Solar Panel ROI & Savings Calculator
Estimate your solar payback period and long-term energy savings.
Understanding Your Solar Return on Investment (ROI)
Switching to solar energy is one of the most significant financial and environmental decisions a homeowner can make. But how do you know if the investment is truly worth it? Our Solar Panel ROI Calculator helps you break down the complex math into simple, actionable numbers.
How Solar Savings Are Calculated
To determine your solar ROI, we look at several key metrics. The formula relies on your geographic location (sun hours), the size of your installation, and your local utility rates.
1. Annual Production (kWh)
This is the total amount of electricity your panels generate in a year. We calculate this by multiplying the System Size (kW) by your Daily Sun Hours, 365 days, and an efficiency derate factor (typically 0.78 to account for inverter loss and wiring).
2. Payback Period
The payback period is the time it takes for your cumulative energy savings to equal the initial cost of the system. In the United States, the average solar payback period is between 6 and 10 years, depending on state incentives and local electricity prices.
Key Factors Affecting Solar ROI
- Federal Tax Credit (ITC): Currently, the federal government offers a 30% tax credit on solar installations, which drastically reduces the net cost.
- Net Metering: This allows you to sell excess energy back to the grid, speeding up your ROI.
- Panel Orientation: South-facing roofs typically yield the highest energy production in the northern hemisphere.
- Utility Rate Inflation: As utility companies raise their rates (usually 2-3% per year), your solar savings actually increase over time.
Example Calculation
If you install a 7kW system in a region with 5 sun hours per day at a cost of $20,000, and your electricity rate is $0.16/kWh:
- Annual Production: ~9,960 kWh
- Annual Savings: ~$1,593
- Payback Period: ~12.5 years (before incentives)
- With the 30% Federal Tax Credit, the cost drops to $14,000, bringing the payback down to 8.7 years.