Solar Financing Comparison Calculator

The Solar Financing Comparison Calculator compares four ways to pay for the same rooftop solar system (cash purchase, solar loan, lease, and a power purchase agreement modelled alongside the lease) across an analysis period, usually 25 years. For each path it tracks the electricity cost avoided year by year and reports payback, total interest, total payments, cumulative net savings, and a ranking.

How it works

1. Validation: The system cost must be greater than zero and the analysis period must run from 1 to 50 years.
2. Processing: Each year, the system produces a little less electricity than the year before (panel degradation) while the utility rate rises (utility inflation). The avoided cost each year is that year's production multiplied by that year's rate.
3. Breakdown: The cash path starts at the net cost after the tax credit and incentives, then climbs by each year's avoided cost. The loan path prices an amortizing loan and credits the tax credit and incentives up front. The lease charges a monthly payment rising by the escalator each year; the PPA is modelled at 95 percent of lease payments.
4. Privacy: Your quotes, rates, and production figures stay in your browser and are not uploaded or stored.

Formula

$\text{Tax credit}=\text{System cost}\times\text{Credit rate}$

$\text{Cash net cost}=\text{System cost}-\text{Tax credit}-\text{Other incentives}$

$\text{Avoided cost in year }t=\text{Production}_t\times\text{Electricity rate}_t$

$\text{Production}_t=\text{Year 1 production}\times\left(1-\text{Degradation}\right)^{t-1}\qquad \text{Rate}_t=\text{Rate}_1\times\left(1+\text{Utility inflation}\right)^{t-1}$

The loan payment uses the standard amortization formula on the principal (system cost minus down payment), and its total interest is total payments minus principal. The lease payment grows each year by the escalator, and PPA payments are modelled at 95 percent of the lease total:

$\text{Lease payment}_t=\text{Monthly lease payment}\times12\times\left(1+\text{Escalator}\right)^{t-1}$

Input parameters

| Parameter | Unit | Realistic range | What it means | | --- | --- | --- | --- | | System cost | USD | 15,000 to 40,000 for a typical home system | The full installed price before incentives | | Federal tax credit rate | percent | 30 in recent US policy for owned systems; 0 models none | The share of system cost returned as a federal credit on owned paths | | Other incentives | USD | 0 to 5,000 typical | State or utility rebates beyond the federal credit | | Year 1 production | kWh per year | 8,000 to 16,000 for common residential sizes | Expected first-year generation from your installer quote | | Panel degradation | percent per year | 0.3 to 0.8; 0.5 is a common planning figure | How much output falls each year as panels age | | Electricity rate | USD per kWh | 0.12 to 0.40 across US regions | What you currently pay the utility per kWh | | Utility inflation | percent per year | 2 to 4 long-run planning range | Assumed annual rise in the electricity rate | | Loan term and rate | years, percent | 5 to 25 years | The solar loan offer being compared | | Loan down payment | USD | 0 upward | Cash paid up front on the loan path | | Lease payment and escalator | USD per month, percent | escalator often 1.5 to 3.5 | The starting lease payment and its annual increase | | Analysis period | years | 25 matches typical panel warranties | The horizon over which all four paths are compared |

Worked example

Compare a USD 20,000 system with a 30 percent federal credit, no other incentives, 10,000 kWh of first-year production, 0.5 percent degradation, a USD 0.15 electricity rate rising 3 percent per year, a 10-year loan at 5 percent with nothing down, and a lease at USD 100 per month with a 2.9 percent escalator, over 25 years:

1. Tax credit: 20,000 x 0.30 = USD 6,000, so the cash net cost is USD 14,000.
2. Year 1 avoided cost: 10,000 kWh x USD 0.15 = USD 1,500.
3. Cash: cumulative savings pass zero during year 9, a payback of about 8.5 years, ending about USD 37,137 ahead after 25 years.
4. Loan: USD 212.13 per month on USD 20,000 over 10 years at 5 percent, with total interest of about USD 5,456, ending about USD 31,681 ahead.
5. Lease: escalating payments total about USD 43,181, ending only USD 7,956 ahead, the weakest result here.
6. PPA: at 95 percent of lease payments, about USD 41,022, ending about USD 10,115 ahead.
7. Ranking for these inputs: cash first, then loan, then PPA, then lease.

Interpreting the result

Cash wins for the usual reason: it pays no interest and no third-party margin, and captures the full tax credit. The loan trails by roughly the interest paid, the honest price of spreading the cost. Lease and PPA finish far behind because payments run the whole 25 years and escalate, and the leasing company captures the incentives.

Two figures deserve scepticism. First, the escalator compounds quietly: at 2.9 percent the year 25 lease payment is nearly double the starting payment, so a low first-year quote can still produce the highest lifetime cost. Second, the loan path assumes you receive and keep the full tax credit, which is why its cumulative line starts ahead; if your tax liability cannot absorb the credit, real loan economics are worse than shown.

Choosing the right tool

• Solar Savings Calculator: Use it to size a system and estimate bill savings from your roof and usage before comparing how to pay for it.
• Solar Financing Calculator: Use it for a closely related four-path comparison of 25-year cost under current law.
• Loan Calculator: Use it to model the solar loan on its own, with a full amortization view, before feeding its payment into a comparison.

Limitations

The model assumes every kilowatt-hour offsets electricity bought at the full retail rate, so it does not handle net metering rules that pay a lower export rate, time-of-use pricing, or a home that cannot use all its generation. It excludes maintenance, inverter replacement (commonly needed once in 25 years), roof work, insurance, and lease or PPA buyout terms, and cannot model selling the home mid-term. Tax credit rules change with legislation and depend on your tax situation; the credit rate is an input precisely because this tool cannot determine it for you. A shaded or poorly oriented roof will underperform the production figure entered.

Questions

Why does the lease finish last even though it costs nothing up front?

Because the payments never stop and they grow. The lease collects about USD 43,181 over 25 years for a system that costs USD 20,000 to buy, and the system owner claims the tax credit. Avoiding up-front cost is bought with the highest lifetime total.

What does the payback period actually tell me?

It is the point where cumulative avoided costs have repaid the net cost of that path: 8.5 years for cash in the example. Payback is a useful risk measure, but not the whole decision: a path can pay back early and still finish behind another over the full period.

How sensitive is the ranking to the electricity rate?

Very. Avoided cost is production multiplied by the utility rate, so at USD 0.35 per kWh every path earns more than double the example's savings, while at USD 0.10 ownership paths take much longer to break even. Always use your actual tariff.

Sources and methodology

The degradation and long-horizon modelling approach follows conventions used by the National Renewable Energy Laboratory (NREL), whose research underpins the common planning figure of roughly half a percent output loss per year, and US Department of Energy guidance. The federal credit is a rate you enter, reflecting the residential investment tax credit structure; confirm the current percentage and your eligibility in IRS guidance.