseFloat(document.getElementById("systemCost").value);
var taxCredit = parseFloat(document.getElementById("taxCredit").value);
var monthlyBill = parseFloat(document.getElementById("monthlyBill").value);
var energyOffset = parseFloat(document.getElementById("energyOffset").value) / 100;
var elecIncrease = parseFloat(document.getElementById("elecIncrease").value) / 100;
var panelDegradation = parseFloat(document.getElementById("panelDegradation").value) / 100;
if (isNaN(systemCost) || isNaN(monthlyBill)) {
alert("Please enter valid numbers for cost and bill amounts.");
return;
}
var netCost = systemCost – taxCredit;
var firstYearSavings = monthlyBill * 12 * energyOffset;
var cumulativeSavings = 0;
var years = 0;
var foundPayback = false;
var paybackYear = 0;
var total25YearSavings = 0;
for (var i = 1; i = netCost) {
paybackYear = i – 1 + ((netCost – (cumulativeSavings – currentYearSavings)) / currentYearSavings);
foundPayback = true;
}
if (i === 25) {
total25YearSavings = cumulativeSavings – netCost;
}
}
document.getElementById("netCost").innerText = "$" + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("yearOneSavings").innerText = "$" + firstYearSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (foundPayback) {
document.getElementById("paybackPeriod").innerText = paybackYear.toFixed(1) + " Years";
} else {
document.getElementById("paybackPeriod").innerText = "Over 25 Years";
}
document.getElementById("longTermSavings").innerText = "$" + total25YearSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("solarResults").style.display = "block";
}