Estimate your payback period and 25-year total savings from solar energy.
Net Investment:$0
Year 1 Savings:$0
Payback Period:0 Years
25-Year Net Profit:$0
How to Calculate Your Solar Return on Investment (ROI)
Understanding the financial implications of switching to solar power is crucial for homeowners. The Solar ROI represents the efficiency of your investment compared to continuing to pay monthly utility bills. To calculate this accurately, we must consider the net cost after federal tax credits (ITC) and local incentives.
The Core Formula
The math behind solar savings follows a specific path:
Net Cost: Total System Cost – (Total System Cost * Tax Credit Percentage).
Annual Savings: Annual Production × Electricity Rate ($/kWh).
Payback Period: Net Cost / Annual Savings.
Realistic Example
Imagine a homeowner in California installs a 6 kW system costing $18,000. With the 30% Federal Tax Credit, the net cost drops to $12,600. If the area receives 5 peak hours of sun daily and electricity costs $0.20/kWh, the system generates 10,950 kWh annually, saving $2,190 in the first year. The payback period would be approximately 5.75 years.
Factors That Influence Your Savings
Several variables impact the speed of your ROI:
Geographic Location: Higher peak sunlight hours directly increase energy production.
Utility Rates: In states with high electricity costs (like Hawaii or Massachusetts), solar pays for itself significantly faster.
Incentives: State-level SRECs (Solar Renewable Energy Certificates) and local utility rebates can shave years off the payback period.
Panel Degradation: Most panels lose about 0.5% efficiency per year, which we account for in long-term 25-year projections.
function calculateSolarROI() {
var totalCost = parseFloat(document.getElementById("systemCost").value);
var taxCredit = parseFloat(document.getElementById("taxCredit").value);
var sizeKw = parseFloat(document.getElementById("systemSize").value);
var sunHours = parseFloat(document.getElementById("sunlightHours").value);
var rate = parseFloat(document.getElementById("electricityRate").value);
var rateHike = parseFloat(document.getElementById("annualIncrease").value) / 100;
if (isNaN(totalCost) || isNaN(sizeKw) || isNaN(sunHours) || isNaN(rate)) {
alert("Please enter valid numeric values for all fields.");
return;
}
// 1. Calculate Net Cost
var netCost = totalCost – (totalCost * (taxCredit / 100));
// 2. Calculate Annual Production (kWh)
// We apply a standard 80% system efficiency factor for real-world conditions (wiring loss, inverter loss)
var annualKwh = sizeKw * sunHours * 365 * 0.8;
// 3. Year 1 Savings
var yearOneSavings = annualKwh * rate;
// 4. Calculate Payback Period and 25-year savings with rate inflation
var cumulativeSavings = 0;
var paybackPeriod = 0;
var currentRate = rate;
var total25YearSavings = 0;
var paybackFound = false;
for (var year = 1; year = netCost) {
paybackPeriod = year – 1 + ((netCost – (cumulativeSavings – yearlySavings)) / yearlySavings);
paybackFound = true;
}
currentRate *= (1 + rateHike); // Utility price inflation
}
var netProfit = total25YearSavings – netCost;
// Update Display
document.getElementById("solarResult").style.display = "block";
document.getElementById("netCostDisplay").innerText = "$" + netCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("yearOneSavingsDisplay").innerText = "$" + yearOneSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (paybackFound) {
document.getElementById("paybackDisplay").innerText = paybackPeriod.toFixed(1) + " Years";
} else {
document.getElementById("paybackDisplay").innerText = "> 25 Years";
}
document.getElementById("totalProfitDisplay").innerText = "$" + netProfit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}