Solar ROI Calculator Formula
Understand the math behind the solar roi calculator. Each variable explained with a worked example.
Formulas Used
Total ROI
roi_pct = net_profit / net_cost * 100Annual ROI
annual_roi = (net_profit / net_cost * 100) / lifespan_yearsLifetime Net Profit
net_profit_out = net_profitEffective Cost per kWh
cost_per_kwh_saved = net_cost / (annual_savings / 0.15 * lifespan_years)Variables
| Variable | Description | Default |
|---|---|---|
system_cost | Total System Cost(USD) | 20000 |
tax_credit_pct | Tax Credit(%) | 30 |
annual_savings | First Year Electricity Savings(USD) | 1800 |
lifespan_years | System Lifespan(years) | 25 |
net_cost | Derived value= system_cost * (1 - tax_credit_pct / 100) | calculated |
lifetime_savings | Derived value= annual_savings * lifespan_years | calculated |
net_profit | Derived value= lifetime_savings - net_cost | calculated |
How It Works
How to Calculate Solar ROI
Solar ROI measures the total financial return over the system lifetime.
Formula
Net Cost = System Cost * (1 - Tax Credit %)
Lifetime Savings = Annual Savings * Lifespan
ROI = (Lifetime Savings - Net Cost) / Net Cost * 100
Most solar panels are warranted for 25 years and can produce electricity for 30+ years with gradual degradation.
Worked Example
A $20,000 system with 30% tax credit, $1,800/year savings over 25 years.
system_cost = 20000tax_credit_pct = 30annual_savings = 1800lifespan_years = 25
- 01Net cost: $20,000 * 0.70 = $14,000
- 02Lifetime savings: $1,800 * 25 = $45,000
- 03Net profit: $45,000 - $14,000 = $31,000
- 04Total ROI: $31,000 / $14,000 * 100 = 221.4%
- 05Annual ROI: 221.4 / 25 = 8.9%/year
Ready to run the numbers?
Open Solar ROI Calculator