Simple payback period

The denominator is a year of production converted into money: annual kilowatt-hours times a tariff. For a self-consuming household that tariff is the retail price NOT paid to the utility — avoided cost, which is why rooftop solar economics track retail prices rather than wholesale ones. Divide the installed cost by that annual value and the quotient is years: how long the system takes, at current prices and current output, to hand back what it cost.

“Simple” means the division deliberately ignores time. No discounting of future savings, no tariff escalation, no decay of output as modules age, no maintenance or inverter replacement along the way. Every one of those omissions bends the true figure — some in the system’s favour, some against — and the honest use of simple payback is comparison and screening, where the same omissions land on both sides of the comparison and largely cancel.

The single tariff hides a real subtlety: it prices every kilowatt-hour identically. A household that consumes its solar directly avoids retail; one that exports much of it is paid an export rate that is typically far lower; most are somewhere between. The right input is a blended value that reflects the actual split — and a payback computed entirely at retail for a system that exports half its output is optimistic in a way no later arithmetic repairs.

The denominator also inherits the whole cluster. The annual energy came from the yield estimate, which leaned on a peak-sun-hours figure and an assumed performance ratio; the chain from sun data to payback is linear at every link, so a flattering assumption upstream shortens the payback downstream by exactly the same fraction. When a metered year later disagrees with the estimate, this page is where that disagreement turns into money.

The calculation’s virtue is that it hides nothing, because it contains nothing: money spent, divided by money saved per year. Every one of its limitations is visible on its face, which cannot be said of the discounted, escalated, degradation-adjusted models that replace it — models whose conclusions can be steered by assumptions a reader never sees.

It deliberately ignores the time value of money, tariff inflation, panel degradation, maintenance, inverter replacement and what happens after the payback year. Each omission biases the answer in a knowable direction: rising tariffs shorten real payback against the simple figure, degradation and maintenance lengthen it. The measure is not naive — it is a declared simplification, and the declared part is what makes it a fair comparison tool.

Its real power is comparative. Two quotes, two roof options, a system with and without an extra string — priced through the same simple lens, their ranking is usually the same ranking a sophisticated model would produce, at a fraction of the argument.

Yield came from physics and a meter; cost is on the invoice. The tariff is the input with the widest honest range, because it depends on when the energy arrives and what happens to the surplus. A household that consumes its solar directly saves at the retail rate; one that exports most of it is paid the export rate; nearly everyone is somewhere between, and the blended figure is a fact about daily habits as much as about contracts.

This is why identical systems on identical roofs can justify different decisions across a border, a tariff reform, or a change in household routine. When payback looks surprisingly long, the tariff assumed for exports is usually why; when it looks surprisingly short, check that the whole yield was priced at the retail rate as if every kilowatt-hour were consumed at home — the single most common flattery in solar quotations.

The engine below arrives pre-filled with the journey’s reference system — the measured year from the previous lesson, priced at an ordinary retail tariff. Put in your own quote and your own tariff. Then move only the tariff between your retail rate and your export rate: the gap between those two payback figures is the value of consuming your own solar.

Read the result as a first-pass ranking tool under declared assumptions, not as financial advice — the calculator refuses nothing about your future tariffs because it claims nothing about them. Every figure is computed live by the verified engine.