How long will my solar electric system take to pay off? What's the ROI on my solar system?

Once you have a general idea on the system price, financing costs, and the value of the electricity generated, it is possible to calculate the payback time on your investment.

The graph below demonstrates the impact of a solar power system and electricity rate prices on the payback time of the purchase as a function of the value of the electricity generated (cents per kWh). As you might expect, the less expensive the solar power system and the higher the regular electricity rate, the faster the payback time is on a system.

For example, if the average electricity rate is $0.20 per kilowatt hour and your installed cost was $4.00 per watt, your payback time would be just over 15 years. If you are exposed to peak pricing on electricity rates, by taking account of tax incentives (available for corporate purchasers), payback may be closer to 10 years.

Your payback time can also be affected by weather conditions and the cost of financing. In less sunny locations, such as Japan, Germany, or the United Kingdom, the average sunlight level may be closer to 2.5 sun-hours per day. In this scenario, a system priced at $8/W will take significantly longer for payback, perhaps 10-20 years.

Over the last two decades, the cost of solar energy systems has come down seven fold. As the demand for solar power systems rises and manufacturing volume increases, costs will decrease and the economic payback time will also decrease. (Material and Graph from SolarBuzz)