Solar Payback Calculator

Work out when a solar system pays for itself, and what it is worth over its life. This runs the years out one at a time rather than dividing cost by year-one saving, because two things move in opposite directions over 25 years: your tariff goes up and your panels slowly go down. Use one currency throughout; the calculator does not care which.

Kept separate from the retail tariff on purpose. Export pays wholesale rates, which do not carry the network and policy levies that push retail prices up, so they historically grow more slowly. Zero is the conservative default.

Used only for the present-value figures. 4 to 6% is the usual residential band.

Typically 10 to 15% of the install price. Left at zero rather than guessed for you.

String inverters carry a 10 to 12 year warranty against a 25 year panel warranty.

25 years matches the usual panel performance warranty. Inverters normally need replacing once inside that window, so add their cost to maintenance if you want it counted.

Used on site: the share you consume rather than export.

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How It Works

Two payback numbers, and why they differ

Simple payback is the one most quotes show:

Simple payback = Net cost ÷ Year-one saving

It assumes year 20 saves exactly what year 1 saved, which is not true of any electricity market. The calculator above also runs a year-by-year model, where each year the production falls slightly and the tariff rises:

Productionₖ = Annual kWh × (1 − degradation)^(y−1)
Rateₖ = Rate × (1 + inflation)^(y−1)
Savingₖ = Productionₖ × (self% × Rateₖ + export% × Exportₖ) − maintenance

Break-even is the point where the running total of savings passes the net cost, interpolated inside the crossing year so the answer reads in years and months. Because tariff inflation of 3% a year comfortably outruns panel degradation of 0.5% a year, the year-by-year answer is usually about a year shorter than the simple one. If you believe your tariff will be flat, set inflation to 0 and the two numbers converge.

Why the self-consumption share matters more than anything else

A kWh you use yourself is worth the full retail rate because it is a kWh you did not buy. A kWh you export is worth whatever your export tariff pays, which in most markets is a third of retail or less. That single split usually moves payback more than the install price does. Shifting the dishwasher, the immersion heater or the EV charge to the middle of the day raises the self-consumption share at no capital cost, and it is the cheapest improvement available to anyone who already owns a system.

Worked example

An 18,000 install with a 30% credit, producing 9,000 kWh a year, at a 0.17 per kWh tariff, 70% used on site, 0.05 export, 3% tariff inflation and 0.5% degradation:

  • Net cost = 18,000 × (1 − 0.30) = 12,600
  • Used on site = 9,000 × 70% = 6,300 kWh × 0.17 = 1,071
  • Exported = 2,700 kWh × 0.05 = 135
  • Year-one saving = 1,206
  • Simple payback = 12,600 ÷ 1,206 = 10.45 years
  • Year-by-year payback = 9.5 years (9 years 6 months)
  • 25-year total saving = 39,692, so a net gain of 27,092 and a 215% return on the net cost, with the export rate held flat
  • Cost of the electricity produced = 12,600 ÷ 212,004 kWh = 0.059 per kWh

That last figure is the one worth carrying around. It converts a capital decision into a tariff you can compare directly with the one on your bill, and it is unaffected by what you assume about future prices.

Where the Inputs Come From

Input Where to find it Typical value
Installed cost The quote, including scaffolding, inverter and certification 1.50 to 3.00 per installed watt
Annual production The installer's estimate, or the panel output calculator 900 to 1,600 kWh per installed kW
Incentive percentage US federal ITC, or your national or state scheme 0% to 30%
Electricity rate Your bill: total cost divided by total kWh, not the headline unit rate 0.12 to 0.35 per kWh
Export rate Your export or feed-in tariff, or 0 if you cannot export 0.03 to 0.15 per kWh
Used on site Higher with a battery, an EV or someone at home in the day 30% to 50% without a battery, 60% to 80% with one
Tariff inflation Your own view. Set it to 0 for the pessimistic case 2% to 4% a year
Degradation The panel warranty states it, usually as a 25-year output floor 0.25% to 0.7% a year

Get the electricity rate from the bottom of the bill rather than the top. Dividing the total amount paid by the total kWh consumed captures standing charges and tiered rates, and it is usually a few cents higher than the advertised unit rate. The energy cost calculator works the same figure out from an individual appliance if you want to check it.

Frequently Asked Questions

How long does it take for solar panels to pay for themselves?

On typical residential figures the break-even point falls between 7 and 12 years, and the two inputs that move it most are the net cost after incentives and the share of production you use on site rather than export. A system that exports most of its output at a low feed-in rate can take half as long again to pay back as an identical system whose owner is home during the day. Run your own numbers above rather than trusting a national average, because the spread is wider than the average is useful.

Should I include tariff inflation in a payback calculation?

Including it is more realistic, but it is a forecast rather than a fact, so quote both. The calculator shows the year-by-year figure as the headline and the simple, inflation-free figure underneath, so you can see how much of the answer depends on the assumption. Setting inflation to 0 gives the worst credible case; anything above about 5% a year should be treated as optimistic over a 25-year horizon.

Does a battery improve solar payback?

It improves the saving per kWh produced by moving output from the export rate to the retail rate, but it also adds capital cost, and in most markets the extra saving does not currently cover the extra cost inside the battery's own warranted life. Model it by raising the self-consumption share and adding the battery price to the installed cost, then compare the payback figures with and without. Size the bank itself with the battery bank size calculator.

What is the cost per kWh figure at the bottom of the result?

It is the net cost of the system divided by every kWh it is expected to produce over the analysis period, so it expresses the install as a tariff. If the number comes out below your current electricity rate, the system generates power more cheaply than you can buy it, which is the same comparison your bill makes every month. It ignores the time value of money, so treat it as a comparison tool rather than a discounted rate of return.

Should I count replacing the inverter?

Yes, if you are modelling 20 years or more. String inverters typically carry a 10 to 12 year warranty against a 25 year panel warranty, so one replacement inside the analysis period is the normal assumption. The simplest way to include it here is to spread the expected replacement cost across the years as an annual maintenance figure, for example a 1,500 inverter over 25 years entered as 60 a year.

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