How solar ROI is calculated
Lifetime savings minus cost, divided by cost. The calculator estimates 25-year savings from your year-1 production, electricity rate, 0.5% yearly panel degradation and 3% yearly price rises, then subtracts the system cost. For a typical US example — $24,360 cost, 11,038 kWh a year at $0.17 per kWh — 25-year savings are estimated at about $63,969, a net profit of about $39,609 and an ROI of about 163%.
That is a 25-year return, not a yearly one — roughly 6.5% a year on average for this example, in the same ballpark as long-term stock market returns, but with very different risks. The break-even year is when cumulative savings pass the system cost: about year 13 here. After that, the electricity is effectively free apart from small maintenance costs.
ROI is most sensitive to your electricity price and your system cost per watt. A $0.25 rate or a $2.50 per watt install changes the answer far more than a sunnier roof does.
Check the pieces separately with the savings calculator and the payback calculator.