Solar payback calculator
How many years until the system has paid for itself — calculated on 2026 rules, which means no federal tax credit on a purchase.
Most payback calculators are now wrong
They subtract a 30% federal credit that no longer exists for homeowner purchases. On a $24,000 system that is a $7,200 error, and it shortens the stated payback by roughly four years. This calculator applies zero.
Best option: Cash purchase — $4,611 net present value over 25 years, paying back in year 11.
| Option | Owns it | 30% credit | Upfront | 25-yr NPV | Payback | Cost/kWh |
|---|---|---|---|---|---|---|
| Cash purchase | You | None | $13,500 | $4,611 | Year 11 | $0.182 |
| Solar loan | You | None | $0 | -$657 | Year 23 | $0.236 |
| Lease | Provider | Indirect (§48E) | $0 | $3,588 | Year 1 | $0.192 |
| PPA | Provider | Indirect (§48E) | $0 | $2,886 | Year 1 | $0.200 |
What this calculation assumes, and where it can be wrong
Federal credit. The 30% federal residential credit (IRC §25D) expired for systems placed in service after December 31, 2025. A 2026 cash or loan purchase receives no federal credit. Leases and PPAs remain eligible indirectly: the third-party owner claims the commercial credit (IRC §48E) and reflects part of it in the price offered, provided the system is placed in service by December 31, 2027.
Estimated §48E value in a lease or PPA quote: about $2,025 for this system, assuming the provider passes through half the credit. That share is our estimate, not a published figure.
Export credit. NEM 3.0 compensates exports at avoided-cost rates far below retail.
State incentives. California has no statewide personal income tax credit or cash rebate for residential PV. Sales tax and property tax exemptions exist but are not cash incentives and are not modelled. SGIP pays roughly $200/kWh toward battery storage (far more for equity-resiliency customers) — that is storage, not PV, and belongs in the battery calculator rather than here. What actually decides California is NEM 3.0: exports earn a fraction of retail, which is already reflected in the export credit ratio.
- Cash purchase: No federal tax credit is applied: IRC §25D expired for systems placed in service after 2025-12-31.
- Cash purchase: Exported power is credited at 25% of retail, so savings depend heavily on using power as it is generated.
- Solar loan: Financed amount includes a 20% dealer fee, which is why a $0-down loan quote costs more than the same system bought outright.
- Solar loan: No federal tax credit is applied: IRC §25D expired for systems placed in service after 2025-12-31.
- Solar loan: Exported power is credited at 25% of retail, so savings depend heavily on using power as it is generated.
- Lease: Pricing assumes the system owner claims the §48E credit and reflects part of it in your quote. The system must be placed in service by 2027-12-31 to qualify.
- Lease: Exported power is credited at 25% of retail, so savings depend heavily on using power as it is generated.
- PPA: Pricing assumes the system owner claims the §48E credit and reflects part of it in your quote. The system must be placed in service by 2027-12-31 to qualify.
- PPA: Exported power is credited at 25% of retail, so savings depend heavily on using power as it is generated.
Sunlight data: 1616 kWh per installed kW per year (verified — NREL PVWatts v8). Retail rate: $0.333/kWh.
What actually drives payback
Payback is far more sensitive to a handful of inputs than to the size of the system. In rough order of impact:
- Your electricity rate. Solar is worth what it displaces. At $0.32/kWh the arithmetic works in places it cannot at $0.12/kWh.
- How exports are credited. A household typically uses only a third of what it generates as it is generated. If the rest earns a quarter of retail rather than full retail, most of the theoretical saving evaporates.
- The rate escalation you assume. Assuming 6% annual increases instead of 3% can shorten a stated payback by several years. It is the most common thumb on the scale in a sales quote.
- Installed cost per watt. Meaningful, but usually less decisive than the three above.
Payback is not the same as a good investment
A system can pay back in year 16 and still be a worse use of the money than leaving it invested. Payback ignores what the capital could have earned in the meantime. Net present value does not, which is why both are shown above and why NPV decides the recommendation.
The reverse also happens: a $0-down PPA has no payback period at all, but can be positive from the first year. Ranking these two on payback alone would be meaningless.
When the answer is "it doesn't"
In states with cheap electricity and poor export compensation, no financing route clears zero over 25 years. The calculator says so plainly rather than stretching the horizon or inflating escalation until a positive number appears.
Common questions
What is a good solar payback period in 2026?
Before 2026, 7–10 years was a common result because the 30% federal credit removed nearly a third of the cost on day one. Without it, payback on a cash purchase commonly lands in the 12–18 year range, and in low-rate states it may never arrive. The honest answer depends almost entirely on your electricity rate and how your utility credits exports.
Why is my payback longer than the quote I was given?
Three usual reasons. The quote may still apply the expired federal credit. It may assume electricity prices rise 5–6% a year rather than a sober 3%. And it may value every generated kWh at the full retail rate, even where exports are credited well below retail.
Does payback period account for the time value of money?
Payback period does not — it is a simple count of years until you break even in nominal dollars. That is why we show net present value beside it. A 16-year payback with a negative NPV means you break even eventually but would have done better leaving the money elsewhere.
Does a lease or PPA have a payback period?
Not in the usual sense. With no money down there is nothing to pay back — you are either cash-flow positive from year one or you are not. That is why the comparison below shows net present value for all four routes rather than payback alone.
Full assumptions and data sources are on the methodology page. For the ownership question specifically, see buy, finance, lease or PPA.