PanelMath

Methodology · last updated 2026-04-30

How we compute solar payback

Every number on PanelMath is built from public datasets. This page documents the formulas and sources end-to-end so you can verify them, replicate them, or tell us when we're wrong.

1

Annual electricity consumption

Your monthly bill divided by your state's average residential retail rate (cents per kWh) gives an annualized kWh consumption estimate.

annual kWh = (monthly bill × 12) ÷ (retail rate ¢ ÷ 100)

Source: EIA Form 826 (Electric Power Sales, Revenue, and Energy Efficiency), residential class average, mid-2025 baseline. State-level averages are used; specific utilities within a state may differ ±15%.

2

System size required

System size is computed to fully offset your annual kWh consumption given the local production. NREL's PVWatts v8 API tells us how many kWh a 1 kW residential PV system produces annually at your zip code's latitude/longitude.

system size (kW) = annual kWh ÷ NREL PVWatts kWh/kW for your zip

Source: NREL PVWatts v8, queried at city-centroid lat/lon for each supported zip. Parameters: 1 kW system, fixed roof mount, 20° tilt, 180° azimuth, 14% system losses, standard module — same parameters EnergySage and SolarReviews publish.

3

Gross install cost

Gross cost is system size × your state's average installed cost per watt. We use a blend of NREL Q1 2025 benchmark, LBNL Tracking the Sun, and EnergySage marketplace data.

gross cost = system size (kW) × 1000 × $/W (state average)

Sources: NREL Q1 2025 Benchmark Report, LBNL Tracking the Sun (annual, LBNL.gov), EnergySage Solar Marketplace Intel reports.

4

Incentive ordering (this is where most calculators get it wrong)

Incentives must apply in a specific order or the math is off by 5–15%:

  1. Sales tax exemptions reduce the gross cost first (you literally pay less upfront).
  2. Upfront rebates reduce the cost basis used for tax credits (per IRS guidance).
  3. Federal ITC (30%) applies to the post-rebate basis.
  4. State tax credits apply to the same post-rebate basis.
net cost = gross − sales-tax saved − rebates − federal credit − state credit

Sources: IRS Form 5695 instructions, individual state revenue department forms (AZ Form 310, NY IT-255, etc.), DSIRE for rebate/exemption details.

5

Year-1 savings

Year-1 savings are computed as offset_kWh × retail_rate, with exports derated by your state's net-metering compensation ratio. We assume 70% of solar production is self-consumed at retail, 30% is exported and credited at the state-specific export ratio.

annual savings = annual production × retail rate × (0.7 + 0.3 × export ratio)

Net-metering policies sourced from individual utility tariffs and state PUC rulings. Export ratios as of April 2026: CA NEM 3.0 = 0.25, AZ APS/TEP RCP = 0.70, FL/NY full retail = 1.00, TX competitive average = 0.60.

6

25-year cumulative savings

Long-term savings compound annual savings with state-specific electric-rate inflation and panel degradation.

year-N savings = annual savings × (1 + inflation)^(N-1) × (1 - degradation)^(N-1)

Inflation rates (annual residential retail rate growth, conservative estimates):

  • California: 4.5%/yr
  • New York & Arizona: 3.5%/yr
  • Texas & Florida: 3.0%/yr

Panel degradation: 0.5%/yr (industry-typical for monocrystalline panels; backed by NREL PV Reliability research).

7

Payback period

Simple payback: net cost divided by year-1 savings. We use the simple version (rather than discounted) because most homeowners think of payback in nominal years, not present-value years.

payback period (years) = net cost ÷ year-1 savings

What we don't model

  • · Roof condition — we assume your roof can support panels without reinforcement; bring this up with your installer.
  • · Shading — we assume an unshaded, south-facing array; trees, dormers, and chimneys can reduce production by 10–60%.
  • · Specific time-of-use rate plans — we use state-level average residential rates rather than your exact tariff. Within a state this varies ±15%.
  • · Battery payback — current calculator excludes batteries from base math; we'll add a battery module in v2.
  • · Home value impact — owned solar typically adds $4k–$15k to home sale price (LBNL studies); we exclude this from payback math to stay conservative.

Update cadence

  • · Production data — refreshed when zips are added to coverage, otherwise stable (NREL PVWatts changes are gradual).
  • · Retail rates — refreshed annually using the latest EIA Form 826 release.
  • · Incentives — checked quarterly; refreshed immediately when laws change.
  • · Net-metering rules — refreshed when individual states or utilities change tariffs.