Solar payback is one division:
Payback (years) = net installed cost ÷ annual saving
Four inputs feed it. Three can be pinned down to within a few percent before you sign anything. The fourth is where the whole answer lives.
Input 1 — net installed cost
Gross installed cost less incentives. At $2.80/W a 9 kW system is $25,200 gross; less a 30% federal credit that is $17,640 net. State, utility and local incentives come off after that. See solar cost per watt for what drives the gross figure.
Use the credit only if you can actually use it — it offsets tax owed, and a household with little federal liability may carry it forward rather than bank it immediately.
Input 2 — annual production
Array size × local peak sun hours × a system derate of roughly 0.80 (inverter losses, wiring, soiling, temperature, mismatch).
A 9 kW array at 4.5 peak sun hours: 9 × 4.5 × 365 × 0.80 ≈ 11,800 kWh/year.
Peak sun hours by location are in peak sun hours by state, and the practical output figures in solar panel output per day by state. Shade and roof orientation move this materially — see solar panel shading loss.
Production also declines about 0.4–0.6% a year; over 25 years that costs roughly 6–8% of lifetime output. Small, but it is why 25-year totals should not be 25 × year one.
Input 3 — your utility rate
Not the national average. The rate on your own bill, all-in — energy plus delivery plus riders, divided by kWh used. This ranges from about 11 ¢/kWh to over 45 ¢/kWh across the US, a 4× spread that dwarfs every other difference between two households.
Input 4 — what happens to exported energy
This is the input that decides the answer, and the one most calculators quietly assume away.
Full-retail net metering. Every exported kWh offsets an imported kWh at the same price. Your saving is the full retail rate on all production.
Net billing / avoided-cost export. Exports are credited at wholesale — often 3–8 ¢/kWh against a 25 ¢ retail rate. Now only the production you consume as it is generated saves the retail rate. On a typical house that self-consumption share is 25–45% without storage.
The difference between those two regimes, on the same house, same system, same sun:
| Full-retail NEM | Net billing at 5 ¢ export | |
|---|---|---|
| Production | 11,800 kWh | 11,800 kWh |
| Self-consumed (35%) | — | 4,130 kWh @ 25 ¢ = $1,033 |
| Exported | 11,800 @ 25 ¢ = $2,950 | 7,670 kWh @ 5 ¢ = $384 |
| Annual saving | $2,950 | $1,417 |
| Payback on $17,640 | 6.0 years | 12.4 years |
Same hardware, same roof. Six years or twelve, decided entirely by a tariff. Before you model anything, find out which regime you are in — it is on your utility's site under net metering, net billing, or successor tariff.
Worked example, start to finish
9 kW array, $2.80/W, 4.5 peak sun hours, 22 ¢/kWh retail, full-retail net metering:
- Gross $25,200 → net after 30% credit $17,640
- Production
9 × 4.5 × 365 × 0.80= 11,826 kWh/yr - Saving
11,826 × $0.22= $2,602/yr - Payback
17,640 ÷ 2,602= 6.8 years
Add rate inflation of 3%/yr and it lands near 6.2 years. Add a $12,000 battery with no export penalty to harvest and it stretches past 11 — which is the arithmetic behind home solar battery cost.
What the number does not include
- Roof life. If the roof needs replacing in six years, do it first. Removing and reinstalling an array costs $2,000–5,000.
- Inverter replacement. A string inverter typically needs replacing once in the system's life; budget $1,500–3,000 around year 12–15. Microinverters usually carry 25-year warranties instead.
- Maintenance. Low but not zero.
- Resale. Owned systems generally add value; leased ones can complicate a sale.
The short version
Payback = net cost ÷ annual saving. Get your own all-in ¢/kWh off your bill, get your peak sun hours, and — before anything else — find out how your utility treats exports. That single input moves a typical residential payback between about 6 and 13 years, and no other variable comes close.