Solar Panel Cost Savings Calculator
Project your total 25-year net savings from going solar, accounting for electricity rate inflation and panel degradation. Use this before getting installer quotes to set realistic financial expectations.
Last updated: September 2026
Formula below · 2 sources (nrel.gov, Wikipedia) · Updated Sep 2026
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About this calculator
The net savings formula sums 25 years of avoided electricity bills, letting the bill grow each year with electricity prices and shrink with panel degradation, then subtracts the upfront cost after any tax credit. Year t (t = 0…24) saves monthlyElectricBill × 12 × q^t, where q = (1 + electricityRateIncrease/100) × (1 − systemEfficiencyLoss/100). Summed over 25 years: Gross Savings = monthlyElectricBill × 12 × (q^25 − 1) / (q − 1) (or × 25 when q = 1). Net Savings = Gross Savings − systemCost × (1 − federalTaxCredit/100). The calculator assumes the system offsets your whole current bill; if it covers only part of the bill, or fixed connection charges remain, enter only the portion solar replaces. Note that the 30% federal Residential Clean Energy Credit ended for homeowner-owned systems installed after December 31, 2025 (One Big Beautiful Bill Act, July 2025), so enter 0 for a 2026 installation unless a state credit applies. Amounts are not discounted for the time value of money.
How to use
Monthly bill: $150. System cost: $18,000. Tax credit: 30% (a 2025 installation). Annual rate increase: 3%. Annual efficiency loss: 0.5%. Net cost = $18,000 − ($18,000 × 0.30) = $12,600. Growth factor q = 1.03 × 0.995 = 1.02485. Sum factor = (1.02485^25 − 1) / 0.02485 ≈ 34.09. Gross savings = $1,800 × 34.09 ≈ $61,365. Net savings = $61,365 − $12,600 ≈ $48,765 over 25 years. With no tax credit (a 2026 installation) net savings are $61,365 − $18,000 ≈ $43,365. Simple payback ≈ $12,600 / $1,800 ≈ 7 years (10 years without the credit).
Frequently asked questions
How does the annual electricity rate increase affect solar savings projections?
Electricity prices in the US have risen an average of 2–4% per year over the past two decades, and this inflation significantly boosts the value of solar over time. Even a 3% annual increase means electricity costs roughly double every 24 years. Because your solar panels lock in a fixed energy cost at installation, every rate hike increases the value of the electricity they generate. Sensitivity analysis shows that changing the rate increase assumption from 2% to 4% can raise projected 25-year savings by 20–30%.
What is the typical payback period for residential solar panels in the US?
The average payback period for residential solar in the US is 6–10 years, depending on system cost, local electricity rates, and available incentives. States with high electricity prices like California, Massachusetts, and Hawaii typically see payback periods of 5–7 years. States with low electricity rates and fewer incentives may see 10–12 year paybacks. After payback, the panels continue generating essentially free electricity for the remaining 15–20 years of their life, delivering the bulk of total financial returns.
Why does system efficiency loss matter when calculating long-term solar savings?
Solar panels degrade over time due to UV exposure, temperature cycling, and material aging, typically losing 0.5–0.7% of their rated output per year. After 25 years at 0.5%/year degradation, a panel produces about 88% of its original output. This means your system generates slightly less electricity — and therefore avoids slightly less cost — each successive year. Ignoring degradation overstates 25-year savings by roughly 6–10%. Premium panels from Tier-1 manufacturers often come with linear power warranties guaranteeing no more than 0.5%/year degradation.