Rooftop Solar NPV
A solid-looking simple payback can still be a weaker investment once the time value of money is properly accounted for. This discounts solar's annual savings back to today's dollars for a more conservative view of the same purchase.
At your inputs, the solar system has an NPV of -$2,873 over 10 years, with a discounted payback of no discounted payback within this horizon.
| Net cost after confirmed incentives | $16,000 |
|---|---|
| Annual savings | $1,700 |
| Net present value | -$2,873 |
Breakeven: No discounted payback occurs within the selected horizon.
- This uses planning estimates you entered, not a contractor quote or guaranteed savings.
- A positive NPV does not guarantee the actual outcome; it reflects your entered assumptions discounted at your chosen rate.
What this also tells you: A positive NPV means the option is worth more than its cost even after discounting future savings back to today; a negative NPV means the upfront cost outweighs what the savings are worth today.
This is a planning estimate based on your entries. It does not size equipment, determine electrical or building-code compliance, verify incentive eligibility, or replace a contractor quote or professional energy audit.
Why this decision comes up
A homeowner comparing solar against other uses of the same money benefits from a discounted view rather than treating every future dollar of savings as equal to a dollar saved today.
How this is calculated
Each year's savings is discounted back to today's dollars using your chosen rate, then summed against the net cost to produce an NPV, plus the year cumulative discounted savings first covers the cost, if that happens within your horizon.
A worked example
With the defaults ($16,000 net cost, $1,700/year savings, 10-year horizon, 5% discount rate), the NPV comes out negative at about $2,873, even though the same system's simple, undiscounted payback of 9.4 years might look reasonable on its own. This is exactly the gap NPV is meant to surface.
Common mistakes
A common mistake is treating a positive simple payback as sufficient proof of a good investment without checking whether it holds up on a discounted basis, especially over a longer horizon.
Limitations
This does not include a confirmed incentive or panel degradation, both of which materially change the picture. See the incentive impact and degradation tools for those.
Common questions
Why might NPV look worse than the simple payback for the same system?
Simple payback treats every future dollar of savings as equal to a dollar today. NPV discounts later years' savings more heavily, which can reveal a weaker case for a long-payback system than the simple number suggests.
What discount rate should I use?
A common starting point is your own opportunity cost of capital, what you could otherwise earn investing that money. 5% is a reasonable planning default if you are unsure.
Does a negative NPV mean I shouldn't get solar?
Not necessarily on its own. It means the investment doesn't clear this specific conservative bar at these assumptions. Check the incentive impact and degradation tools too before deciding.
Does a longer ownership horizon always help NPV?
Generally yes for a system with positive annual savings, since more years of discounted savings accumulate against a one-time cost, though the effect diminishes for savings far in the future due to discounting.
Should I use the same discount rate here as in other clusters' NPV tools?
You can for consistency across comparisons, though your discount rate should really reflect your own opportunity cost of capital, which doesn't change based on which purchase you're evaluating.