Solar Panel ROI — How to Calculate Payback Period

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Overview

Installing solar panels is a significant investment. Calculating the payback period tells you exactly how long before the system pays for itself.

Annual savings = Daily generation (kWh) × 365 × Electricity rate | Payback = Installation cost ÷ Annual savings

Standard formula used by professionals worldwide

System 5kW, generates 20kWh/day, rate 0.15/kWh → saves 1,095/year | Cost 150,000 → payback 137 years (without subsidies)

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Units: Always use consistent units throughout
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Selling excess power to grid significantly improves returns. Check your local utility rates.

25-30 years typically. Most manufacturers guarantee 80% output at 25 years.

Panel orientation, tilt angle, local sunshine hours, shading, dust, and temperature.

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