How to use the solar payback calculator
- Enter the system size in kW and the energy made per kW per year. Use the estimate from your installer quote.
- Enter the electricity price you avoid, the system cost and any incentives you are sure to receive.
- Enter a yearly electricity price rise, a yearly output loss, yearly upkeep and the years to look at.
- Read the payback period, the savings in the first year and the net position after your chosen years.
Formula
Energy in year y = size x kWh per kW x (1 - output loss)^(y - 1)
Price in year y = price x (1 + yearly rise)^(y - 1)
Savings in year y = energy x price - upkeep
Payback = the year when total savings reach (cost - incentives), interpolated within the year
Net position = total savings so far - (cost - incentives).
A 7 kW system
A 7 kW system making 1,300 kWh per kW makes 9,100 kWh in year 1. At $0.17 a kWh and $100 of upkeep, savings are $1,447.00 in year 1. With a cost of $21,000, no incentives, 0.5% output loss a year and a flat price, the payback is 15.1 years and the net position after 25 years is $12,941.06.
A $6,300 incentive brings payback to about 10.4 years, and a 3% yearly price rise brings it to about 12.4 years.
What payback means
Simple payback is the time until the savings add up to what you paid. It does not count the time value of money, and it ignores what happens after payback, which is why the table also shows the net position over time. A system that pays back in 15 years and runs for 25 saves money overall, while a shorter life changes that.
The biggest uncertainties are the electricity price in future years and how much of your production offsets power you would buy. Test the price rise at 0% and at a few higher values.
Getting your inputs from real documents
Take the production estimate and cost from your installer quote and the price from your bill. Some places credit power you send to the grid at a different price from what you pay, and some bills have time-of-use pricing. This tool treats every kWh as replacing power you would buy at the price you enter, so adjust the price if that is not true for you.
For related numbers, see the electricity cost calculator, the ROI calculator and the battery life calculator. The BTU calculator helps size heating and cooling loads.
Assumptions and limits
- Production, prices, upkeep and rates are numbers you enter, and the examples are only samples.
- Every kWh made is assumed to replace a kWh you would have bought at the price you enter.
- Financing costs, inverter replacement, roof work, home value and export credit rules are not modeled.
- Incentives cannot be more than the system cost.
Frequently asked questions
How long does it take for solar panels to pay for themselves?
It depends on cost, how much energy the system makes, your electricity price and incentives. Enter your own numbers, and the tool shows the payback year and the savings by year.
What is output loss per year?
It is the small drop in energy a system makes each year as panels age. Use the figure from your warranty or installer, or 0 to ignore it.
Why does the tool say not within the years?
It means the savings in the years you chose do not add up to the net cost. Try a longer period or check your inputs.
Should I count incentives?
Only the ones you are sure to receive and for which you qualify. Their rules differ and may change, so check them before entering an amount.