Methodology & Sources
Primary data sources
| Input | Source | How we use it |
|---|---|---|
| Peak sun hours by location | NREL solar resource data | Converts system size (kW) into annual production (kWh) |
| Residential electricity rates | EIA state-level residential rate data | Values each kWh your system offsets |
| Rate escalation | EIA historical residential rate trend | Projects future bill savings |
| Federal tax credit | IRS Residential Clean Energy Credit (Section 25D) | 30% of qualified installed cost, with carryforward |
| Installed cost per watt | Published national installed-cost benchmarks | Default system cost when you do not supply a quote |
Default assumptions
Every default below can be overridden. They exist so the calculator returns something useful before you have a quote in hand.
- Installed cost: $3.20 per watt before incentives
- Annual electricity rate inflation: 3.5%
- Panel wattage: 400W per panel for panel-count and roof-area estimates
- System derate: 80% (inverter losses, wiring, soiling, temperature, shading)
- Panel degradation: roughly 0.5% per year on long-horizon projections
- Federal credit: 30%, applied to total qualified installed cost
Core formulas
Annual production
Annual kWh = System size (kW) × Peak sun hours/day × 365 × Derate factor
Simple payback period
Payback (years) = Net system cost after incentives ÷ First-year electricity savings
Our payback calculator does not stop at the simple version. It runs a year-by-year cumulative model that escalates your electricity rate and degrades panel output, then reports the year cumulative savings cross net cost. That crossover is typically later than the simple formula suggests — which is exactly why we model it rather than divide once.
System sizing
Required kW = Annual kWh usage ÷ (Peak sun hours × 365 × Derate factor)
Federal tax credit
Credit = Qualified installed cost × 30%
The credit is nonrefundable: it offsets tax liability and cannot generate a refund beyond what you owe. Unused credit carries forward. Our tax credit calculator models that carryforward rather than assuming you can absorb the full amount in year one.
Known limitations
Places our estimates are weakest, stated plainly:
- Shading. We use a flat derate. Real shading from trees or structures is site-specific and can move production substantially. Only an on-site or satellite shade analysis settles it.
- Net metering. Rules vary by state and utility and are changing fast. Where a utility has moved to net billing or an export rate below retail, savings will be lower than a retail-rate model implies.
- Time-of-use rates. Our models use average rates. On a TOU plan, the value of your production depends on when it is generated.
- Local incentives. We model federal credit and let you enter state or utility rebates manually. We do not maintain a complete municipal incentive database.
- Quoted cost beats our default. $3.20/W is a benchmark, not your price. Real quotes vary widely by market and installer.
- Roof condition and orientation. Not modeled. A south-facing roof at optimal pitch outperforms an east-west split.
How often this updates
We review rate data and federal incentive rules at least annually, and sooner when policy changes materially. Each page carries a last-updated date.
Found an error?
Send it to us via the contact page. Include the calculator, your inputs, and what you expected. Corrections to the math get priority over everything else we do.