What solar payback actually measures
Solar payback is the number of years it takes for a system’s savings to add up to what you paid for it. The answer depends on how much sunlight your state gets, what your utility charges per kWh, how much of your production you use yourself, and what the utility pays for the rest.
Having built billing software for electricity retailers, we can say the part of a solar estimate most often wrong is not the panels but the tariff. A kWh from your roof is only worth what it displaces on your bill, and rate plans, export rules and time-of-use periods set that value.
How this calculator works
You pick your utility and rate plan, then describe the system:
- System size (kW DC) and installed price ($/W). Size times price gives the gross price. The default, $4.0/W, is Berkeley Lab’s median for 2024 US home systems before incentives; the middle 60% paid $3.0–5.2/W.
- Federal tax credit (%), which defaults to 0, and state and utility rebates ($). These reduce the gross price to a net cost.
- Export rule, taken from your plan’s URDB record: net metering, net billing, or buy all/sell all.
- Export credit ($/kWh) for net billing and buy all/sell all, filled from URDB when the utility publishes it; otherwise you enter it.
- Electricity price rise per year, which defaults to your state’s average yearly price change over the last 10 years (EIA).
Production comes hour by hour from NREL’s PVWatts v8 for your state (south-facing, 20° tilt, 14% system losses), as a typical day for each month. Each hour, the solar your home uses at once, measured against the typical single-family home in your state from NREL’s ResStock load profiles, replaces imports from the grid; the rest is exported. Under net metering, exports offset use within the same month at the plan’s own prices, credits carry forward, and any left in December are forfeited. Under net billing, imports are billed on the plan and each exported kWh earns the export credit. Under buy all/sell all, every kWh produced earns the export credit. Each year, savings grow with the price rise you set and output falls by 0.5%, the median degradation rate in NREL’s review by Jordan and Kurtz.
The payback point is when cumulative savings reach the net cost. The calculator also reports 25-year net savings, which is total savings over 25 years minus net cost.
A worked example
This is simple arithmetic, not a calculator run. Take a 7 kW system at the default $4.0/W, so $28,000 with no credits or rebates. Assume the array produces 1,400 kWh per kW a year, which gives 9,800 kWh, and a flat retail rate of $0.18/kWh. Assume the home uses at least that much, prices stay flat and the panels do not degrade.
| Scenario | Year-1 savings | Payback | 25-year net savings |
|---|---|---|---|
| Full retail net metering | 9,800 × $0.18 ≈ $1,760 | about 15.9 years | 25 × $1,764 − $28,000 ≈ $16,100 |
| Net billing, half used at home, $0.06 export | 4,900 × $0.18 + 4,900 × $0.06 ≈ $1,180 | about 23.8 years | 25 × $1,176 − $28,000 ≈ $1,400 |
Same roof, same panels, same price. Only the export credit changed, and it moved payback by about eight years and cut 25-year savings from about $16,100 to about $1,400. The calculator replaces each assumption here with your state’s hourly production, your plan’s actual prices, the share your home really uses as it is produced, your price-rise setting and panel degradation.
Net metering versus net billing
Under full retail net metering, each exported kWh offsets a kWh you buy later in the month at the plan’s own prices, and unused credits roll forward. The grid works much like a free battery, so self-consumption matters little, except that credits still left in December are forfeited in the calculator and, on a TOU plan, an export is worth the price of the period it happens in.
Under net billing, exports are credited at a separate, lower rate, often tied to the utility’s avoided cost or to hourly values. California’s current structure for new customers (commonly called NEM 3.0) is the best-known example, but several states have moved in this direction. Here self-consumption becomes the key variable: a kWh you use yourself is worth the retail rate, while an exported one earns only the export credit. Your utility page shows the export rule recorded for each plan.
Self-consumption and batteries
The calculator works out self-consumption hour by hour for a typical home in your state. You can raise yours above that by running the dishwasher, laundry, pool pump or EV charging while the sun is up. A home battery raises it further by storing midday surplus for the evening. It adds significant cost and has its own lifespan, so it tends to pay off only where the gap between retail and export value is wide.
Why time-of-use timing matters
On a time-of-use plan, the retail rate itself changes by hour. Solar output peaks around midday, while many TOU peak periods now run from late afternoon into the evening, for example 4 to 9 p.m. That means much of your self-consumed production displaces mid-priced or off-peak energy, not peak energy. The calculator prices each hour at its own period, so this is built in, but it uses a typical day for each month and a typical home’s hourly use, so treat results on TOU plans as a reasonable estimate rather than an exact bill forecast. West-facing arrays produce more in late afternoon and can be worth more per kWh on these plans. The calculator models south-facing panels only; PVWatts can model other orientations.
Costs the headline number leaves out
A few real costs are not in the basic payback math:
- Inverter replacement. Inverters often carry shorter warranties than panels. If you expect to replace one within the calculator’s 25-year horizon, add its cost to the installed price.
- Financing. The calculator assumes a cash purchase. A loan adds interest, which can push payback out by years. Leases and power purchase agreements are different: you don’t own the system, so payback doesn’t apply the same way.
- Roof work. If the roof needs replacing soon, do it first to avoid removing and reinstalling the array later.
Roof orientation and shading
Production assumes an unshaded, south-facing array at 20° tilt with 14% system losses, at your state’s 2020 center of population. East or west orientations, a different tilt, and shading from trees or chimneys all change that. If your roof is not like this, run PVWatts for your exact address and orientation, and scale the system size input by the ratio of its annual result to a south-facing, 20° run at the same address.
About the federal tax credit
The federal Residential Clean Energy Credit (Section 25D), which covered 30% of system cost, is not available for property placed in service after December 31, 2025, according to the IRS. If you are installing in 2026, do not count on it. That is why the federal credit input defaults to 0%. You can change it if a tax professional confirms you qualify. State tax credits, utility rebates and performance incentives may still exist, and they belong in the rebates field.
Why payback varies so much by state
Production per kW, retail prices and export rules do most of the work. PVWatts gives very different yearly output per kW for a cloudy northern state and a sunny southwestern one. Retail prices differ widely between states and utilities; the state and utility pages on this site show them. Export rules range from full retail credit to far lower export credits. A sunny state with cheap power and low export rates can show a longer payback than a cloudier state with expensive power and full net metering. That is why a national average payback tells you little about your own roof.
Frequently asked questions
What is a good solar payback period?
Payback well inside the calculator’s 25-year horizon, with meaningful net savings left over, is generally considered sound. A payback close to the end of that horizon leaves little margin for repairs or policy changes.
Should I still enter the 30% federal credit?
For systems installed after December 31, 2025, the Section 25D credit is no longer available, so leave the input at 0% unless a tax professional confirms you qualify. Enter any state or utility incentives in the rebates field.
How does the calculator decide how much solar I use myself?
It compares production and a typical home’s use hour by hour, for weekdays and weekends in each month. Whatever the home uses in the same hour counts as self-consumed; the rest is exported. Under net billing, self-consumed energy is worth your retail rate while exports earn the export credit, so if you use more power in daylight than a typical home, your savings will be higher than shown. Under net metering, it makes little difference.
What price rise should I assume?
The default is your state’s average yearly change in residential electricity prices over the last 10 years, from EIA. That is a record of the past, not a forecast. Try a lower and a higher value to see how sensitive your result is.