Solar Panel Payback Calculator

Solar economics turn on one number that installers rarely lead with: how much of the generation you use yourself. Electricity you consume avoids the full retail price, while electricity exported earns a much lower rate — often a quarter of it. A system with high self-consumption pays back in half the time of an identical one on an empty house.

The other thing to get right is degradation. Panels lose output slowly but steadily, so a twenty-year projection at year-one output overstates the return by several percent.

The calculation

Annual benefit = (generation × self-use share × your electricity price) + (the rest × export price). That benefit is then reduced by the degradation rate each year and accumulated until it covers the installed cost.

Worked example

A 5,000 system generating 4,500 kWh a year with 50% self-use: 2,250 kWh avoided at 0.28 is 630, and 2,250 kWh exported at 0.08 is 180 — a benefit of 810 in year one, a 16.2% return on the cost. With 0.5% annual degradation it breaks even during year seven and is worth about 15,450 over twenty years.

Self-consumption is the lever

Raising self-use from 50% to 70% on this system lifts the annual benefit from 810 to 990 — a 22% improvement with no extra panels. Running the dishwasher, washing machine and any heating or vehicle charging during daylight is free; a battery does the same thing at a cost that has to be justified on its own.

Frequently asked questions