Solar payback: the simple formula
Solar payback is the money you spend divided by the money you save each year. The sum is easy. The inputs are the hard part, and most of them are specific to your roof and your utility.
The formula
Payback in years = net cost ÷ yearly savings. Net cost is the quoted price minus incentives you will actually receive. Yearly savings is the kWh the system produces times the value of each kWh, minus any yearly costs.
The value of a kWh is the price you stop paying if you use it yourself or if your utility credits exports at the retail rate. If exports earn a lower credit, the value of those kWh is lower. Use your tariff, not the state average, when you can.
Worked example with round numbers: a 7 kW system at a net $3,000 per kW costs $21,000. If it makes 1,500 kWh per kW a year and each kWh is worth 20 cents, savings are $2,100 a year and payback is 10.0 years. Every number there is an assumption: replace them with yours.
What the federal credit says now
The IRS says the Residential Clean Energy Credit equals 30% of the cost of qualified new clean energy property installed from 2022 through December 31, 2025, and is not available for property placed in service after December 31, 2025. Anyone pricing a system now should assume no federal credit unless the IRS page or a tax adviser says otherwise.
State and utility incentives, and the rules for credit on exported power, are separate. We list none of them: no data. In California, for example, the CPUC says net billing applies to interconnection applications from April 15, 2023.
A proxy for production, with limits
We have no rooftop production data. As a stand-in we use the capacity factor of utility-scale solar in each state: 2025 net generation from EIA-923 divided by EIA-860 nameplate MW times 8,760 hours. The U.S. figure is 22.2%. It is a rough guide to the relative sunshine of states, not a forecast for a roof. Plants that came online during 2025 pull it down, tracking systems pull it up, and rooftop panels face different angles.
For your roof, use a tool built for it. NREL's PVWatts takes your address, tilt and shading: no data here.
United States, Payback in years at a net cost of $3,000 per kW, scenario: EIA retail sales 2025; EIA-860 and EIA-923 2025 for output; cost is a scenario.
CSV| State | Home price 2025, cents per kWh | Utility-scale solar capacity factor | kWh per kW-year (proxy) | Value per kW-year | Payback at $2,000 per kW | At $3,000 per kW | At $4,000 per kW |
|---|---|---|---|---|---|---|---|
| California | 32.54 | 25.2% | 2,210 | $719 | 2.8 yrs | 4.2 yrs | 5.6 yrs |
| Hawaii | 40.59 | 18.8% | 1,649 | $669 | 3.0 yrs | 4.5 yrs | 6.0 yrs |
| Rhode Island | 29.46 | 17.6% | 1,540 | $454 | 4.4 yrs | 6.6 yrs | 8.8 yrs |
| Maine | 27.78 | 17.7% | 1,551 | $431 | 4.6 yrs | 7.0 yrs | 9.3 yrs |
| Massachusetts | 30.48 | 16.1% | 1,407 | $429 | 4.7 yrs | 7.0 yrs | 9.3 yrs |
| Connecticut | 29.38 | 15.5% | 1,359 | $399 | 5.0 yrs | 7.5 yrs | 10.0 yrs |
| Maryland | 19.48 | 12.8% | 1,124 | $219 | 9.1 yrs | 13.7 yrs | 18.3 yrs |
| Tennessee | 13.18 | 17.8% | 1,556 | $205 | 9.8 yrs | 14.6 yrs | 19.5 yrs |
| Kentucky | 13.24 | 16.3% | 1,425 | $189 | 10.6 yrs | 15.9 yrs | 21.2 yrs |
| Oklahoma | 13.12 | 15.5% | 1,361 | $179 | 11.2 yrs | 16.8 yrs | 22.4 yrs |
| Missouri | 13.49 | 12.6% | 1,107 | $149 | 13.4 yrs | 20.1 yrs | 26.8 yrs |
| West Virginia | 15.41 | 10.3% | 900 | $139 | 14.4 yrs | 21.6 yrs | 28.8 yrs |
Source: EIA retail sales 2025 (price); EIA-923 and EIA-860 2025 (utility-scale solar generation over nameplate times 8,760 hours; states with 200+ MW). The cost per kW values are scenarios, not market data. First six rows shortest payback, last six longest. Retrieved 2026-10-02. CSV, 43 rows.
Why the same panel pays back faster in some states
Two things move payback: how much each kWh is worth and how many kWh a kW makes. The first varies more. The cheapest states for electricity are where solar takes longest to pay back even with good sun, and the most expensive are where it is quickest. The top and bottom of the table are driven by price, not by weather.
This is also why a change in credit rules matters so much: if exports are credited below the retail price, the payback in a high-price state lengthens quickly. Net-metered capacity in the EIA-861 2024 file totals 55,776 MW across the U.S.
Costs the formula forgets
Inverter replacement, roof repair before install, insurance changes, financing interest, and lower output as panels age. Batteries add cost and change the value of a kWh. Add each as a cost or as a lower yearly saving. None of these has data on this site.
Key facts and where they come from
| Fact | Value | Source | Date |
|---|---|---|---|
| Residential Clean Energy Credit rate | 30% for property installed 2022 through Dec. 31, 2025 | IRS, Residential Clean Energy Credit (irs.gov) | retrieved 2026-10-02 |
| Credit after Dec. 31, 2025 | Not available for property placed in service after that date | IRS, Residential Clean Energy Credit (irs.gov) | retrieved 2026-10-02 |
| California net billing tariff applies from | Applications on or after April 15, 2023 | CPUC, NEM Revisit page | retrieved 2026-10-02 |
| U.S. home price | 17.30 cents per kWh | EIA retail sales, 2025 | 2025 annual |
| Utility-scale solar share of U.S. generation | 6.8% | EIA-923 2025 Final, plants 1 MW+ | 2025 |
| Utility-scale solar capacity factor, U.S. (proxy) | 22.2% | EIA-923 and EIA-860, 2025 | 2025 |
| Shortest payback at $3,000 per kW: California | 4.2 years | Computed, scenario | 2025 inputs |
| Longest payback at $3,000 per kW: West Virginia | 21.6 years | Computed, scenario | 2025 inputs |
| States in the table (200+ MW utility-scale solar) | 43 | EIA-860 2025 | 2025 |
| Net-metered capacity, U.S., MW | 55,776 | EIA-861 2024 Net_Metering | 2024 data |
| Hours in a year used for capacity factor | 8,760 | Arithmetic |
Related guides
Questions
How do I calculate solar payback?
Net cost divided by yearly savings. Savings are kWh produced times the value of each kWh, minus yearly costs.
Is the 30% federal credit still available?
The IRS says the Residential Clean Energy Credit is not available for property placed in service after December 31, 2025.
Which state has the shortest payback?
In this scenario table, California: 4.2 years at $3,000 per kW. It is a scenario, not a quote.
Do the cost numbers come from the market?
No. $2,000, $3,000 and $4,000 per kW are scenarios. Replace them with a quote.
Why use utility-scale capacity factors?
We have no rooftop production data. It is a proxy for relative sunshine and has limits.
Does net metering change the answer?
Yes. Credit below the retail price lowers the value of exported kWh and lengthens payback.
Does this include a battery?
No. Batteries change cost and value. No data here.
Where do I get a real estimate?
From installer quotes and a production tool such as NREL's PVWatts, plus your utility's current tariff.