How a solar payback calculation works
Solar panels convert sunlight into electricity, offsetting what you would otherwise buy from the grid. The payback math compares your net system cost (installed price minus rebates/credits) against the annual value of the electricity your system produces.
The annual value has two parts: electricity you consume directly (valued at full retail rate) and excess you export to the grid (valued at your net metering rate). As electricity rates rise with inflation, your savings grow each year - while panel output slowly decreases due to degradation.
Inputs that move the answer the most
- Electricity rate. Higher rates mean each kWh of solar is worth more, accelerating payback.
- Installed cost and rebates. The federal ITC (30% in the US) dramatically reduces net cost. State and utility incentives stack on top.
- Annual production. Sunnier locations produce significantly more per kW installed. A system in Arizona produces ~70% more than the same system in Seattle.
- Net metering policy. If your utility pays less than retail for exports, self-consumption becomes much more important.
What this calculator deliberately ignores
Shading losses, inverter efficiency curves, roof orientation penalties, permitting costs, and battery economics are not modeled. These simplifications keep inputs manageable. See the methodology page for the full list of formulas and assumptions.
Frequently asked questions
What's a realistic kWh/kW/year for my location?
This depends on your latitude, weather, and roof orientation. Pacific Northwest or Northern Europe: 1,000–1,200. Mid-latitudes (e.g. mid-US, Southern Europe): 1,300–1,500. Sunbelt (Arizona, Australia, Middle East): 1,600–1,900. Check PVWatts (NREL) for a location-specific estimate.
How does net metering work?
When your panels produce more than you use, excess electricity is exported to the grid. With full net metering (1.0), your utility credits you at the full retail rate. Some utilities pay less for exports - set the net metering rate to the fraction of retail they offer (e.g. 0.5 for 50%).
Should I add battery storage?
A battery increases self-consumption (you use more solar directly instead of exporting) but adds significant cost. This calculator doesn't model battery economics separately - instead, increase your self-consumption ratio to reflect what a battery would achieve, and add the battery cost to your system cost.
Does shading matter?
Yes, significantly. Even partial shading on one panel can reduce output of the entire string. If you have shading issues, reduce the annual kWh/kW figure to account for it, or get a shade analysis from an installer.
What happens after 25 years?
Panels don't stop working at 25 years - that's just the typical warranty period. Most panels continue producing at 80%+ of original capacity well beyond 25 years. The inverter may need replacement around year 12–15 ($1,500–$3,000), which this calculator doesn't model separately.
What is LCOE and why does it matter?
Levelized Cost of Energy (LCOE) is your total system cost divided by total lifetime energy production. It tells you what each kWh of solar costs you. If your LCOE is below your electricity rate, solar saves you money. A lower LCOE means better value.
Disclaimer. Estimates are for informational purposes only. Actual production and savings depend on weather, roof orientation, shading, equipment quality, and local utility policies we cannot model perfectly. Consult a qualified solar installer before making purchasing decisions. See our full disclaimer.
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