Savings and payback
Find the exact annual rate of return your solar system earns, a single percentage you can compare directly against any other investment.
Current status: the 30% federal residential solar tax credit (Section 25D) expired for systems placed in service after December 31, 2025. If you're buying with cash or a loan in 2026 or later, use your full system price with no credit subtracted. Only subtract 30% if your system was placed in service by the end of 2025.
How it works
Step 1
Use the result from the payback period calculator if you haven't worked these out yet.
Step 2
The tool solves for the exact rate at which your savings, discounted at that rate, exactly equal your net cost over the chosen years. This uses the same underlying math as the net present value calculator, solved in reverse.
A $22,000 net cost system with $1,800 in annual savings over 25 years has an IRR of about 6.5%. That means the system performs financially as if it were an investment earning a steady 6.5% annual return, a single figure that makes it easy to compare against stocks, bonds, or other opportunities. The US Department of Energy's homeowner's guide to going solar walks through the same decision step by step.
NPV starts with a discount rate you pick and produces a dollar value. IRR works backward, solving for the rate that would make that dollar value exactly zero. If you check the net present value calculator using a discount rate below the IRR, you'll get a positive NPV, confirming the investment beats that rate. Utility rates drive the whole savings calculation, and the US Energy Information Administration's electricity data track them state by state.
An IRR above 8 to 10% is generally considered a strong result for solar, comparable to or exceeding long-term stock market averages, though solar carries a different risk profile than equities, including no market volatility but limited liquidity. Compare your IRR against your realistic alternative investments to judge whether it's competitive for your situation, or check the ROI percentage calculator for a simpler, non-discounted comparison. This estimate assumes normal upkeep, and the maintenance cost vs savings net calculator breaks down what that upkeep costs year by year.
If a system's payback period is longer than the time horizon being evaluated, there may be no rate within a reasonable range at which NPV reaches zero, and IRR becomes undefined. This usually points to too short a horizon rather than a genuinely poor system. Try extending the years, or check the payback period calculator to confirm your simple payback fits comfortably within your chosen horizon. If you have not sized the system yet, start with the solar panel calculator and bring its kilowatt figure back here.
Questions
IRR is the annual rate of return your solar investment effectively earns, expressed as a single percentage you can compare against other investments. A $22,000 net cost system with $1,800 in annual savings over 25 years has an IRR of about 6.5%, meaning it performs like an investment earning that rate every year.
NPV starts with a discount rate you choose and calculates a dollar value. IRR works in reverse, solving for the exact rate at which that dollar value would be zero. If your chosen discount rate is below the IRR, NPV will be positive, confirming the investment beats that rate.
An IRR above 8 to 10% is generally considered a strong result, comparable to or exceeding long-term stock market averages, though solar carries different risk characteristics than equities. Compare your IRR against your other investment options to judge whether it's competitive for you.
Yes, if a system's payback period is longer than the time horizon being evaluated, there may be no rate within a reasonable range at which NPV reaches zero. This usually points to too short a horizon rather than a genuinely bad system, try extending the years and recalculating.
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