Solar panel ROI calculator

Solar panel ROI — beyond the marketing brochure

Most residential solar quotes show a single "$30k savings over 25 years" number that conflates federal credits, SREC income, and rate inflation into one feel-good headline. This calculator separates the assumptions so you can pressure-test the deal.

What drives payback period

The key variables, ranked by sensitivity:

1. Electricity rate — every $0.01 you pay above the national average shortens payback by ~6 months on a typical 8kW system.
2. Annual production — sun-hours × system size. SW US gets 1500+ kWh/kW. The Northeast gets 1100. Don't trust national averages.
3. Federal tax credit — 30% through 2032, then drops. This is the single biggest incentive most homeowners get.
4. State rebates and SRECs — wildly state-dependent. NJ/MA/DC SRECs add $300-1500/yr; most states have nothing.
5. Rate growth — utility rates have grown 3-4% annually for two decades. Modeling 0% inflation is a deal-killer assumption.

What we assume

• 25-year horizon: Industry standard. Most production warranties cover 25 years at 80%+ original capacity.
• 0.5%/yr degradation: Conservative — modern Tier 1 panels degrade 0.3-0.5%. Cheap panels can hit 1%.
• Compound rate growth: Real utility rates compound, not linear. A 3%/yr growth doubles your bill in ~24 years.
• No financing: This calculator assumes cash purchase. Loans add interest cost; PPAs/leases keep the credit with the installer.
• Constant O&M: Most systems need an inverter replacement around year 10-15 ($1500-2500). Bake this in via the O&M field.

Where homeowners get burned

• Forgetting the credit only applies if you owe taxes. The 30% federal credit is non-refundable. If you owe $5,000 in taxes and your credit is $7,200, you can only use $5,000 this year (the rest carries forward).
• Believing inflated production estimates. Get the installer's PVWatts number for your specific roof orientation, not a regional average.
• Ignoring net-metering rules. Some states (CA, NV) have replaced full retail net metering with reduced-export pricing — this can cut bill savings by 30-50%.
• Modeling SRECs that don't exist in your state. Only ~12 states have a meaningful SREC market.

Reading the result

• Payback < 8 years: Excellent. Utility-rate spikes will only improve this.
• Payback 8-12 years: Standard residential outcome. Lifetime ROI typically 100-200%.
• Payback 12-15 years: Marginal. Reconsider unless you have non-financial motivations (resilience, environmental).
• Payback > 15 years: The math probably doesn't work. Look for hidden cost (deep-cycle batteries, electrical upgrades) or production assumptions that are too aggressive.

What this calculator does NOT include

• Property value lift: Studies show 4-5% home value bump for owned (not leased) solar.
• Battery storage: Adds $10-15k cost but enables resilience and time-of-use arbitrage. Treat as a separate decision.
• Carbon offsets: Real but not financial.
• Income tax on SRECs: SREC income is taxable as ordinary income in most cases. Subtract your marginal rate from the SREC field if you want a post-tax number.