Payback period calculator
How long until the money comes back. Simple payback answers it literally; the discounted version answers it honestly, counting later dollars as worth less.
What is the difference between simple and discounted payback?
Put in $10,000 and get back $3,000, $4,000, $4,000, and $3,000 over four years: the running total crosses zero partway through year 3, and interpolating within that year gives a simple payback of 2.75 years. Discount each cash flow at 10% first - because a dollar in year 3 is not worth a dollar today - and the honest answer stretches to 3.47 years. The gap between the two numbers is the cost of ignoring time.
What can payback not tell you?
Everything after breakeven is invisible to it. A project that repays in 2 years then stops, and one that repays in 3 then produces income for a decade, rank in the wrong order on payback alone. It is a fine measure of liquidity risk - how long your capital is exposed - and a poor measure of value. For value, the NPV & IRR calculator uses the whole cash-flow picture.
Is solar actually worth it? A worked example
Load this exact scenario into the calculator above and follow along, or read it through first. Most solar payback calculators do one division: system cost divided by a flat annual savings figure. Put in $18,000 net (after incentives) with $2,000 a year in bill savings and that gives 9.00 years - and stops there. Two things are missing. First, electricity rates tend to rise, so a flat savings figure understates the case: escalate that $2,000 by 3% a year - a modest, realistic assumption - and the same system actually pays back in 8.08 years, because later years save more than the naive number assumed. Enter each year's expected saving separately above (row by row, rising each year) rather than one flat figure, and the calculator does this properly rather than assuming your savings never change.
Second, and this is the part almost no solar calculator does: that $18,000 was not doing nothing while it sat in a solar system. It could have been invested elsewhere. Set the discount rate to whatever that money could otherwise have earned - 7% is a reasonable stand-in for a diversified investment - and the honest, opportunity-cost-adjusted payback stretches to 11.72 years. That is not a worse answer, it is a more complete one: it is the number that actually answers "was this a better use of $18,000 than the alternative," which a flat 9.00-year figure never claimed to answer in the first place. Whether 11.72 years is still worth it depends on how long the system lasts past that point - most panels are warrantied for 20-25 years, so there is a long tail of free electricity on the other side of either payback number.