Solar Payback Calculator
How many years a solar system takes to pay for itself, from its cost after incentives and the yearly saving, with a rising electricity price and panels that slowly lose output.
Result…
How it's calculated
Net cost = system cost − incentives Saving in year y = year-1 saving × [(1 + price rise) × (1 − output loss)]^(y − 1) − upkeep Payback = the point where the running total of savings reaches the net cost Simple payback = net cost ÷ (year-1 saving − upkeep) NPV = Σ saving_y ÷ (1 + discount rate)^y − net cost
Payback is the time it takes for the money the panels save to add up to what they cost you after grants, rebates and tax credits. The simple payback divides the net cost by the first year's saving. The year-by-year figure is more realistic: each year the electricity price may rise by the percentage you enter and the panels make a little less energy, so the saving changes, and payback is the moment the running total crosses the net cost, read between whole years. The year-1 saving is the solar energy you use or are paid for times its price per kWh, or a figure you already have. The net present value discounts each future saving back to today at your chosen rate: a positive NPV means the system beats leaving the money at that rate.
Your numbers, step by step
About the Solar Payback calculator
This solar payback calculator works out how many years a solar system takes to pay for itself. Enter the installed cost, any grants, rebates or tax credits, and the yearly saving, either as the solar energy you use or are paid for times its price per kWh, or as a figure you already have. It then runs the numbers year by year: the electricity price can rise by a percentage you choose and the panels lose a little output each year, so the saving changes over time. You get the payback point read between whole years, the simple payback for comparison, the lifetime saving over the years you choose, and an optional net present value at your own discount rate. It suits homeowners comparing quotes and anyone checking an installer's claims, and every step is shown with your own numbers.
How to use it
- Enter the “System cost” from your quote and the total of “Incentives, grants and tax credits”.
- Choose “Yearly saving from” and enter the “Solar energy used or credited in year 1” and the “Electricity price per kWh”, or your own “Saving in year 1”.
- Set the “Electricity price rise a year” and the “Panel output loss a year” from the panel datasheet.
- Enter the “Years to count” and, if you want an NPV, a “Discount rate for NPV (optional)”.
- Read the payback time, then compare it with the simple payback and the lifetime saving.
Worked example
A system costs 9,000 with a 1,500 grant, so the net cost is 7,500. It saves 5,000 kWh × 0.28 = 1,400 in year 1, so the simple payback is 7,500 ÷ 1,400 = 5.36 years. With prices rising 3% a year and output falling 0.5% a year, the saving grows each year and the running total passes 7,500 at 5.09 years. Over 25 years the savings add up to about 47,728, a gain of 40,228 after the net cost, and the NPV at a 4% discount rate is about 20,878.
Updated
Questions people ask
How do I calculate the payback period of solar panels?
Take the cost after incentives and divide it by the yearly saving for the simple payback. For a closer figure, add up each year's saving, allowing for price rises and panel wear, until the total reaches the net cost.
What is the formula for solar payback with rising electricity prices?
The saving in year y is the year-1 saving × [(1 + price rise) × (1 − output loss)] to the power y − 1, minus any upkeep. Payback is the point where the running total of those savings equals the net cost.
Should I count all the energy my panels make?
Count only the energy that saves or earns you money. Energy you use yourself is worth your electricity price, while exported energy is worth whatever your supplier pays, which may be much less, so a blended price per kWh is often closer.
What does a positive solar NPV mean?
It means the discounted savings are worth more than the net cost, so the system beats leaving the money at your chosen rate. The NPV calculator shows the same idea for any series of cash flows.
What does this solar payback estimate leave out?
It does not know your actual export rate, future tariffs, shade, a replacement inverter or battery, or loan interest, and incentives differ by country and supplier. To estimate the yearly energy, try the solar panel calculator. For a buying or financing decision, ask an independent installer or financial adviser.