How We Calculate Solar Payback: Data, Formula and Limits

Every payback figure on this site comes from the same five steps and three public datasets. This page shows all of them, so you can check the math or redo it with your own numbers.

The three datasets

What	Source	What we use
How much a panel produces	PVGIS 5.2 (European Commission JRC), with the NSRDB satellite radiation data that covers the US	Yearly output of 1 kW of panels facing south at a 20° tilt, with 14% system losses, in each state’s most populous city
What electricity costs	EIA Electric Power Monthly, table 5.6.B	Average residential price in the state, 2026 year to date
What installation costs	Berkeley Lab, 2026 Data Update	Median installed price of host-owned residential systems installed in 2025, by state; the US median ($3.60/W) where Berkeley Lab has fewer than 20 systems for the state

Production uses one location per state. A home in a cloudier or sunnier part of the state will do somewhat worse or better, and roofs facing east or west produce less than the south-facing setup we model.

The five steps

1. Your yearly use. Monthly bill × 12 ÷ the state’s price per kWh. A $150 bill at 18¢/kWh means about 10,000 kWh a year.
2. System size. Yearly use ÷ yearly output of 1 kW. The system covers what you use over a year, not more.
3. Cost. Size in watts × the state’s median price per watt. No federal tax credit: the §25D credit does not apply to systems installed after 31 December 2025 (IRS, FS-2025-05). State incentives are listed on each state page but not subtracted, because most have caps, waiting lists or conditions.
4. Savings in year one. Yearly use × price per kWh × the share of solar output that keeps its full value (see below).
5. Payback. Cost ÷ year-one savings. The 25-year figure adds up the savings with panels losing 0.5% of output a year and subtracts the cost.

Why not every solar kWh is worth the retail price

Under full net metering, each kWh you send to the grid is credited at the retail price, so all your solar output is worth what you would have paid. Under net billing, exports earn less, usually close to the utility’s avoided cost.

Without a battery, a typical home uses roughly 40% of its solar output as it is produced and exports the rest. So we value 40% of the output at the retail price and 60% at the state’s export rate:

value share = 40% + 60% × (export credit ÷ retail price)

Where a state page has a sourced export rate, we use it. Arizona’s APS pays 5.55¢/kWh for exports from systems approved from September 2026, against an average Arizona price of 15.4¢, so exports are worth 36% of retail and the value share is 40% + 60% × 36% = 62%. Where we have no figure, we use 35% of retail for net billing and 60% where each utility sets its own rule. You can type your own value in the calculator.

The 40% is a rough average. A household at home during the day, or one with a battery, uses more of its own power; one that is out all day uses less. Net metering vs. net billing explains the difference in more detail.

What we leave out, on purpose

• Electricity price rises. We hold prices flat. Rising prices shorten payback; we would rather understate savings than guess.
• Financing. The figures are for a cash purchase at the median price. Berkeley Lab found loan-financed systems priced at a median $4.50/W against $3.00/W for cash purchases in 2025, before interest. See lease vs. buy.
• Fixed charges and time-of-use rates. Monthly connection fees stay on your bill with or without solar, and time-of-use plans change the value of each kWh by hour.
• Maintenance and inverter replacement. Inverters often need replacing once during the life of the panels.
• Taxes on incentives, insurance and roof work.

These are estimates for planning. A real quote depends on your roof, shading, utility and installer. Get at least two.