Calculate solar ROI and payback period with ITC, rate escalation, SREC income, 25-year net savings, and IRR. Free solar ROI calculator for homeowners and solar professionals.
Return on investment is the ultimate question every solar buyer needs answered: will this system make financial sense over its lifetime? Simple back-of-envelope math — dividing system cost by Year 1 savings — misses the variables that most dramatically shape the real outcome: compounding utility rate increases, annual panel degradation, SREC income streams, and the true time value of money.
This solar ROI calculator models your investment year by year across a full 25-year horizon. Enter your system cost, annual production, current electricity rate, and key financial assumptions, and the tool returns five distinct metrics: simple payback period, adjusted payback period, 25-year net savings, 25-year ROI percentage, and Internal Rate of Return (IRR). Each metric tells a different part of the story — together they give you a complete, honest picture of your solar investment.
Whether you are a homeowner comparing installer quotes, a solar sales professional building proposals that close, or a financial analyst evaluating a commercial project, this calculator gives you the depth and precision your decision demands.
Delivers simple payback, adjusted payback, 25-year net savings, 25-year ROI %, and IRR — every metric a solar investor, installer, or sales professional needs in a single calculation.
Projects savings each year using your chosen utility rate escalation percentage and panel degradation rate, so results reflect realistic future savings — not just Year 1 estimates.
Allows you to enter any ITC percentage (useful for commercial 30% ITC under IRA), state rebates, and annual SREC income — so net cost and total returns reflect your actual incentive stack.
Run each installer's proposal through this calculator using their production estimates and pricing. A system with higher upfront cost but better production may deliver a faster payback and higher IRR than a cheaper alternative. Always compare on IRR and 25-year ROI, not just price per watt.
Solar sales professionals use this tool to present credible, multi-metric financial analyses to prospects. Showing IRR alongside simple payback builds trust and positions you as a financial advisor, not just a product seller. Customers who see the complete picture close at higher rates.
Compare the payback period and ROI for cash purchase, solar loan, and PPA/lease scenarios side by side. If your solar IRR exceeds your loan APR, financing makes financial sense. Use this tool to model each scenario and choose the structure that maximizes your lifetime return.
Enter Gross System Cost
Input the total installed cost of your solar system before any incentives are applied. This should include panels, inverter, racking, labor, permits, and utility interconnection fees. For residential systems in 2026, expect $2.50–$3.50/W installed.
Enter ITC Percentage & Other Incentives
For commercial solar projects still qualifying under the Inflation Reduction Act, enter 30% (or up to 50% with adders). For residential installs in 2026, the federal ITC has expired — enter 0%. Add any state rebates, utility incentives, or MACRS depreciation value in the incentives field.
Enter Annual Production & Electricity Rate
Input your system's estimated annual production in kWh (from your installer's proposal or use our Solar Calculator to estimate). Enter your current electricity rate in $/kWh — check your utility bill for the blended rate. The US average in 2026 is approximately $0.16/kWh.
Set Rate Escalation & Panel Degradation
Enter the expected annual utility rate increase (default: 3.0%, based on the US 20-year historical average). Enter the annual panel degradation rate (default: 0.5%/year for premium monocrystalline modules; budget panels may degrade at 0.7–1.0%/year).
Configure Discount Rate & SREC Income
Set your discount rate for NPV/IRR calculations (default: 6%, representing a conservative opportunity cost of capital). If you are in an active SREC market (NJ, MA, MD, IL, PA, DC), enter your annual SREC income. One SREC = 1 MWh of solar production. SREC prices range from $20–$400 depending on state.
Review All Five Output Metrics
The calculator returns simple payback period, adjusted payback period (with escalation and degradation), 25-year net savings in dollars, 25-year ROI percentage, and Internal Rate of Return. Compare the IRR against your alternative investment options to judge whether solar outperforms.
Output 1
Simple Payback Period
Calculated as Net System Cost divided by Year 1 annual electricity savings. This is the most conservative metric because it assumes flat electricity rates forever. Use it as a worst-case baseline and sanity check — if simple payback is already reasonable, the real payback will be even shorter.
Typical: 9–14 years (2026, no residential ITC)Output 2
Adjusted Payback Period
The year when cumulative savings — modeled annually with utility rate escalation and panel degradation applied — exceed your net system cost. This is the most practically accurate payback figure because it reflects how electricity bills actually change over time. Typically 1–3 years shorter than simple payback.
Typical: 7–11 years (3% escalation, 0.5% degradation)Output 3
25-Year Net Savings ($)
The total dollar value of electricity savings over 25 years, minus net system cost and any ongoing O&M expenses (e.g., inverter replacement around Year 12). This is the most intuitive metric for homeowners: it directly answers "how much money will solar make me over its lifetime?" Plus any SREC income is included.
Typical: $25,000–$75,000 depending on system size and locationOutput 4
25-Year ROI %
Total net savings expressed as a percentage of net system cost. A 300% ROI means you earn $3 in net savings for every $1 invested in your solar system. This metric lets you compare solar directly against other investments like stocks, bonds, or real estate on a like-for-like return basis.
Typical: 200–500% over 25 yearsOutput 5
Internal Rate of Return (IRR)
The annualized equivalent return rate on your solar investment — the discount rate at which the net present value of all future cash flows equals zero. Solar IRR of 8–15% frequently outperforms the long-run S&P 500 average of ~10%, with lower volatility and a guaranteed "dividend" through electricity bill reduction.
Typical: 8–15% annualizedThis calculator uses industry-standard financial modeling techniques applied to solar photovoltaic investments. All calculations are performed on a year-by-year basis over a 25-year analysis period, reflecting the typical warranted output lifespan of modern solar panels.
ITC (Investment Tax Credit) reduces federal tax liability dollar-for-dollar. For 2026 residential installations, the ITC has expired. Commercial and utility projects may still qualify under the IRA.
Panel degradation compounds annually. Utility rates escalate annually. SREC income is added as a flat annual value (assumes constant SREC price — adjust conservatively as SREC markets are volatile).
The most conservative metric. Does not account for rate escalation or degradation.
Iterates annually. The year cumulative escalation-adjusted savings first exceed net cost.
IRR is solved iteratively using Newton's method. Compare IRR to alternative investment returns (e.g., S&P 500 10-yr average ~10%) to evaluate solar as an investment.
Calculations sourced from SurgePV’s Solar ROI Calculator — surgepv.com/tools/roi-payback-calculator/
Representative values based on $2.80/W installed cost, $0.16/kWh electricity rate, 3% annual rate escalation, 0.5% panel degradation, and no ITC (residential 2026). Actual results vary by location, utility, and incentives.
| System Size | Gross Cost | Annual Production | Year 1 Savings | Simple Payback | Adjusted Payback | 25-Yr Net Savings | 25-Yr ROI | IRR |
|---|---|---|---|---|---|---|---|---|
| 4 kW | $11,200 | 5,600 kWh | $896 | 12.5 yr | 10.2 yr | $18,400 | 164% | 7.8% |
| 6 kW | $16,800 | 8,400 kWh | $1,344 | 12.5 yr | 10.2 yr | $27,600 | 164% | 7.8% |
| 8 kW | $22,400 | 11,200 kWh | $1,792 | 12.5 yr | 10.2 yr | $36,800 | 164% | 7.8% |
| 10 kW | $28,000 | 14,000 kWh | $2,240 | 12.5 yr | 10.2 yr | $46,000 | 164% | 7.8% |
| 12 kW | $33,600 | 16,800 kWh | $2,688 | 12.5 yr | 10.2 yr | $55,200 | 164% | 7.8% |
| 15 kW | $42,000 | 21,000 kWh | $3,360 | 12.5 yr | 10.2 yr | $69,000 | 164% | 7.8% |
| 20 kW | $56,000 | 28,000 kWh | $4,480 | 12.5 yr | 10.2 yr | $92,000 | 164% | 7.8% |
| 30 kW (Comm.) | $78,000 | 42,000 kWh | $6,720 | 11.6 yr | 9.5 yr | $142,000 | 182% | 8.6% |
| 50 kW (Comm.) | $125,000 | 70,000 kWh | $11,200 | 11.2 yr | 9.1 yr | $238,000 | 190% | 9.0% |
Some installers inflate projected production to make payback look shorter. Always cross-reference with PVWatts or our Solar Calculator using your actual roof orientation, tilt, and local peak sun hours. Even a 10% overestimate in production extends payback by 1–2 years and significantly reduces 25-year ROI.
String inverters typically need replacement around Year 10–15, adding $1,000–$3,000 in costs. Microinverters (25-year warranties) often avoid this. If your system uses a string inverter, factor in a replacement cost at Year 12 — it can add 6–12 months to your real payback period.
Net metering policies are changing rapidly — California's NEM 3.0, for example, dramatically reduced export compensation. If your utility's net metering is under review, model scenarios with lower export rates (e.g., 30–50% of retail rate) to stress-test your ROI before committing to a system size.
The discount rate you choose dramatically affects discounted payback and NPV. Using a 3% discount rate (savings account benchmark) versus 8% (equity market benchmark) can change the apparent financial attractiveness of solar significantly. Always run the calculation at both conservative and optimistic discount rates to bracket your true outcome.
A good solar ROI is typically 200–400% over a 25-year system life, meaning you earn $2–$4 in net lifetime savings for every $1 invested. In high-electricity-rate states like California, Hawaii, or New York, ROI can reach 400–600%. In lower-rate states, 150–250% is still a solid return compared to other low-risk investments. IRR of 8–12% is generally considered excellent for solar.
Simple payback = Net System Cost ÷ Year 1 Annual Savings. Adjusted payback iterates annually, adding escalating savings until the cumulative total exceeds net cost. Discounted payback also accounts for the time value of money by applying a discount rate to future savings before summing them. This calculator calculates all three, plus 25-year ROI and IRR.
Significantly. The 30% federal ITC reduced net system cost by nearly a third. For example, a $30,000 system cost only $21,000 after ITC, shortening payback by roughly 3–4 years. For 2026 residential installations, the residential ITC has expired. Commercial systems under the Inflation Reduction Act still qualify for 30% ITC (plus bonus adders for domestic content, energy communities, and low-income projects).
IRR (Internal Rate of Return) is the annualized return on your solar investment — the discount rate at which the net present value of all future electricity savings equals your net system cost. A solar IRR of 8–15% is typical. For context, the S&P 500 has averaged ~10% annually over long periods, but with significant volatility. Solar offers a similar or better return with far lower risk, since your electricity savings are guaranteed by your utility's rate structure.
Utility rate escalation is one of the most powerful variables in solar ROI. At 3% annual escalation (US historical average), electricity savings grow every year, shortening adjusted payback by 1–3 years compared to simple payback. At 5% escalation (seen in states like California and Hawaii), payback can be 2–4 years shorter than simple payback, and 25-year ROI increases dramatically. Higher escalation = faster payback = higher IRR.
In 2026, without the residential ITC, typical solar payback periods range from 9–14 years for residential systems. In high-rate states (California, Massachusetts, New York, Hawaii), payback is often 7–10 years. In low-rate states (Louisiana, Oklahoma, Utah), payback may be 12–16 years. With commercial ITC still intact, commercial solar payback can be as short as 5–8 years.
Use both for different purposes. Simple payback is best for quick comparisons and explaining solar to customers — it's intuitive and easy to understand. Discounted payback is most appropriate for rigorous financial analysis, especially when comparing solar against other capital investments, because it accounts for the true time value of money. IRR is the most useful single metric for investors comparing solar to alternatives.
Payback Period Calculator
Deep-dive payback analysis with discounted cash flows, SREC income, and 25-year projection charts.
Solar Loan Calculator
Calculate monthly loan payments, total interest cost, and net savings versus cash purchase for solar financing.
Solar Savings Calculator
Estimate total electricity cost savings over any time horizon with your actual utility rate and usage data.
Net Metering Savings Calculator
Calculate how much you earn from net metering export credits and compare NEM 1.0, NEM 2.0, and NEM 3.0 scenarios.
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