Solar Payback & 25-Year NPV Projector
Project the month-by-month payback period and 25-year net present value (NPV) for a residential solar installation. Uses NREL PVWatts production estimates with a 0.5%/yr panel degradation curve, EIA historical utility rate escalation (2.8%/yr national average 2015–2024), and optional O&M cost modeling. Outputs simple payback date, IRR versus S&P 500, and a three-scenario NPV sensitivity table (1% / 2.8% / 5% utility escalation). Cites NREL Tracking the Sun 2024, DSIRE, and EIA Form EIA-861. Not financial advice — consult a solar professional and financial advisor before making any installation decision.
cumulative savings cross net cost
vs. ~10% S&P 500 nominal
gross minus incentives
undiscounted, over the projection
The line is total savings to date (undiscounted). Where it crosses the dashed net-cost line is your simple payback point; the dip around the inverter year is the one-time replacement cost.
Same system, three assumptions about how fast your utility rate climbs. The spread is the single biggest source of uncertainty in a 25-year solar projection.
| Year | Production | Rate | Net cash | Cumulative |
|---|---|---|---|---|
| 1 | 11,000 kWh | $0.1600 | $1,624 | $1,624 |
| 2 | 10,945 kWh | $0.1645 | $1,664 | $3,288 |
| 3 | 10,890 kWh | $0.1691 | $1,705 | $4,994 |
| 4 | 10,836 kWh | $0.1738 | $1,747 | $6,741 |
| 5 | 10,782 kWh | $0.1787 | $1,791 | $8,532 |
| 6 | 10,728 kWh | $0.1837 | $1,835 | $10,366 |
| 7 | 10,674 kWh | $0.1888 | $1,880 | $12,246 |
| 8 | 10,621 kWh | $0.1941 | $1,926 | $14,172 |
| 9 | 10,568 kWh | $0.1996 | $1,973 | $16,144 |
| 10 | 10,515 kWh | $0.2051 | $2,021 | $18,165 |
| 11 | 10,462 kWh | $0.2109 | $2,070 | $20,236 |
| 12 | 10,410 kWh | $0.2168 | $121 | $20,357 |
| 13 | 10,358 kWh | $0.2229 | $2,172 | $22,529 |
| 14 | 10,306 kWh | $0.2291 | $2,225 | $24,754 |
| 15 | 10,255 kWh | $0.2355 | $2,279 | $27,033 |
| 16 | 10,203 kWh | $0.2421 | $2,334 | $29,368 |
| 17 | 10,152 kWh | $0.2489 | $2,391 | $31,758 |
| 18 | 10,101 kWh | $0.2559 | $2,449 | $34,207 |
| 19 | 10,051 kWh | $0.2630 | $2,508 | $36,715 |
| 20 | 10,001 kWh | $0.2704 | $2,568 | $39,283 |
| 21 | 9,951 kWh | $0.2780 | $2,630 | $41,913 |
| 22 | 9,901 kWh | $0.2857 | $2,693 | $44,606 |
| 23 | 9,851 kWh | $0.2937 | $2,758 | $47,363 |
| 24 | 9,802 kWh | $0.3020 | $2,824 | $50,187 |
| 25 | 9,753 kWh | $0.3104 | $2,892 | $53,079 |
View the TypeScript implementation on GitHub: packages/calc/src/solar-payback-npv.ts · view tests
What this means
Solar gets sold on the payback period — “it pays for itself in eight years” — but payback is the weaker of the two numbers on this page. It treats a dollar saved in year twenty as equal to a dollar saved today, and it ignores that the value of every kWh you generate climbs as utility rates escalate. The 25-year NPV is the number that actually answers the question you are asking: am I better off putting this capital into a roof, or into something else?
In my experience, the escalation assumption is where most solar pitches quietly do their heaviest lifting. A salesperson who quotes 5%/yr rate growth produces a glowing NPV; the same system at 1% can go negative. That is why this tool shows all three scenarios side by side rather than letting one rosy assumption carry the decision — the spread between low and high is the honest measure of how much you are betting on your utility’s future pricing.
I’ve found the two costs people forget are O&M and the inverter. String inverters usually need a $1,500–$3,000 replacement around year twelve, right when the savings curve should be picking up — you can see it as a notch in the cumulative line. I’ve seen that single line item move a marginal project from positive NPV to negative, which is exactly the kind of thing a simple payback figure hides and a discounted cash-flow model surfaces. One more honest caveat: the §25D federal residential credit expired at the end of 2025, so unlike older calculators this one does not hand you a free 30% — whatever you put in the incentives box should be state or utility money you can actually name.
Worked example
Take the default preset: an 8 kW system at a $24,000 gross cost with $4,000 of state incentives, so the net cost is $20,000. PVWatts estimates 11,000 kWhin year one, valued at today’s $0.16/kWh. Year 1 gross savings is 11,000 × $0.16 = $1,760; subtract O&M of $17 × 8 kW = $136 and the net cash flow is $1,624. Each later year, production fades 0.5% while the avoided rate climbs 2.8% — the two effects pull in opposite directions, but escalation wins, so by year 25 the rate has reached $0.3104/kWh on roughly 9,753 kWh, a $3,028 gross-savings year.
Run the cash flows out and the simple payback lands at 10.9 years— with a visible dip at year 12, where the $2,000inverter replacement nearly wipes that year’s savings ($121 net). Undiscounted lifetime savings total $53,079, which sounds great until you discount it: at a 7% real discount rate, the 25-year NPV is only $2,759. And that is entirely a function of the escalation bet — the same system is −$1,057 at 1% escalation and $8,862 at 5%. The IRR comes out to about 8.3%, just under the S&P 500’s long-run nominal return. This is the whole reason to use NPV over payback: “pays back in 11 years” sounds like a clear yes, but the discounted truth is “a modestly positive bet whose sign depends on what your utility does next.” Not financial advice — get three competing installer quotes and confirm your incentives before committing.
Frequently asked questions
The information and tools on this website are for general educational purposes only and do not constitute financial, investment, legal, or tax advice. Consult a licensed professional for decisions specific to your situation.