Why use this calculator
Solar panels are a significant investment. This calculator helps you understand the financial return by estimating energy production, annual savings, payback period, and long-term ROI including tax incentives.
How to use it
Enter your current monthly electric bill, the solar system cost and size, your local electricity rate, average daily sun hours, panel degradation rate, and available tax credits. The calculator projects savings over 25 years.
The formula
Annual production = System size (kW) x Sun hours x 365 days. Annual savings = Min(Production x Rate, Annual bill). Payback = Net cost (after tax credit) / Annual savings. 25-year ROI accounts for annual panel degradation.
Worked examples
8kW system costing $20,000 with $200/month bill, 5 sun hours, 30% tax credit
Net cost of $14,000, payback in ~7 years, 25-year ROI of approximately 250%
5kW system costing $12,000 with $120/month bill, 4.5 sun hours, 30% tax credit
Net cost of $8,400, payback in ~8 years, with significant long-term savings
When people use it
- Homeowners evaluating whether solar makes financial sense
- Comparing quotes from different solar installation companies
- Estimating the impact of tax credits on solar investment returns
- Planning for energy independence and reduced utility costs
Tips
- Check your local sun hours at the NREL PVWatts calculator for accurate estimates
- Factor in potential electricity rate increases which improve ROI over time
- Some states offer additional incentives beyond the federal tax credit
- Panel warranties typically last 25 years but panels can produce power for 30+ years
Questions people ask
- What is panel degradation?
- Solar panels lose a small percentage of efficiency each year, typically 0.5% annually. After 25 years, panels still produce about 87.5% of their original output.
- Does this include net metering?
- This calculator assumes you use all produced energy. With net metering, excess energy is sold back to the grid, which can improve your returns depending on your utility's buy-back rate.
- How do I find my average sun hours?
- Peak sun hours vary by location. The US averages 4-6 hours. Use NREL's PVWatts tool or check solar insolation maps for your specific area.