Answer first
What this calculator tells you
Estimate the payback period and 25-year net savings of a solar system after incentives. Test a quote by checking how long the savings take to repay what you spend. Formula: Payback (years) = (system cost × (1 − incentive)) ÷ annual savings; annual savings = annual kWh × price per kWh. At the worked-example inputs, the simple payback is 8.2 years. Holding every other input steady, moving electricity price per kwh from $0.14 to $0.20 moves the result from 7.0 years to 10.0 years.
Transparent method
The formula
Test a quote by checking how long the savings take to repay what you spend.
Worked example
Example inputs
How to interpret the result
Payback is the cost after incentives divided by the yearly savings. An $18,000 system with a 30 percent credit costs $12,600. At 9,000 kilowatt-hours and 17 cents a unit, that saves $1,530 a year and pays back in about eight years. The 25-year figure trims each year's output a little, because panels fade, so it lands lower than eight times 25 would suggest.
At the worked-example inputs the simple payback is 8.2 years. It rises with system cost before incentives and falls as electricity price per kwh, annual production (kwh) and tax credit or incentive increase; yearly output decline does not move it.
Real energy use depends on how the appliance or vehicle is actually run: duty cycle, weather, driving style, battery age and your utility's rate structure, including tiers and time-of-use pricing. Treat the result as a planning estimate and check it against your own bill or trip log.
Before you rely on it
What to check
Confirm the incentive still applies to your system and your tax situation, and use your real rate, since it changes the payback more than any other input.
The common error
Where people go wrong with solar payback calculator
Holding the electricity price flat forever or assuming it climbs forever. Both are guesses, so run the number at a lower and a higher rate before you sign.
Sensitivity evidence
How electricity price per kwh changes the simple payback
Holding every other input at the worked-example value, moving electricity price per kwh from $0.14 to $0.20 moves the simple payback from 7.0 years to 10.0 years: a spread of 3.0 years, or 36% of the worked-example result.
| Electricity price per kWh | Simple payback | Cost after incentive | Net savings over 25 years |
|---|---|---|---|
| $0.14 | 10.0 years | $12,600 | $17,080 |
| $0.15 | 9.3 years | $12,600 | $19,201 |
| $0.17worked example | 8.2 years | $12,600 | $23,441 |
| $0.19 | 7.4 years | $12,600 | $27,681 |
| $0.20 | 7.0 years | $12,600 | $29,801 |
Every input, tested
Which input moves the simple payback most
Of the 5 inputs, electricity price per kwh moves the simple payback most (2.0 years across the range tested) and tax credit or incentive moves it least (0.5 years). Yearly output decline does not change it at all.
| Input | Tested from | To | Simple payback at each end | Swing |
|---|---|---|---|---|
| Electricity price per kWh | $0.15 | $0.19 | 9.3 years to 7.4 years | 2.0 years (24%) |
| Annual production (kWh) | 8,100 | 9,900 | 9.2 years to 7.5 years | 1.7 years (20%) |
| System cost before incentives | $16,200 | $19,800 | 7.4 years to 9.1 years | 1.6 years (20%) |
| Tax credit or incentive | 28.0% | 32.0% | 8.5 years to 8.0 years | 0.5 years (5.7%) |
| Yearly output decline | 0.250% | 0.750% | 8.2 years to 8.2 years | none |
Two variables at once
Simple payback by electricity price per kwh and system cost before incentives
Across the grid the simple payback runs from 5.6 years to 12.0 years. Moving electricity price per kwh from $0.14 to $0.20 shifts it by 3.0 years at the middle column, and moving system cost before incentives from $14,400 to $21,600 shifts it by 3.3 years at the middle row, so system cost before incentives is the bigger lever here.
| Electricity price per kWh \ System cost before incentives | $14,400 | $18,000 | $21,600 |
|---|---|---|---|
| $0.14 | 8.0 years | 10.0 years | 12.0 years |
| $0.15 | 7.5 years | 9.3 years | 11.2 years |
| $0.17 | 6.6 years | 8.2 years | 9.9 years |
| $0.19 | 5.9 years | 7.4 years | 8.8 years |
| $0.20 | 5.6 years | 7.0 years | 8.4 years |
The highlighted cell is the worked example: 8.2 years.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| System cost before incentives | $18,000 | Enter the system cost before incentives used in this calculation. |
| Tax credit or incentive | 30.0% | The share of the cost that comes back as a credit or rebate. |
| Annual production (kWh) | 9,000 | Enter the annual production (kwh) used in this calculation. |
| Electricity price per kWh | $0.17 | Enter the electricity price per kwh used in this calculation. |
| Yearly output decline | 0.500% | Panels lose a little output each year. |
| Simple payback | 8.2 years | |
| Cost after incentive | $12,600 | |
| Net savings over 25 years | $23,441 | |
Inputs, definitions and assumptions
System cost before incentives
Enter the system cost before incentives used in this calculation. The prefilled worked-example value is $18,000.
Tax credit or incentive
The share of the cost that comes back as a credit or rebate. The prefilled worked-example value is 30.0%.
Annual production (kWh)
Enter the annual production (kwh) used in this calculation. The prefilled worked-example value is 9,000.
Electricity price per kWh
Enter the electricity price per kwh used in this calculation. The prefilled worked-example value is $0.17.
Yearly output decline
Panels lose a little output each year. The prefilled worked-example value is 0.500%.
How to use this calculator
- 1Verify the inputs. Gather system cost before incentives, tax credit or incentive, annual production (kwh), electricity price per kwh and yearly output decline from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the simple payback at 8.2 years. Store your own version of it as Scenario A.
- 3Test one change. Start with electricity price per kwh, the input with the biggest effect here: moving electricity price per kwh from $0.15 to $0.19 takes the simple payback from 9.3 years to 7.4 years, a swing of 24% of the worked-example figure.
- 4Check the extremes. At half the example electricity price per kwh ($0.09) the simple payback is 16.5 years; at double ($0.34) it is 4.1 years.
People also ask
Frequently asked questions
How do you calculate solar payback?
Payback (years) = (system cost × (1 − incentive)) ÷ annual savings; annual savings = annual kWh × price per kWh. Enter system cost before incentives in dollars, tax credit or incentive in percent, electricity price per kwh in dollars and yearly output decline in percent (30 means 30%). At the worked-example inputs the simple payback is 8.2 years.
What does the solar payback result mean?
Test a quote by checking how long the savings take to repay what you spend. At the worked-example inputs the simple payback is 8.2 years. It rises with system cost before incentives and falls as electricity price per kwh, annual production (kwh) and tax credit or incentive increase; yearly output decline does not move it.
How much does electricity price per kwh change the simple payback?
Holding every other input at the worked-example value, moving electricity price per kwh from $0.14 to $0.20 moves the simple payback from 7.0 years to 10.0 years, a spread of 3.0 years.
What are the limits of this solar payback calculator?
Real energy use depends on how the appliance or vehicle is actually run: duty cycle, weather, driving style, battery age and your utility's rate structure, including tiers and time-of-use pricing. Treat the result as a planning estimate and check it against your own bill or trip log. The tables on this page test electricity price per kwh only from $0.14 to $0.20; a value outside that range is not tabulated here.
Which input moves the simple payback most in the solar payback calculator?
Ranked by how far each moves the simple payback across the range tested: electricity price per kwh (2.0 years, 24%), annual production (kwh) (1.7 years, 20%), system cost before incentives (1.6 years, 20%) and tax credit or incentive (0.5 years, 5.7%). Yearly output decline does not change it.
If I double electricity price per kwh in the solar payback calculator, does the simple payback double?
Doubling it from $0.17 to $0.34 takes the simple payback from 8.2 years to 4.1 years, which is 0.50 times the worked-example figure. So it falls instead of rising. Halving it to $0.09 gives 16.5 years.
How much does system cost before incentives matter in the solar payback calculator?
The worked example uses $18,000. With the other inputs left at the worked example, moving system cost before incentives from $16,200 to $19,800 takes the simple payback from 7.4 years to 9.1 years, a swing of 20% of the worked-example figure.
How much does tax credit or incentive matter in the solar payback calculator?
The worked example uses 30.0%. With the other inputs left at the worked example, moving tax credit or incentive from 28.0% to 32.0% takes the simple payback from 8.5 years to 8.0 years, a swing of 5.7% of the worked-example figure.
How much does annual production (kwh) matter in the solar payback calculator?
The worked example uses 9,000. Holding every other input at its worked-example value, moving annual production (kwh) from 8,100 to 9,900 takes the simple payback from 9.2 years to 7.5 years, a swing of 20% of the worked-example figure.
How much does yearly output decline matter in the solar payback calculator?
The worked example uses 0.500%. The simple payback does not depend on yearly output decline; it moves the net savings over 25 years from $24,524 to $22,398 instead when yearly output decline goes from 0.250% to 0.750%.
Which inputs change the cost after incentive in the solar payback calculator?
At the worked-example inputs it is $12,600. System cost before incentives takes it from $11,340 to $13,860 and tax credit or incentive takes it from $12,960 to $12,240.
Which inputs change the net savings over 25 years in the solar payback calculator?
At the worked-example inputs it is $23,441. System cost before incentives takes it from $24,701 to $22,181, tax credit or incentive takes it from $23,081 to $23,801, annual production (kwh) takes it from $19,837 to $27,045 and electricity price per kwh takes it from $19,201 to $27,681.
Is my electric rate the same for every kilowatt-hour?
Not always. Many utilities charge tiered or time-of-use rates and add delivery fees and taxes. For an all-in rate, divide your whole bill by the kilowatt-hours you used.
What is a kilowatt-hour?
The energy used by a 1,000 watt device running for one hour. A 100 watt bulb left on for ten hours uses one.
What is a peak sun hour?
One hour of sunlight at 1,000 watts per square meter, the standard test strength. A day with five peak sun hours delivers the same energy as five hours at that strength, even if daylight lasts much longer.
Sources and evidence
Free Calculators Online is independent and is not affiliated with or endorsed by the source organizations. Educational estimates only.