About the solar vs utility calculator
Buying a rooftop solar system is a large up-front bet against decades of rising electricity bills. This calculator settles that bet in numbers: it projects what you would pay the utility over your chosen horizon, with rates climbing each year, and compares it against the one-time net cost of going solar after the tax credit. The output is the long-run saving and how it grows as utility rates escalate.
The case for solar rests on two trends. First, a typical residential system pays back its net cost in roughly 6 to 10 years and then keeps producing power for 25 to 30 years, so most of its life is effectively free electricity. Second, grid rates do not stand still; US utility prices have historically risen around 3 to 5 percent a year, so a fixed bill today compounds into a much larger one over a couple of decades. The federal Investment Tax Credit, set at 30 percent through 2032 under the Inflation Reduction Act, sharply cuts the net system cost, and state net-metering rules determine how much credit you earn for exporting surplus power back to the grid.
How it works: the formula
The tool grows the utility bill at the escalation rate, sums it over the horizon, then subtracts the after-credit solar cost:
net_solar_cost = system_cost x (1 - tax_credit) utility_total = sum over N years of (annual_bill growing at escalation rate) net_savings = utility_total - net_solar_cost
- system_cost is the installed price before incentives.
- tax_credit is the percentage cut, 30 percent under the federal ITC through 2032.
- annual_bill is your current monthly bill times 12, compounded each year at the escalation rate.
- net_savings is the cumulative advantage of solar over staying on the grid for the full horizon.
Worked example
A 30,000 dollar system, 30 percent tax credit, 180 dollar monthly bill, 4 percent annual rate increase, over 25 years:
- Net solar cost: 30,000 x (1 - 0.30) = 21,000 dollars.
- Year-1 utility: 180 x 12 = 2,160 dollars.
- Utility over 25 years at 4 percent growth: about 90,000 dollars cumulatively.
- Net savings: 90,000 - 21,000 = roughly 69,000 dollars.
- Simple payback: 21,000 / 2,160, under 10 years before rate increases even kick in.
Reference: how rate escalation compounds a bill
A 180 dollar monthly bill (2,160 a year) projected forward at different annual increase rates:
| Escalation | Year 10 annual | Year 25 annual | 25-yr cumulative |
|---|---|---|---|
| 2% | $2,633 | $3,544 | ~$69,000 |
| 3% | $2,898 | $4,517 | ~$79,000 |
| 4% | $3,196 | $5,760 | ~$90,000 |
| 5% | $3,521 | $7,317 | ~$103,000 |
Common pitfalls
- Ignoring the rate escalation. Comparing solar to a flat utility bill badly understates the saving; the whole case rests on grid rates rising over 25 years.
- Forgetting the tax credit cliff. The 30 percent federal ITC runs through 2032 under current law; the net cost rises if it steps down, so timing matters.
- Overlooking net-metering rules. What you earn for exported power varies by state and is being cut in some markets; a poor net-metering rate lengthens payback.
- Skipping panel degradation. Panels lose roughly 0.5 percent of output a year, so a 25-year system produces a little less late in life than on day one.
- Assuming you can use the full credit. The ITC is non-refundable; you need enough tax liability to absorb it, though it can carry forward.
Frequently asked questions
How long does solar take to pay back?
A typical residential system pays back its net cost in about 6 to 10 years, then produces power for 25 to 30 years. Dividing a 21,000 dollar net cost by a 2,160 dollar first-year bill gives under 10 years even before utility rate increases shorten it further. The exact payback depends on your bill size, system cost, and local rates.
What is the federal solar tax credit in 2026?
The federal Investment Tax Credit is 30 percent of the system cost through 2032 under the Inflation Reduction Act. On a 30,000 dollar system that is a 9,000 dollar credit, cutting the net cost to 21,000 dollars. It is non-refundable but can carry forward to future tax years if your liability is too low to use it all at once.
Why does the utility rate increase matter so much?
Because you are comparing a fixed solar cost against a grid bill that compounds. At 4 percent annual growth a 2,160 dollar bill more than doubles over 25 years, so the cumulative utility spend balloons. The higher the escalation rate, the larger solar's lifetime advantage; comparing against a flat bill hides most of the benefit.
Does this account for solar panel degradation?
The core comparison uses your bill offset and net cost. In reality panels lose roughly 0.5 percent of output per year, so a 25-year-old array makes slightly less than when new. For a conservative estimate, trim your expected savings a few percent over the full horizon to reflect that gradual decline.
Is it better to buy or lease solar panels?
Buying captures the full tax credit and the long-run savings this calculator models, but ties up capital. Leasing or a power-purchase agreement needs little money down and the provider keeps the credit, so your savings are smaller. This tool assumes a purchase; a lease shifts the economics toward lower upside in exchange for no upfront cost.