Solar & battery
Payback Calculator
Works a simple payback, where the assumptions deserve more attention than the arithmetic.
Result
Simple payback, with no discounting and no financing cost. For anything large or long, money now is worth more than money later and a lender will want interest, both of which make the real return lower than this.
Get a Free Business AuditHow the calculation works
Net cost divided by annual savings gives the simple payback period, with a cumulative view applying degradation and any rate escalation. The arithmetic is trivial; the result depends almost entirely on the net cost after incentives and the annual saving, both of which are assumptions.
What moves the number
- Net cost after incentives actually available.
- Annual saving under the actual tariff.
- Rate escalation assumed.
- Degradation and component replacement.
Where this one goes wrong
Simple payback ignores the time value of money, component replacement and the alternative use of the money, so it is a rough screen rather than a financial analysis. For a long-lived asset those omissions matter. The two inputs most often wrong are the incentive assumption, since availability has changed by legislation, and the export credit rate, since many tariffs no longer credit exports at retail.
Before you quote
- Verify which incentives are currently available.
- Use the tariff's actual export credit terms.
- Treat simple payback as a screen, not an analysis.
Questions
About this calculator
How reliable is simple payback?
As a rough screen rather than a financial analysis, since it ignores the time value of money, component replacement and the alternative use of the capital. For an asset with a twenty-five year life those omissions matter.
Which inputs are most often wrong?
The incentive assumption and the export credit rate. Federal incentive availability has changed by legislation, and many tariffs no longer credit exported energy at retail, and either error moves the payback period substantially.
Should component replacement be in a payback?
In any long projection yes, because at least one inverter will typically need replacing within a system's life. Omitting it understates cost and overstates the result by a meaningful margin.
The formula
payback = cost / (monthly gain - monthly running cost)
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How to use this calculator
- Up-front cost ($). Enter your own figure; the page starts at $12,000.
- Extra gross profit per month ($). Enter your own figure; the page starts at $1,400.
- Extra running cost per month ($). Enter your own figure; the page starts at $220.
- Period to judge it over. Enter your own figure; the page starts at 36.
The result updates as you type, so you can try a figure, see what it does to payback period, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Up-front cost | $12,000 |
| Extra gross profit per month | $1,400 |
| Extra running cost per month | $220 |
| Period to judge it over | 36 |
What comes out
| Result | Value |
|---|---|
| Payback period main result | 10.2 |
| Net gain per month | $1,180 |
| Net return over the period | $30,480 |
| Return on investment | 254% |
It pays for itself in 10.2 months and returns $30,480 over 36 months, a 254% return.
How sensitive the answer is
Holding everything else steady and changing only up-front cost, this is what happens to payback period. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Up-front cost ($) | Payback period |
|---|---|
| $6,000 | 5.1 |
| $9,000 | 7.6 |
| $12,000 example above | 10.2 |
| $18,000 | 15.3 |
| $24,000 | 20.3 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Up-front cost ($)
- A money amount, starting at $12,000.
- Extra gross profit per month ($)
- A money amount, starting at $1,400.
- Extra running cost per month ($)
- A money amount, starting at $220.
- Period to judge it over
- A number, between 0 and 240, starting at 36.
What the results tell you
| Result | What it is |
|---|---|
| Payback period | The headline result. A decimal figure. |
| Net gain per month | A money figure. |
| Net return over the period | A money figure. |
| Return on investment | A percentage. |
A design still needs a site visit
Output and sizing figures use the assumptions you enter, not measured irradiance, shading or roof orientation at your address. Real production depends on all three, plus inverter behaviour and local interconnection rules.
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.