Solar Panel Savings Calculator
Estimate your annual net solar savings after accounting for system output and financing costs. Use it when comparing solar quotes or deciding whether rooftop solar makes financial sense for your home.
About this calculator
Solar savings depend on how much electricity your panels generate and how much that electricity is worth. This calculator uses the formula: Annual Net Savings = ((systemSize × sunHours × 365 × electricityRate) − (systemCost × 0.07)) × 0.85. The first term — systemSize × sunHours × 365 × electricityRate — is your gross annual energy value: system size in kW multiplied by average daily peak sun hours gives daily kWh output, scaled to a year and priced at your local rate. The term (systemCost × 0.07) subtracts an annualized financing or opportunity cost of 7% of the system price. The final multiplier of 0.85 applies a system efficiency factor that accounts for real-world losses including panel degradation, inverter losses, shading, and temperature de-rating. Together these produce a realistic net annual savings figure.
How to use
Inputs: 8 kW system, 5 sun hours/day, $0.14/kWh electricity rate, $24,000 system cost. Step 1 — gross annual energy value: 8 × 5 × 365 × 0.14 = 2,044 dollars. Step 2 — annual cost factor: 24,000 × 0.07 = 1,680 dollars. Step 3 — net before efficiency: 2,044 − 1,680 = 364 dollars. Step 4 — apply 0.85 efficiency: 364 × 0.85 = $309.40 annual net savings. To estimate payback, divide total system cost by gross annual savings before the cost factor: $24,000 ÷ $2,044 ≈ 11.7 years.
Frequently asked questions
How many peak sun hours does my location receive and why does it matter for solar savings?
Peak sun hours measure the equivalent number of hours per day when sunlight intensity averages 1,000 watts per square meter — the standard test condition for solar panels. The U.S. ranges from about 3.5 hours/day in cloudy northern states like Washington to over 6 hours/day in the Southwest desert. Every additional peak sun hour linearly increases your system's annual output: a 8 kW system gains roughly 2,920 kWh per year for each extra hour. You can find your location's average using NASA's POWER database or NREL's PVWatts tool.
What does the 0.85 efficiency factor in the solar savings formula represent?
The 0.85 derate factor accounts for all the real-world losses between the rated output of your panels and the electricity that actually reaches your home. Major contributors include inverter conversion losses (3–5%), wiring losses (1–2%), soiling and dust on panels (1–3%), temperature de-rating on hot days (5–10%), and annual panel degradation of roughly 0.5% per year. Industry standard derate factors range from 0.75 to 0.90, with 0.85 being a commonly used middle estimate for a well-maintained residential system.
When does rooftop solar stop making financial sense for a homeowner?
Solar becomes less attractive when your electricity rate is very low (below $0.08/kWh), your roof has significant shading from trees or neighboring buildings, your roof needs replacement within 5–7 years, or your home's net metering policy has been reduced or eliminated by your utility. High upfront costs without available financing or incentives can also push the payback period beyond 15–20 years, making the investment marginal. Checking your state's net metering rules and available federal or state tax credits (such as the 30% federal ITC) is essential before making a final decision.