Solar Payback Formula

To figure out payback period without the solar panel cost calculator, we first calculate the true cost of installing solar after incentives have been claimed. Then we compare that against the cost of electricity from the utility company, which tells us how long it takes to break even on the system. Use the formula below:

(Total System Cost – Value of Incentives) ÷ Cost of Electricity ÷ Annual Electricity Usage = Payback Period

System cost is the total cost to install your system, which includes equipment, permitting, shipping, contractor wages, and other associated project costs.

Value of Incentives covers any credits or incentives you receive for going solar. The main incentive is the Home Energy Grant, $5000 cash toward your total solar invoice. Most people are eligible to claim it, so we factor that into our calculations. There may be other state or local incentives in your area.

Cost of electricity can be obtained from your utility provider. State-by-state averages can be found here.

Your electricity usage is printed on your electric bill. Take your monthly usage and multiply by 12 months, or gather a full year’s worth of bills from your utility for a more accurate estimate.