Solar ROI Calculator
Calculate solar investment return with payback period, 25-year NPV analysis, and federal/state incentives. Includes electricity rate escalation and panel degradation.
System Details
Energy & Savings
Incentives & Rebates
Investment Summary
Payback Period
9.3 years
Investment Comparison
Your solar ROI of 232% over 25 years compares to:
- S&P 500 Average (7% annually): 443% return
- High-Yield Savings (4% APY): 167% return
- 10-Year Treasury Bonds: ~80-120% return
Note: Solar provides tax-free savings and hedges against rising electricity costs.
- The 30% federal tax credit is use-it-or-lose-it in the tax year of installation
- Check DSIRE (dsireusa.org) for state and local incentives
- Net metering policies significantly impact ROI - verify with your utility
- Higher electricity rates = faster payback and better ROI
- Consider battery storage for additional self-consumption and backup power
Related Calculators
About This Calculator
Solar energy represents one of the best home investments available today, with typical returns of 10-15% annually—significantly outperforming the stock market while providing hedge against rising electricity costs. Our comprehensive Solar ROI Calculator analyzes your complete financial picture including payback period, 25-year return on investment, net present value (NPV), and lifetime savings to help you make an informed decision.
In 2026, residential solar installation costs average $2.50-3.50 per watt before incentives, translating to $12,500-35,000 for typical home systems. Important 2026 Update: The 30% residential solar tax credit expired December 31, 2025. Homeowners can now only access federal incentives through third-party ownership (leases, PPAs, prepaid arrangements) where the business owner claims the Section 48E Clean Electricity Investment Credit. Direct-purchase systems no longer qualify for federal tax credits for individual taxpayers.
Despite this change, solar remains financially attractive in most markets due to continued electricity rate increases (averaging 3-5% annually), panel price decreases, and state/utility incentives that remain available. This calculator helps you compare purchase vs. lease/PPA options and determine the true financial return for your specific situation.
How to Use the Solar ROI Calculator
- 1Enter your solar system size in kilowatts (kW) from installer quotes.
- 2Input the installed cost per watt or total system cost.
- 3Enter expected annual production in kWh (from installer estimate or our Solar Panel Calculator).
- 4Input your current electricity rate per kWh from your utility bill.
- 5Select your ownership type: Purchase (no federal credit in 2026), Lease, or PPA.
- 6Add any state tax credits, utility rebates, or SREC income.
- 7Toggle Advanced Mode for NPV analysis with custom discount rate and assumptions.
- 8Review payback period, lifetime ROI, and year-by-year financial breakdown.
- 9Compare lease/PPA terms to purchase economics.
Formula
Simple ROI = (Total Savings - Total Cost) ÷ Total Cost × 100Total savings includes all electricity cost avoided over the system lifetime (typically 25 years), plus any incentive income (SRECs, rebates). Total cost is the net installation cost after incentives. NPV calculations discount future savings using your chosen rate to reflect the time value of money. Payback period is when cumulative savings equal net investment.
2026 Solar Economics: What Changed
The solar landscape shifted significantly at the end of 2025:
The Big Change: Federal Tax Credit Expiration
| Year | Homeowner Tax Credit | Business Credit |
|---|---|---|
| 2022-2025 | 30% ITC | 30% ITC |
| 2026+ | 0% (expired) | 30% Section 48E |
What This Means for Homeowners:
- Direct Purchase: No federal tax credit available for individual taxpayers
- Third-Party Ownership: Leases, PPAs, and prepaid arrangements can still access 30% credit through business owner
- Lease/PPA Advantage: Monthly payments may be lower because installers pass credit savings to customers
- State Credits: Many state incentives remain unchanged
2026 Solar Still Makes Sense Because:
| Factor | Impact |
|---|---|
| Equipment prices | Down 70% over decade, still declining |
| Electricity rates | Rising 3-5% annually in most areas |
| State incentives | Many states offer 10-25% credits |
| Property value | Solar increases home value 4-7% |
| Utility rate structure | Time-of-use rates favor solar |
Comparison: 2025 vs. 2026 Purchase Economics:
| Metric | 2025 (with ITC) | 2026 (no ITC) |
|---|---|---|
| System cost (8kW) | $24,000 | $24,000 |
| Federal credit | -$7,200 (30%) | $0 |
| Net cost | $16,800 | $24,000 |
| Payback (@ $0.15/kWh) | 7.5 years | 10.7 years |
| 25-year ROI | 270% | 150% |
Key Insight: Solar is still profitable but takes longer to pay back without the federal credit. Lease/PPA options become more attractive comparatively.
Understanding Solar Payback Period
The payback period is when cumulative electricity savings equal your net investment:
Payback Formula:
Payback Years = Net System Cost ÷ Annual Electricity Savings
Where:
Annual Savings = System Production (kWh) × Electricity Rate ($/kWh)
2026 Payback Periods by Region (8kW system, direct purchase):
| Region | Avg Rate | Sun Hours | Payback |
|---|---|---|---|
| California | $0.28/kWh | 5.5 | 7-9 years |
| Hawaii | $0.35/kWh | 5.0 | 6-8 years |
| Northeast | $0.22/kWh | 4.5 | 9-12 years |
| Southwest | $0.13/kWh | 6.0 | 10-13 years |
| Southeast | $0.12/kWh | 5.0 | 12-15 years |
| Midwest | $0.14/kWh | 4.5 | 11-14 years |
Factors That Speed Up Payback:
| Factor | Impact |
|---|---|
| Higher electricity rates | Each $0.01/kWh = 6-12 months faster |
| State tax credits | 10% credit = 10% faster payback |
| Utility rebates | Direct cost reduction |
| SREC income | $100-500/year additional income |
| Net metering at full retail | Maximizes savings value |
| TOU rates with evening peak | Solar shifts usage to cheaper hours |
Important: After payback, your electricity is essentially free for 15-20+ more years. A system that pays back in 10 years provides 15 years of free electricity.
2026 Installation Costs and Pricing
Solar installation costs have stabilized in 2026 after years of decline:
National Average Costs (2026):
| System Size | Cost/Watt | Total Cost | Monthly Production |
|---|---|---|---|
| 4 kW | $3.00-3.50 | $12,000-14,000 | 400-550 kWh |
| 6 kW | $2.80-3.30 | $16,800-19,800 | 600-825 kWh |
| 8 kW | $2.60-3.10 | $20,800-24,800 | 800-1,100 kWh |
| 10 kW | $2.50-3.00 | $25,000-30,000 | 1,000-1,375 kWh |
| 12 kW | $2.40-2.90 | $28,800-34,800 | 1,200-1,650 kWh |
Cost Variation by State:
| State | $/Watt | Why |
|---|---|---|
| Arizona | $2.10-2.50 | High competition, simple installs |
| Texas | $2.20-2.60 | Large market, low labor costs |
| California | $2.70-3.30 | High demand, labor costs |
| New York | $3.00-3.60 | Labor costs, complex permitting |
| Tennessee | $3.20-3.65 | Smaller market, less competition |
Cost Breakdown:
| Component | % of Total | 2026 Cost |
|---|---|---|
| Solar panels | 25-30% | $0.65-0.90/W |
| Inverter | 10-15% | $0.25-0.45/W |
| Mounting/hardware | 10% | $0.25-0.30/W |
| Labor | 15-20% | $0.40-0.60/W |
| Permits/inspection | 5-10% | $0.12-0.30/W |
| Overhead/profit | 20-25% | $0.50-0.75/W |
Getting the Best Price:
- Get 3-5 quotes from different installers
- Compare using EnergySage or similar platforms
- Ask about year-end pricing specials
- Consider larger systems for lower $/watt
- Check for local installer promotions
Lease vs. Purchase vs. PPA in 2026
With the residential tax credit gone, third-party ownership becomes more competitive:
Ownership Options Compared:
| Factor | Purchase | Lease | PPA |
|---|---|---|---|
| Upfront cost | $15,000-35,000 | $0 | $0 |
| Federal credit | None (2026+) | Installer claims | Installer claims |
| Monthly payment | None | Fixed | Per kWh |
| Savings | 100% of production | 10-30% of bill | 10-30% of bill |
| Maintenance | Your responsibility | Included | Included |
| Term | Own forever | 20-25 years | 20-25 years |
| Home sale | Adds value | Transfer or buyout | Transfer or buyout |
When Lease/PPA Makes Sense in 2026:
- You don`t have $15,000-30,000 for purchase
- You don`t want maintenance responsibility
- You`re uncertain about staying in home long-term
- Monthly savings matter more than long-term ROI
- Your state lacks strong state-level incentives
When Purchase Still Wins:
- You have cash or can get solar loan at <6%
- You qualify for substantial state credits
- You plan to stay 10+ years
- You want to maximize total savings
- You`re okay with slower payback
2026 Comparison Example (8kW system, $0.15/kWh rate):
| Metric | Purchase | Lease | PPA |
|---|---|---|---|
| Net cost | $24,000 | $0 | $0 |
| Monthly savings | $150 | $30-50 | $30-50 |
| 25-year savings | $60,000 | $10,000-15,000 | $10,000-15,000 |
| Payback | 10.7 years | N/A | N/A |
| Total ROI | 150% | ~100%* | ~100%* |
*ROI on opportunity cost of not purchasing
Key Insight: Leases/PPAs now provide comparable ROI to purchased systems because they can access the business tax credit that homeowners cannot.
State and Local Incentives (2026)
State incentives have become more important with federal credit expiration:
Top State Incentives (2026):
| State | Incentive | Value | Type |
|---|---|---|---|
| New York | NY-Sun Program | $0.20-0.35/W | Rebate |
| Massachusetts | SMART Program | $0.05-0.10/kWh | Performance |
| California | SGIP (w/ battery) | $150-200/kWh | Rebate |
| New Jersey | SuSI Program | $0.10-0.15/W | Rebate |
| Illinois | Adjustable Block | $0.08-0.10/kWh | SREC |
| Minnesota | Xcel Solar*Rewards | $0.08/kWh | Performance |
| Maryland | SREC II | $50-100/SREC | Certificate |
| Connecticut | RSIP | $0.10-0.15/W | Rebate |
Types of State Incentives:
| Type | Description | Typical Value |
|---|---|---|
| State tax credit | Reduces state income tax | 10-25% of cost |
| Rebate | Cash payment from state/utility | $500-3,000 |
| SRECs | Sell renewable energy certificates | $50-300/year |
| Performance payment | $/kWh for production | $0.05-0.15/kWh |
| Property tax exemption | No tax on added home value | $200-500/year |
| Sales tax exemption | No sales tax on equipment | 5-10% of cost |
Net Metering Status (2026):
| Status | States | Value |
|---|---|---|
| Full retail rate | 35+ states | Maximum value |
| Reduced rate | CA, NV, others | 60-80% of retail |
| No net metering | TX (varies by utility) | Varies widely |
Finding Your Incentives:
- DSIRE Database (dsireusa.org) - comprehensive listing
- State energy office website
- Local utility website
- EnergySage incentive finder
- Solar installer quotes should include all incentives
Net Present Value (NPV) Analysis
NPV accounts for the time value of money—a dollar today is worth more than a dollar in 25 years:
NPV Formula:
NPV = -Initial Investment + Σ (Annual Savings ÷ (1 + r)^n)
Where:
r = discount rate (your alternative investment return)
n = year number (1 through 25)
Interpreting NPV:
| NPV Result | Meaning |
|---|---|
| Positive | Investment beats your required return |
| Zero | Investment equals your required return |
| Negative | Investment underperforms |
Choosing a Discount Rate:
| Rate | Represents | Best For |
|---|---|---|
| 3% | Treasury bond return | Risk-averse investors |
| 5% | Conservative portfolio | Most homeowners |
| 7% | Stock market average | Comparison to equities |
| 10%+ | Aggressive investments | Opportunity cost comparison |
NPV Example (8kW system, purchased, no federal credit):
Investment: $24,000
Annual savings: $1,800 Year 1 (growing 3%/year)
Discount rate: 5%
Year 1: $1,800 ÷ 1.05 = $1,714
Year 2: $1,854 ÷ 1.10 = $1,685
Year 3: $1,910 ÷ 1.16 = $1,647
...
Year 25: $3,762 ÷ 3.39 = $1,110
Sum of discounted cash flows: ~$38,500
NPV = $38,500 - $24,000 = +$14,500
NPV positive at 5% means solar beats a 5% investment return.
Sensitivity Analysis:
| Discount Rate | NPV | Verdict |
|---|---|---|
| 3% | +$22,000 | Strong buy |
| 5% | +$14,500 | Good investment |
| 7% | +$8,500 | Competitive |
| 10% | +$2,000 | Marginal |
Key Insight: Even without the federal credit, solar provides positive NPV at reasonable discount rates due to rising electricity costs.
Long-Term Savings and ROI
Solar panels produce electricity for 25-30+ years, providing substantial lifetime returns:
25-Year Savings Analysis (8kW system):
| Factor | Conservative | Moderate | Aggressive |
|---|---|---|---|
| Year 1 production | 11,000 kWh | 11,500 kWh | 12,000 kWh |
| Panel degradation | 0.5%/year | 0.4%/year | 0.3%/year |
| Electricity escalation | 2%/year | 3%/year | 4%/year |
| Starting rate | $0.14/kWh | $0.15/kWh | $0.16/kWh |
| 25-year savings | $48,000 | $65,000 | $85,000 |
2026 ROI Scenarios (Direct Purchase, No Federal Credit):
| Scenario | Cost | Savings | ROI |
|---|---|---|---|
| Low (SE, low rates) | $24,000 | $42,000 | 75% |
| Medium (MW, avg rates) | $24,000 | $55,000 | 130% |
| High (CA/NE, high rates) | $24,000 | $75,000 | 212% |
| With state credit (10%) | $21,600 | $55,000 | 155% |
ROI vs. Other Investments (25 years):
| Investment | Expected Return | Risk |
|---|---|---|
| Solar panels | 100-200% | Low (guaranteed savings) |
| S&P 500 Index | 150-250% | High (market volatility) |
| Treasury bonds | 60-80% | Very low |
| Bank savings | 20-40% | Very low |
Home Value Impact:
| Metric | Impact |
|---|---|
| Home value increase | 4-7% (avg 6.9%) |
| Dollar value (avg) | $15,000-25,000 |
| Sales time | 20% faster |
| Property tax | Often exempt |
Real-World ROI Examples:
| State | Net Cost | 25-Year Savings | ROI |
|---|---|---|---|
| California | $22,000 | $78,000 | 255% |
| Massachusetts | $20,000 | $68,000 | 240% |
| Texas | $18,000 | $45,000 | 150% |
| Florida | $19,000 | $52,000 | 174% |
| Arizona | $17,000 | $48,000 | 182% |
Production Factors and Degradation
Accurate production estimates are crucial for ROI calculations:
Production Variables:
| Factor | Impact on Production |
|---|---|
| Location (sun hours) | ±30-50% variation |
| Panel orientation | South = 100%, East/West = 80-85% |
| Roof tilt | Optimal varies by latitude |
| Shading | Each 10% shading = 10-15% loss |
| System losses | Inverter, wiring = 10-14% |
Peak Sun Hours by Region:
| Region | Peak Sun Hours | Annual Production/kW |
|---|---|---|
| Southwest | 5.5-6.5 | 1,600-1,900 kWh |
| California | 5.0-5.5 | 1,500-1,650 kWh |
| Southeast | 4.5-5.0 | 1,350-1,500 kWh |
| Midwest | 4.0-4.5 | 1,200-1,350 kWh |
| Northeast | 4.0-4.5 | 1,200-1,350 kWh |
| Northwest | 3.5-4.0 | 1,050-1,200 kWh |
Panel Degradation:
| Panel Type | Annual Degradation | After 25 Years |
|---|---|---|
| Budget | 0.7-0.8% | 80-82% original |
| Standard | 0.4-0.5% | 87-90% original |
| Premium | 0.25-0.3% | 92-94% original |
Lifetime Production Example (8kW system, 5.0 sun hours):
Year 1: 11,680 kWh (100%)
Year 5: 11,450 kWh (98%)
Year 10: 11,100 kWh (95%)
Year 15: 10,770 kWh (92%)
Year 20: 10,440 kWh (89%)
Year 25: 10,120 kWh (87%)
Total 25-year: ~270,000 kWh
Warranties and Guarantees:
| Warranty Type | Standard | Premium |
|---|---|---|
| Equipment | 12-15 years | 25 years |
| Performance | 80% at 25 years | 92% at 25 years |
| Inverter | 10-12 years | 25 years |
Financing Options and Impact on ROI
How you pay for solar significantly affects your returns:
Financing Options (2026):
| Option | Pros | Cons |
|---|---|---|
| Cash purchase | Maximum long-term ROI | Large upfront cost |
| Solar loan | Own system, spread cost | Interest reduces ROI |
| HELOC | Low rates, tax-deductible interest | Home as collateral |
| Lease | No upfront cost, maintenance included | Lower savings |
| PPA | No upfront, pay per kWh | Locked rate, limited savings |
Solar Loan Impact on ROI:
| Loan Terms | Effective Cost | 25-Year ROI |
|---|---|---|
| Cash purchase | $24,000 | 150% |
| 4% / 10 years | $28,800 | 115% |
| 6% / 12 years | $32,400 | 90% |
| 8% / 15 years | $37,200 | 65% |
Monthly Cash Flow (8kW system, $0.15/kWh):
| Scenario | Payment | Savings | Net Monthly |
|---|---|---|---|
| Cash | $0 | $150 | +$150 |
| $24k @ 4%/10yr | $243 | $150 | -$93 |
| Lease ($100/mo) | $100 | $150 | +$50 |
| PPA ($0.12/kWh) | $110 | $150 | +$40 |
When to Finance:
| Situation | Best Option |
|---|---|
| Have cash, staying 10+ years | Cash purchase |
| Have equity, <6% rate | HELOC |
| Good credit, moderate term | Solar loan (10-12yr) |
| No upfront budget, want savings now | Lease or PPA |
| Uncertain about staying | Lease or PPA |
Key Insight: Even with financing, positive monthly cash flow is possible if loan payment is less than electricity savings.
Pro Tips
- 💡Get multiple quotes (3-5) to ensure competitive pricing—system costs vary 20-30% between installers.
- 💡Verify net metering policy with your utility before committing—this significantly affects savings.
- 💡In 2026, seriously consider lease/PPA options since they can access federal credits you cannot.
- 💡Check state incentives at DSIRE (dsireusa.org)—state credits can significantly improve ROI.
- 💡Ask installers about year-end pricing specials when they need to hit sales targets.
- 💡Consider 25-year panel warranties—premium panels with 0.25% degradation provide significantly more lifetime production.
- 💡Factor in electricity rate increases (3-5%/year historical) when calculating long-term savings.
- 💡If using a solar loan, ensure monthly payment is less than electricity savings for positive cash flow from day one.
- 💡For accurate ROI, use installer production estimates rather than generic calculators.
- 💡If you have high credit card debt (15%+ interest), paying that off first may provide better returns than solar.
- 💡Consider your time horizon—solar ROI improves dramatically the longer you stay in your home.
- 💡Ask about referral bonuses—many installers offer $500-1,000 for referrals.
Frequently Asked Questions
Without the federal tax credit, a 25-year ROI of 100-200% is typical for purchased systems, translating to 5-10% annual returns. This remains competitive with stock market returns (7% historical average) with the added benefits of being tax-free savings and providing a hedge against rising electricity costs.
