What is a good payback period for rooftop solar?

In most of Europe a well-specified residential system with reasonable self-consumption lands between six and eleven years. Southern latitudes with high retail tariffs sit at the short end; northern roofs with low export prices sit at the long end. Anything under five years usually means either a strong subsidy or an optimistic assumption hiding in the yield or self-consumption figure.

Should I use payback or net present value?

Payback answers 'when do I get my money back' and ignores everything after that date. Net present value answers 'is this a good use of capital' across the full life of the asset. Use payback to compare quotes quickly and net present value to decide whether to build at all. If the two disagree, trust net present value.

How accurate is the self-consumption input?

It is the single most influential and least known input. Without metering data, assume 25% to 35% for a household away during the day, 40% to 50% with someone home or a heat pump, and 55% to 70% with a correctly sized battery. Half-hourly consumption data from your supplier turns that guess into a measurement.

Does a battery improve payback?

Usually it lengthens payback while increasing total lifetime savings and resilience. Batteries raise self-consumption but they cost real money per usable kilowatt-hour of throughput. Run the array alone first, then re-run with the battery's added cost and the higher self-consumption share, and compare net present value rather than payback.

What discount rate should I enter?

Use the return you would otherwise earn on the money, after tax. For a household paying down a mortgage at 3.5%, that rate is a fair choice. For cash sitting in a deposit account earning 1%, use 1%. Commercial projects normally apply their weighted average cost of capital, often 6% to 9%.

Calculator

Solar Payback and ROI Calculator

Payback is the year in which the cumulative savings from a photovoltaic system overtake what it cost to install. It is the number every quote leads with and the number quotes most often flatter, usually by assuming that every generated kilowatt-hour displaces an expensive imported one.

This tool works year by year across a 25-year horizon. It separates self-consumed energy from exported energy, degrades production annually, escalates tariffs, subtracts maintenance and then discounts the result so you can see net present value and internal rate of return alongside the simple payback year.

Run your numbers

Installed cost after incentives

€

System size

kWp

Specific yield

kWh/kWp/yr

Take this from PVGIS or PVWatts for your roof, not from a rule of thumb.

Self-consumption share

Import price

€/kWh

Export price

€/kWh

Annual maintenance

€/yr

Annual degradation

%/yr

Electricity price inflation

%/yr

Discount rate

Simple payback

8.6 years

Undiscounted, first year cumulative cash flow turns positive

Net present value

€10,031

25 years discounted at 4%

Internal rate of return

11.5%

Compare against your alternative use of the money

Levelised cost of energy

€0.068/kWh

Against an import price of €0.26/kWh

Year-one production

7,500 kWh

Undiscounted 25-year net

€22,967

How the calculation works

Each year is modelled separately. Production starts at system size multiplied by specific yield and falls by the degradation rate compounded annually. That production splits into two revenue streams at very different prices: the part you consume on site avoids the retail import price, and the part you export earns whatever your export scheme pays, typically a quarter to a third of retail.

Both prices escalate with your electricity price inflation assumption. Maintenance is subtracted flat. The cumulative sum of those net cash flows crosses zero at the payback year; the same flows discounted at your chosen rate give net present value, and the rate that drives net present value to zero is the internal rate of return, found here by bisection.

The formula

E(y)   = kWp × yield × (1 − d)^(y−1)
S(y)   = E(y) × s × p_import × (1 + i)^(y−1)
X(y)   = E(y) × (1 − s) × p_export × (1 + i)^(y−1)
CF(y)  = S(y) + X(y) − O&M
Payback: smallest y where Σ CF(1..y) ≥ C₀
NPV    = −C₀ + Σ CF(y) / (1 + r)^y
IRR    = r where NPV = 0
LCOE   = (C₀ + 25 × O&M) / Σ E(y)

C₀ installed cost · d degradation · s self-consumption share
i tariff inflation · r discount rate

Assumptions behind the numbers

A 25-year analysis window. Modules usually carry a 25 to 30 year performance warranty, so this is conservative rather than optimistic.
No inverter replacement is included as a separate line. If you expect one at year 12, add roughly €120 to €160 per year of maintenance to approximate it.
Self-consumption share is treated as constant. In reality it drifts as household load, batteries or an EV change.
Export price is flat in real terms apart from the inflation factor. Schemes that step down over time will do worse.
Tariff inflation applies equally to import and export prices.
No financing costs. For a loan-funded system, set the discount rate to your loan interest rate as a first approximation.
No subsidy clawback, insurance premium change or property value effect is modelled.

How to read the result

Simple payback is the headline, but net present value is the number that tells you whether the project beats leaving the money where it is. A positive NPV at a discount rate equal to your realistic alternative return means the array is worth building even if payback looks long.

Levelised cost of energy is the cleanest comparison of all: if the LCOE sits well below your import price, every self-consumed kilowatt-hour is profitable regardless of export policy. When LCOE is close to the export price only, the economics depend entirely on how much of the output you use yourself, which is where storage or solar EV charging starts to matter.

Worked example

A 6.4 kWp array on a south-facing roof near Thessaloniki, installed for €8,900 after VAT relief. PVGIS returns 1,430 kWh/kWp/yr for the roof's tilt and azimuth, so year-one production is about 9,150 kWh. The household is a two-adult, two-child home with a heat pump; metering data shows 48% of production is consumed on site.

At €0.24/kWh import and €0.06/kWh export, year one yields 4,392 kWh self-consumed (€1,054) and 4,758 kWh exported (€285), less €90 maintenance: €1,249 net. With 0.5% annual degradation and 2% tariff inflation the cumulative flow crosses €8,900 during year seven, giving a payback near 7.0 years, an IRR in the low teens and an LCOE around €0.045/kWh — well under half the import price.

Change one input, self-consumption, from 48% to 25% and payback stretches past ten years. That single sensitivity explains why load shifting matters more than squeezing the last few hundred euros out of a quote.

Mistakes that skew the answer

Using nameplate capacity times 'peak sun hours' instead of a modelled yield for the actual roof, tilt, azimuth and shading.
Valuing all production at the retail import price. Exported energy almost never earns retail.
Ignoring the standing charge and network fees, which do not disappear when you go solar.
Assuming aggressive electricity price inflation to make the payback look shorter. Above 3% per year deserves justification.
Forgetting the inverter. One replacement at year 12 typically costs €1,000 to €1,800 for a residential system.
Comparing payback across quotes with different assumptions rather than re-running every quote through the same model.

Questions readers ask

What is a good payback period for rooftop solar?: In most of Europe a well-specified residential system with reasonable self-consumption lands between six and eleven years. Southern latitudes with high retail tariffs sit at the short end; northern roofs with low export prices sit at the long end. Anything under five years usually means either a strong subsidy or an optimistic assumption hiding in the yield or self-consumption figure.
Should I use payback or net present value?: Payback answers 'when do I get my money back' and ignores everything after that date. Net present value answers 'is this a good use of capital' across the full life of the asset. Use payback to compare quotes quickly and net present value to decide whether to build at all. If the two disagree, trust net present value.
How accurate is the self-consumption input?: It is the single most influential and least known input. Without metering data, assume 25% to 35% for a household away during the day, 40% to 50% with someone home or a heat pump, and 55% to 70% with a correctly sized battery. Half-hourly consumption data from your supplier turns that guess into a measurement.
Does a battery improve payback?: Usually it lengthens payback while increasing total lifetime savings and resilience. Batteries raise self-consumption but they cost real money per usable kilowatt-hour of throughput. Run the array alone first, then re-run with the battery's added cost and the higher self-consumption share, and compare net present value rather than payback.
What discount rate should I enter?: Use the return you would otherwise earn on the money, after tax. For a household paying down a mortgage at 3.5%, that rate is a fair choice. For cash sitting in a deposit account earning 1%, use 1%. Commercial projects normally apply their weighted average cost of capital, often 6% to 9%.

References

Battery sizing calculator

Find the usable capacity that raises self-consumption without wasting cycles.

Inverter sizing calculator

Check the DC to AC ratio before it clips your best hours away.

The honest payback calculation

The long-form article this tool is built from.

Solar system economics

LCOE, NPV and IRR explained for residential and commercial PV.