About the Solar Payback Calculator
This solar payback calculator estimates how long a home solar system takes to earn back its cost through lower electricity bills, and what it returns over its life. Enter the system size and installed price, any tax credit or rebate you qualify for, how much energy each kilowatt produces in your area and your electricity rate. It then projects year-by-year savings, allowing for utility rates that rise over time and panels that slowly lose output.
Use it to compare installer quotes, test whether solar still makes sense at your local rates, or see how much an incentive or a cheaper price per watt shortens the payback. The chart shows your cumulative cash position: it starts at minus the net cost and crosses zero in the payback year.
The model assumes every kWh the panels produce offsets electricity you would otherwise buy at your full rate (full retail net metering). If your utility credits exported power at a lower rate, lower the rate input to a blended value. As of 2026, the 30% US federal Residential Clean Energy Credit no longer applies to new home systems: it ended for expenditures made after December 31, 2025 (a system counts when its installation is completed), so the incentive defaults to 0%. Enter any state, local or utility incentives you do receive.
With the default inputs, the payback period is 11.1 years. Change any value above to recalculate instantly.
How to use the solar payback calculator
- 1Enter the system size and installed cost per watt from your quote.
- 2Add any tax credit percentage and cash rebates you qualify for.
- 3Enter yearly production per kW for your location (PVWatts can estimate it).
- 4Enter your electricity rate and how fast you expect it to rise.
- 5Read the payback period, total savings and ROI, and check the yearly table.
Formula and method
Net cost is system size × cost per watt, minus the percentage incentive and any cash rebates. Each year the panels produce kW × yearly production per kW, reduced by the degradation rate for every year of age, and every kWh is valued at that year’s electricity price, which grows by the yearly price increase. Maintenance is subtracted from each year’s savings.
The payback period is when cumulative savings first equal the net cost, interpolated within the year. Return on investment is total savings minus net cost, divided by net cost. The model ignores financing interest, inverter replacement (add it via maintenance), and the time value of money; a loan or lower export credits lengthen the payback.
- yield
- kWh produced per kW of panels in year one
- d
- Yearly panel degradation (0.005 = 0.5%)
- e
- Yearly electricity price increase
- t
- Year number (1 = first year)
Worked examples
7 kW system at $2.90/W with no incentive
The 7 kW system costs $20,300 and produces 9,450 kWh in year one, worth $1,606.50 at $0.17/kWh. With rates rising 3% a year and output falling 0.5%, cumulative savings pass $20,300 after about 11 years, and total about $54,800 over 25 years — a net gain of roughly $34,500.
Same system with a 30% credit and $1,000 rebate
A 30% incentive cuts $6,090 and the rebate another $1,000, leaving $13,210. The same savings stream now repays the cost in about 7.6 years, and the 25-year net gain rises to about $41,600.
High-rate state, 10 kW, $150 yearly maintenance
Ten kW producing 15,000 kWh at $0.30/kWh saves $4,500 minus $150 maintenance in year one. The $32,000 system pays back in about 7 years and saves roughly $101,000 over 20 years.
Frequently asked questions
What is a good solar payback period?+
Many US home systems pay back in roughly 6–12 years. Payback is shortest where electricity is expensive, sunshine is strong, installed prices are low and exported power is credited at full retail rates. Panels typically carry 25-year warranties, so anything well under that leaves years of free power.
Is the 30% federal solar tax credit still available?+
Not for new installations. The Residential Clean Energy Credit (IRS Form 5695) was 30% through 2025, but the One Big Beautiful Bill Act, signed in July 2025, ended it for expenditures made after December 31, 2025, and an expenditure counts as made when installation is completed. State, local and utility programs may still offer incentives.
How much do solar panels degrade each year?+
Most modern panels lose around 0.25–0.8% of their output per year; 0.5% is a common planning figure. Manufacturers usually warrant about 80–90% of original output after 25 years.
Does net metering affect payback?+
Yes. This calculator assumes every kWh is worth your full retail rate. If your utility pays less for power you export, such as California’s NEM 3.0, the effective value per kWh is lower and payback is longer unless you use most power on site or add a battery.
Should I include inverter replacement?+
String inverters often last 10–15 years and may cost $1,500–$3,000 to replace, while microinverters usually carry 25-year warranties. Spread an expected replacement across the years as a maintenance cost for a more conservative estimate.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.