Solar Panel ROI & Payback Calculator
Estimate your savings and return on investment for a home solar installation.
Understanding Solar ROI: Is It Worth It?
Switching to solar energy is more than just an environmental choice; it is a significant financial investment. To determine if solar is right for your home, you must look beyond the initial price tag and focus on the Payback Period and the Return on Investment (ROI).
Key Factors in Solar Calculations
- System Size (kW): The capacity of your solar array. A standard residential system is usually between 5kW and 10kW.
- Cost per Watt: The total installed cost divided by the wattage. As of 2024, the US average is roughly $2.50 to $3.50 per watt.
- Sun Hours: Not all daylight is created equal. "Peak sun hours" refer to the intensity of sunlight that produces the most energy.
- Incentives: The Federal Investment Tax Credit (ITC) currently allows homeowners to deduct 30% of the installation cost from their federal taxes.
Example Calculation
If you install a 7 kW system at $3.00 per watt, your gross cost is $21,000. With a 30% Federal Tax Credit ($6,300), your net cost drops to $14,700.
If your local electricity rate is $0.16/kWh and you receive 5 sun hours per day, your system generates roughly 12,775 kWh per year, saving you approximately $2,044 annually. In this scenario, your payback period would be roughly 7.2 years. Given that most panels are warrantied for 25 years, you would enjoy over 17 years of essentially free electricity.
How to Use This Calculator
1. Find your usage: Check your utility bill for your average kWh rate.
2. Get a quote: Use a ballpark figure like $3.00 per watt if you don't have a formal quote yet.
3. Check Sun Hours: Residents in Arizona may get 6 hours, while those in Seattle might average 3.5 hours.
4. Review ROI: The "25-Year Net Profit" accounts for the money you would have otherwise paid to the utility company, factoring in the rising costs of energy over time.