Solar & battery
Solar Payback Period Calculator
Works payback, where the assumptions about rates and incentives carry the result.
Result
Incentives change, expire and differ by state, utility and tax position. Nothing here is tax advice: whether you can use a credit at all depends on your own liability, and a credit is not a rebate. Confirm what applies to you with a tax professional before it affects a purchase decision. The escalation rate does most of the work in this calculation and nobody knows it. Run it at 1% as well as at your optimistic figure; if the answer only works at 5%, it is a bet on energy prices rather than an investment in equipment.
Get a Free Business AuditHow the calculation works
Net cost after any incentives divided by annual savings gives a simple payback, with degradation and utility rate escalation applied for a more realistic cumulative view. The result is highly sensitive to the rate escalation assumed and to what exported energy is credited at, both of which are assumptions rather than facts.
What moves the number
- Net system cost after incentives actually available.
- Annual savings, which depend on the export credit rate.
- Utility rate escalation assumed.
- Module degradation over the period.
Where this one goes wrong
Federal incentives for solar have been changed and curtailed by legislation more than once, residential and business credits are separate provisions with separate rules, and availability depends on when the system is placed in service, so confirm the current position with the IRS and a tax professional rather than applying a remembered rate. On the savings side, a payback built on full retail credit for exports is wrong under a tariff that credits them below retail, and that difference can double the period.
Before you quote
- Confirm which incentives are currently available before netting them off.
- Use the actual export credit terms from the utility tariff.
- Include degradation and state the rate escalation assumed.
Where the rules come from
Questions
About this calculator
Can I assume a federal tax credit?
No. Federal incentives for solar have been changed and curtailed by legislation, residential and business credits are separate provisions, and availability depends on when the system is placed in service. Confirm the current position with the IRS and a tax professional.
What makes payback estimates wrong?
Usually the export credit assumption and the rate escalation assumption. A payback built on full retail credit for exported energy is wrong under a tariff that credits below retail, and that single difference can double the period.
Should degradation be included?
Yes, since production declines gradually and a payback using first-year output overstates every later year. Manufacturers publish a degradation rate, and including it is what separates a projection from a sales figure.
The formula
each year: production x blended rate, escalated; payback is the year cumulative saving passes net cost
Put this calculator on your site
Free to embed. Paste this where you want it to appear. It stays up to date automatically because it loads from BDEVY.
Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- System cost before incentives ($). Enter your own figure; the page starts at $21,500.
- Incentives as a share of cost (%). Enter your own figure; the page starts at 30%.
- Annual production (kWh). Enter your own figure; the page starts at 9,200.
- Electricity rate per kWh ($). Enter your own figure; the page starts at $0.16.
- Annual electricity price rise (%). Enter your own figure; the page starts at 3%.
- Share you use rather than export (%). Enter your own figure; the page starts at 65%.
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 |
|---|---|
| System cost before incentives | $21,500 |
| Incentives as a share of cost | 30% |
| Annual production (kWh) | 9,200 |
| Electricity rate per kWh | $0.16 |
| Annual electricity price rise | 3% |
| Share you use rather than export | 65% |
| Export credit per kWh | $0.06 |
What comes out
| Result | Value |
|---|---|
| Payback period main result | 11.5 |
| Net cost after incentives | $15,050 |
| Saving in year one | $1,150 |
| Net saving over 25 years | $24,155 |
| Effective value per kWh | $0.13 |
Payback in about 11.5 years on a net cost of $15,050. Over 25 years the system is ahead by $24,155, assuming electricity rises 3 a year every year.
How sensitive the answer is
Holding everything else steady and changing only system cost before incentives, this is what happens to payback period. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| System cost before incentives ($) | Payback period |
|---|---|
| $10,750 | 6.1 |
| $16,125 | 8.9 |
| $21,500 example above | 11.5 |
| $32,250 | 16.2 |
| $43,000 | 20.4 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- System cost before incentives ($)
- A money amount, starting at $21,500.
- Incentives as a share of cost (%)
- A percentage, between 0 and 90, starting at 30%.
- Annual production (kWh)
- A number, between 0 and 5000000, starting at 9,200.
- Electricity rate per kWh ($)
- A money amount, starting at $0.16.
- Annual electricity price rise (%)
- A percentage, between 0 and 20, starting at 3%.
- Share you use rather than export (%)
- A percentage, between 0 and 100, starting at 65%.
- Export credit per kWh ($)
- A money amount, starting at $0.06.
What the results tell you
| Result | What it is |
|---|---|
| Payback period | The headline result. A decimal figure. |
| Net cost after incentives | A money figure. |
| Saving in year one | A money figure. |
| Net saving over 25 years | A money figure. |
| Effective value per kWh | A money figure. |
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.
Keep going
Related calculators
All solar & battery calculators
Solar Energy Savings Calculator
Works bill savings, where the tariff structure matters more than the production.
Open calculatorSolar Lease vs Buy Calculator
Compares leasing against buying, where ownership of the incentives is the difference.
Open calculatorSolar Tax Credit Calculator
Works the value of a solar tax credit, where current eligibility has to be confirmed first.
Open calculatorEstimating 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.