Your System
Enter the system size and gross install cost from a quote — or start with a state and tune defaults.
EIA 2024 avg rate + NREL sun hours.
Typical home 4–10 kW.
Pre-incentives. Typical $3.00–$3.50/W.
Editable — check your latest bill.
NREL state average.
Historic US avg ≈ 2.5–3.5%.
Performance & Operating Cost
Modern panels ≈ 0.4–0.6%/yr.
Inverter replacement + cleaning, amortized.
Incentives & Financing
30% through 2032 (cash & loan only).
Check DSIRE for your area.
Your alternative-investment return.
Financing
The Math
How It Works
Five numbers drive everything on this page. Here's the math behind each of them.
Year-1 Production & Savings
DC system size × peak sun hours × 365 days × 0.80 derate gives you usable AC kWh in year one. The 0.80 covers panel temperature, inverter conversion, and wiring losses — standard for residential rooftop.
Multiply by your utility rate (in dollars per kWh, not cents) to get the gross dollar savings. Subtract annual O&M (inverter replacement amortized, occasional cleaning) to land on year-one net.
yr1 kWh = kW × sun hr × 365 × 0.80
yr1 $ = yr1 kWh × rate − O&M
Degradation & Rate Escalation
Panels lose about 0.5% of output every year — a 25-year-old panel still produces ~88% of its day-one rating. We compound that loss year over year so production drops gradually across the projection.
Utility rates have climbed ~3%/yr historically, which actually accelerates payback the longer you own the system. Each year the system saves you more dollars per kWh even as it produces slightly fewer kWh.
yrN kWh = yr1 kWh × (1 − degr)^(N−1)
yrN $ = yrN kWh × rate × (1 + esc)^(N−1) − O&M
ITC, Rebates, and Net Cost
The 30% federal Investment Tax Credit is the single biggest discount most homeowners get. It applies to the full installed cost — panels, inverter, racking, wiring, permits, and labor — and is locked in through 2032 before stepping down.
Subtract state/local rebates on top to land on true out-of-pocket. This net cost is what every payback calculation divides into — not the sticker price. Leases give up the ITC entirely; the leasing company claims it.
net cost = gross − (gross × ITC%) − rebates
IRR, NPV, and LCOE
IRR is the annualized return you'd need from a different investment to match what solar earns you. NPV discounts future savings back to today's dollars at your chosen discount rate — if positive, the project beats that benchmark.
LCOE is the all-in cost per kWh once you spread system cost plus O&M over every kWh it will produce in 25 years. Compare it directly to your current utility rate to see how much cheaper self-generated electricity is.
NPV = Σ (yrN $ / (1 + d)^N) − upfront
IRR = rate where NPV = 0
LCOE = (net cost + Σ O&M) / Σ kWh
Financing
Cash vs Loan vs Lease
How the three ways to pay for solar compare on payback, lifetime savings, and tax credit eligibility.
| Mode | Upfront | ITC? | 25-yr $ | Payback | Who owns it |
|---|---|---|---|---|---|
| Cash | Full | Yes | Highest | 7–10 yr | You |
| Loan | $0–10% | Yes | −10–20% | 8–12 yr | You |
| Lease / PPA | $0 | No | −40–60% | N/A | Lease company |
FAQ
Common Questions About Solar Payback
What counts as a good payback period for solar?
For a cash purchase with the 30% federal ITC, 6–9 years is the typical good range in most US states. High-rate states like California, Massachusetts, and Hawaii often see 5–7 year payback.
Low-rate states like Washington or Louisiana can stretch to 10–13 years. Anything under 12 years still beats the average S&P 500 return over the 25-year warranty life of the panels.
Should I take a solar loan or pay cash?
Cash gives the shortest payback and highest total return — you avoid paying interest. A loan adds 1–3 years to payback depending on APR, but you keep the 30% federal tax credit and free up cash for other investments.
If your loan rate is below your alternative-investment return (an index fund at 7–10%), the loan can come out ahead on a pure-return basis. Leases give up the ITC entirely — total savings over 25 years are typically 40–60% lower than owning.
Does the 30% federal tax credit apply to batteries?
Yes. Since 2023, the Investment Tax Credit covers standalone batteries (3 kWh or larger) and battery storage paired with new solar, at the same 30% rate as panels.
The credit applies through 2032, then steps down to 26% in 2033 and 22% in 2034. Add battery cost to your system cost in this calculator to include batteries in the ROI math.
What is IRR and why does it matter?
IRR (internal rate of return) is the annualized return your solar investment generates over its life — comparable to the yield on a stock portfolio or bond. A residential system in a sunny, high-rate state often hits 10–14% IRR, which beats most passive investments.
IRR is more honest than simple payback because it accounts for the timing of cash flows. A system that pays back in year 8 but produces strong savings for 17 more years has a much higher IRR than that 8-year payback number suggests.
What is LCOE and how does it compare to my utility rate?
LCOE (levelized cost of energy) divides total all-in cost (net of incentives, plus 25-yr O&M) by every kWh the system will produce. The result is your effective cost per kWh from solar.
If your LCOE is 7¢/kWh and your utility charges 18¢/kWh, you save 11¢ on every kWh of self-consumption. Most residential systems land between 4¢ and 10¢/kWh — well below grid rates almost anywhere in the US.
How accurate are 25-year projections?
Production math is solid: panel degradation is well-characterized (0.4–0.6%/yr for monocrystalline) and 25-year warranties guarantee at least 85% output at year 25.
The biggest uncertainty is rate escalation. Projecting 3%/yr is the historical average, but actual rates can spike (post-2022 inflation pushed some utilities to 6–8%/yr) or stall in regulated markets. A conservative approach: run the calculator at 2%/yr as a floor and your local average as a likely case.
Related Tools
Home Solar Savings
Start from a monthly bill instead of a quoted system — back-solves the size for you.
↳ $180/mo bill, CA → 7.5 yr payback
Battery Bank Sizing
Add storage to your ROI math — size a bank by days of autonomy and chemistry.
↳ 30 kWh/day, 2 days → 12 × 100Ah
Off-Grid Cabin System
Full off-grid design: panels, batteries, inverter, and installed cost range.
↳ 3 kWh/day, 3 days backup → 4.4 kW