How to work out solar payback honestly

Electricity you use yourself is worth what you would have paid. Electricity you export is worth much less. Conflating them inflates every payback estimate.

Payback is the time for accumulated benefit to equal what you spent. The arithmetic is simple; the inputs are where estimates go wrong, usually in the same direction.

Step-by-step

1. Enter the installed cost, after any grants.
2. Enter production and consumption.
3. Enter your import rate and your export rate separately.
4. Read the year-by-year cash flow.

The two rates are not the same

This is the single most important thing. A kilowatt-hour you consume as it is generated saves you the full retail price. A kilowatt-hour you export earns the export rate, frequently a small fraction of that.

So the crucial figure is your self-consumption rate — the share of generation you use directly. Without a battery this is typically 30–50% for a household away during the day. Estimates that value all generation at the retail rate can overstate the return by a factor of two.

Improving self-consumption

Running dishwashers, washing machines and hot water heating during daylight moves consumption under the production curve, and costs nothing. It is usually a better return than adding capacity.

Assumptions to be careful with

• Electricity price inflation. A high assumed rate shortens payback dramatically and is unknowable. Test a conservative figure and see how the answer moves.
• Panel degradation, around 0.5% a year.
• Inverter replacement, typically once in the system's life. Frequently omitted, and it is a real cost.
• Export tariff changes. Today's rate is not guaranteed for twenty years.

Frequently asked questions

Why is my installer's payback shorter than this?

Usually because they valued all generation at the retail rate rather than separating exports, or assumed high electricity price inflation. Ask which self-consumption rate they used.

What is self-consumption and why does it matter?

The share of what you generate that you use directly. It is worth the full retail price, while exports earn much less — so it dominates the economics.

Should I include inverter replacement?

Yes. Inverters typically need replacing once during a system's life and it is a substantial cost that optimistic estimates leave out.