Solar Payback Calculator Formula
Understand the math behind the solar payback calculator. Each variable explained with a worked example.
Formulas Used
Simple Payback Period
payback = payback_yearsNet System Cost
net_cost_out = net_cost25-Year Savings
savings_25yr = annual_savings * 25 - net_costTax Credit Amount
tax_credit_amt = system_cost * tax_credit_pct / 100Variables
| Variable | Description | Default |
|---|---|---|
system_cost | Total System Cost(USD) | 20000 |
tax_credit_pct | Federal Tax Credit(%) | 30 |
annual_savings | Annual Electricity Savings(USD) | 1800 |
electricity_increase | Annual Electricity Rate Increase(%) | 3 |
net_cost | Derived value= system_cost * (1 - tax_credit_pct / 100) | calculated |
payback_years | Derived value= net_cost / annual_savings | calculated |
How It Works
How to Calculate Solar Payback Period
The solar payback period tells you how many years until your solar investment pays for itself.
Formula
Net Cost = System Cost * (1 - Tax Credit %)
Payback Period = Net Cost / Annual Savings
The US federal Investment Tax Credit (ITC) is currently 30% through 2032, significantly reducing the effective cost.
Worked Example
A $20,000 solar system with 30% tax credit saving $1,800/year on electricity.
system_cost = 20000tax_credit_pct = 30annual_savings = 1800electricity_increase = 3
- 01Tax credit: $20,000 * 30% = $6,000
- 02Net cost: $20,000 - $6,000 = $14,000
- 03Simple payback: $14,000 / $1,800 = 7.8 years
- 0425-year savings: $1,800 * 25 - $14,000 = $31,000
Ready to run the numbers?
Open Solar Payback Calculator