Estimate only. Use the price from your own installer quote, and check how your utility credits the energy you send back to the grid.
How the payback is calculated
- System cost: system size × 1,000 × price per watt, before any incentive.
- Yearly production: system size × how much 1 kW of panels produces in a year in your state.
- Yearly savings: production × your state's average residential electricity price × the value of each solar kWh.
- Simple payback: cost ÷ yearly savings.
The 25-year figure is yearly savings × 25 minus the cost. It does not include panel degradation, future rate increases, maintenance or financing.
What price per watt to use
Use your quote. For reference, Lawrence Berkeley National Laboratory's Tracking the Sun (2024 edition) found that most residential systems installed in 2023 cost between $3.20 and $5.50 per watt before incentives (20th to 80th percentile). Loan-financed systems often include dealer fees.
The value of each solar kWh
Leave 100% if your utility credits every exported kWh at the full retail rate (classic net metering). Many utilities now pay less for exported energy under net billing; in that case use a lower value. Energy you use at home while the panels produce is always worth the full rate.
Data and the federal tax credit
- Electricity prices: EIA Electric Power Monthly, Table 5.6.B.
- Solar production: PVWatts, standard 1 kW roof system facing south at a 20° tilt with 14% losses.
- The federal Residential Clean Energy Credit does not apply to systems placed in service after December 31, 2025 (IRS), so the cost here is the full price.
Example: how much the price per watt matters
For a 7 kW system with every kWh valued at the full retail rate, yearly savings are about $3,909 in California and $1,695 in Texas. The price you pay changes the payback a lot:
| Price per watt | System cost | California | Texas |
|---|---|---|---|
| $3.20 | $22,400 | 5.7 years | 13.2 years |
| $4.00 | $28,000 | 7.2 years | 16.5 years |
| $5.50 | $38,500 | 9.8 years | 22.7 years |
The range of prices is the 20th to 80th percentile of residential systems installed in 2023 in Lawrence Berkeley National Laboratory's data, so both ends are common.
Example: how much export credits matter
If your utility credits exported energy at less than the retail rate, enter a lower value. For the same 7 kW at $4.00 per watt, the payback in California goes from 7.2 years at 100% to 9.6 years at 75% and 14.3 years at 50%. That is why the rules of your utility are as important as the sun.
How to read your result
- Simple payback is the cost divided by the first year's savings. It ignores rate increases and panel aging; the break-even calculator includes both.
- Net savings over 25 years is a rough upper bound without maintenance, an inverter replacement or financing.
- A payback under 10 years usually means a strong investment, since panels typically keep producing for 25 years or more.
Common mistakes
- Comparing quotes with different sizes. Divide each quote's price by its size in watts to compare like with like.
- Counting the federal credit. It does not apply to systems placed in service after December 31, 2025.
- Ignoring financing. A loan with a dealer fee can add thousands of dollars; check it with the solar loan payment calculator.