Understanding your cost per kWh
What the number actually shows
For a $22,000 net cost system producing 9,490 kWh in year one with 0.5% annual degradation over 25 years, the effective cost comes to about $0.098 per kWh, roughly 38% cheaper than a $0.16 per kWh utility rate, the same rate used in the solar savings calculator example. That's the clearest apples-to-apples way to see whether solar beats what you're currently paying, expressed in the same units as your utility bill. Utility rates drive the whole savings calculation, and the US Energy Information Administration's electricity data track them state by state.
Why the time horizon changes the answer
A longer horizon spreads the same fixed system cost across more total kWh of production, which lowers the cost per kWh. Extending the same example to 30 years drops the figure to about $0.058 per kWh, since five more years of production dilute the upfront cost further, even though the system itself is unchanged. Output varies by roof and weather, and the real world vs nameplate output gap calculator shows what your site should produce in a typical year.
How this relates to levelized cost of energy
This calculation is a simplified version of a broader concept called levelized cost of energy, which also factors in maintenance costs and sometimes discounts future production back to present value. See the levelized cost of energy calculator for that fuller version if you want to include ongoing costs. The US Energy Information Administration's solar explainer covers how solar generation works and where it fits in the wider grid.
Net cost versus gross cost
Always use net cost, after incentives like the federal tax credit, for this calculation, the same distinction covered in the payback period calculator. Using the gross price before incentives overstates your real cost per kWh and makes the comparison against your utility rate less meaningful. To size the array behind this number, the solar panel calculator turns your usage into a kilowatt target.