What the animation shows
The animation and the step-by-step video above use your numbers. Here is the same walkthrough written out for the default example.
What you enter
- System size: 8 kW DC.
- Installed cost per watt: 3 $/W. Get real quotes. Prices vary widely by market and installer.
- Percentage incentives or tax credits: 0 %. Enter only credits you have confirmed you qualify for.
- Yearly production per kW: 1300 kWh/kW. From PVWatts for your site. US values range from about 1,000 to 1,700.
- Value of each solar kWh: 0.17 $/kWh. Find this on your utility bill: total charges ÷ kWh used gives an all-in rate.
- Years to analyze: 25.
What happens, step by step
- The orange column is the net cost after incentives: $24,000.00.
- Each stack is a year of savings, growing 2.5% a year with power prices.
- Savings reach the net cost line: paid back in 12.1 years.
- Every stack above the line is profit: $32,539.26 by year 25.
The answer: payback period is 12.1 years.
How it’s calculated
- Net cost = kW × 1,000 × $/W × (1 − incentive %) − rebates
- Year-n savings = kW × yield × value × (1 + escalation)^(n−1) × (1 − degradation)^(n−1)
- Payback = year when cumulative savings reach net cost (interpolated within the year)
Worked example
8 kW at $3.00/W, no incentives, 1,300 kWh/kW, $0.17/kWh, 2.5% rate increase, 0.5% degradation.
Inputs
- System size
- 8 kW DC
- Installed cost per watt
- 3 $/W
- Percentage incentives or tax credits
- 0 %
- Fixed rebates
- 0 $
- Yearly production per kW
- 1300 kWh/kW
- Value of each solar kWh
- 0.17 $/kWh
- Yearly electricity price increase
- 2.5 %
- Yearly panel degradation
- 0.5 %
- Years to analyze
- 25
Results
- Payback period
- 12.1 years
- Net system cost
- $24,000.00
- First-year savings
- $1,768.00
- Total savings over the period
- $56,539.26
- Savings minus net cost
- $32,539.26
Assumptions and limits
- No financing costs or discounting (simple payback).
- Production and rates follow the stated yearly rates of change.
Verify the result against the applicable local code, adopted code edition, manufacturer instructions and project requirements. See our methodology.
Questions
What is a typical solar payback period?
It depends mostly on installed cost, local sun and what your utility pays for solar energy. Run your own quotes and rates through this tool rather than relying on national averages.
Does the federal tax credit apply?
Federal residential solar credit rules have changed recently. Confirm current eligibility with the IRS or a tax professional before entering a percentage.