After the incentive, how long until the system pays for itself? Divide the net cost by the yearly savings and you have the simple payback every solar buyer asks about.
A $14,000 net system saving $1,680 a year pays back in about 8.3 years — the headline a homeowner remembers.
The example
Three homes, each with a net (after-incentive) cost and a yearly savings figure.
| A | B | C | D | |
|---|---|---|---|---|
| 1 | Home | Net cost | Annual savings | Payback (yrs) |
| 2 | Home A | $14,000 | $1,680 | 8.33 |
| 3 | Home B | $18,000 | $1,440 | 12.50 |
| 4 | Home C | $11,000 | $1,950 | 5.64 |
The formula
A single division turns dollars into years:
How it works
Payback is just how many years of savings it takes to recover the cost:
B2is the net cost — the price after tax credits and rebates.C2is the dollars the system saves each year.- Dividing cost by yearly savings gives the number of years to break even.
This is simple payback. It ignores rising utility rates and panel degradation, which usually shorten the real payback.
Try it: interactive demo
Enter the net system cost and the estimated annual savings.
Variations
Account for rate increases
With rising rates, divide by an inflated average annual savings instead of year-one savings.
Pitfalls & errors
Use the net cost (after incentives), not the gross price, or the payback looks far worse than it is.
A zero or blank savings cell returns #DIV/0!. Guard it: =IF(C2=0,"",B2/C2).
Practice workbook
Frequently asked questions
Is simple payback the same as ROI?
Should I include financing interest?
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