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ROI & Payback Period

Simple payback, ROI and lifetime net savings of a PV plant.

Financial

Inputs (SI units)

Total turnkey installed cost.

Deducted from CAPEX to get net investment.

First-year AC energy output.

Portion of generation used on-site at the retail tariff; the remainder is exported at the export tariff.

Value of one self-consumed kWh.

Value of one exported kWh.

Annual change in tariffs; can be negative if regulated tariffs are expected to fall.

Annual O&M as a percentage of CAPEX.

Annual inflation applied to O&M cost.

Annual reduction in generation.

Number of years modelled (also the row count of the cash-flow table).

Set above 0 to also compute discounted payback and NPV/IRR; 0 gives an undiscounted-only analysis.

Results

Simple payback
1 years
Discounted payback
n/a (0% discount rate)
Net investment
1,000,000
Lifetime net savings
34,081,074
Lifetime ROI
3,408.1 %
NPV
—
IRR
106.41 %
✓ PASS — Simple payback occurs within the analysis period.
✓ PASS — IRR exceeds the discount rate — project creates value.

Engineering Recommendations

  • →The 25-year (or entered horizon) cash flow table in the logs shows year-by-year generation, blended tariff, O&M and cumulative cash flow — inspect it rather than relying on the payback figure alone.
  • →Set the discount rate above 0% to obtain a bankable discounted payback, NPV and IRR alongside the simple payback.
  • →Engineering-grade preliminary calculation. Final design must be verified against project-specific site conditions, manufacturer datasheets, applicable standards and utility requirements.

Detailed Calculation Log

Year | Generation (kWh) | Blended tariff | Savings | O&M | Net cash flow | Cumulative | Discounted cumulative
1 | 140,000 | 7.5 | 1,050,000 | 10,000 | 1,040,000 | 1,040,000 | 1,040,000
2 | 139,230 | 7.73 | 1,075,552 | 10,500 | 1,065,052 | 2,105,052 | 2,105,052
3 | 138,464 | 7.96 | 1,101,725 | 11,025 | 1,090,700 | 3,195,752 | 3,195,752
4 | 137,703 | 8.2 | 1,128,536 | 11,576 | 1,116,960 | 4,312,712 | 4,312,712
5 | 136,945 | 8.44 | 1,155,999 | 12,155 | 1,143,844 | 5,456,555 | 5,456,555
6 | 136,192 | 8.69 | 1,184,130 | 12,763 | 1,171,367 | 6,627,922 | 6,627,922
7 | 135,443 | 8.96 | 1,212,946 | 13,401 | 1,199,545 | 7,827,467 | 7,827,467
8 | 134,698 | 9.22 | 1,242,463 | 14,071 | 1,228,392 | 9,055,859 | 9,055,859
9 | 133,957 | 9.5 | 1,272,698 | 14,775 | 1,257,924 | 10,313,782 | 10,313,782
10 | 133,221 | 9.79 | 1,303,669 | 15,513 | 1,288,156 | 11,601,938 | 11,601,938
11 | 132,488 | 10.08 | 1,335,394 | 16,289 | 1,319,105 | 12,921,043 | 12,921,043
12 | 131,759 | 10.38 | 1,367,891 | 17,103 | 1,350,787 | 14,271,831 | 14,271,831
13 | 131,034 | 10.69 | 1,401,178 | 17,959 | 1,383,220 | 15,655,051 | 15,655,051
14 | 130,314 | 11.01 | 1,435,276 | 18,856 | 1,416,420 | 17,071,470 | 17,071,470
15 | 129,597 | 11.34 | 1,470,204 | 19,799 | 1,450,404 | 18,521,875 | 18,521,875
16 | 128,884 | 11.68 | 1,505,981 | 20,789 | 1,485,192 | 20,007,066 | 20,007,066
17 | 128,175 | 12.04 | 1,542,629 | 21,829 | 1,520,800 | 21,527,867 | 21,527,867
18 | 127,470 | 12.4 | 1,580,169 | 22,920 | 1,557,249 | 23,085,115 | 23,085,115
19 | 126,769 | 12.77 | 1,618,622 | 24,066 | 1,594,556 | 24,679,671 | 24,679,671
20 | 126,072 | 13.15 | 1,658,011 | 25,270 | 1,632,742 | 26,312,413 | 26,312,413
21 | 125,379 | 13.55 | 1,698,359 | 26,533 | 1,671,826 | 27,984,239 | 27,984,239
22 | 124,689 | 13.95 | 1,739,689 | 27,860 | 1,711,829 | 29,696,069 | 29,696,069
23 | 124,003 | 14.37 | 1,782,024 | 29,253 | 1,752,771 | 31,448,840 | 31,448,840
24 | 123,321 | 14.8 | 1,825,390 | 30,715 | 1,794,674 | 33,243,514 | 33,243,514
25 | 122,643 | 15.25 | 1,869,810 | 32,251 | 1,837,559 | 35,081,074 | 35,081,074

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Engineering Formula

  • Net CAPEX = CAPEX − Subsidy
  • Savings(t) = E₁ × (1−d)^(t−1) × Tariff × (1+e)^(t−1) − O&M
  • Payback = first year where Σ Savings ≥ Net CAPEX (interpolated)
  • ROI = (Σ Savings − Net CAPEX) / Net CAPEX × 100

Cash-flow model: generation decays with module degradation while the avoided grid tariff escalates. Cumulative net savings are compared to net CAPEX to obtain the simple payback; ROI is lifetime net gain over invested capital.

Step-by-step Calculation

  1. 1.Net CAPEXCAPEX − subsidy1,000,000
  2. 2.Blended year-1 tariffretail×self% + export×(1−self%)7.5/kWh
  3. 3.Year-1 O&MCAPEX × O&M%10,000
  4. 4.Simple paybackcumulative net cash flow = net CAPEX (interpolated)0.96 yr
  5. 5.Discounted paybacknot computed (discount rate = 0)—
  6. 6.NPV−NetCAPEX + Σ CF_t/(1+r)^t— (set discount rate > 0)
  7. 7.IRRrate where NPV = 0106.41 %
  8. 8.Lifetime ROI(Σ net cash flow − net CAPEX) / net CAPEX3,408.1 %

How to use this calculator: ROI & Payback Period

Simple payback, ROI and lifetime net savings of a PV plant. The example below is calculated by this page's real engine from the displayed inputs.

  1. 1Confirm that the ROI & Payback Period matches the quantity or design check you need.
  2. 2Enter System CAPEX, Subsidy / incentive, and Year-1 annual generation using the units printed beside each field.
  3. 3Check every value before calculating, especially decimal points and measurement units.
  4. 4Calculate, then follow the substituted equations in the worked example and compare the result with any stated limit.
  5. 5Read the assumptions, warnings and cited references before using the result for a financial, medical or engineering decision.

Input guide and example values

Use values from the same measurement basis and time period. Conditional fields appear only when the related option is selected.

InputExample valueWhy it matters
System CAPEX1000000 currencyTotal turnkey installed cost.
Subsidy / incentive0 currencyDeducted from CAPEX to get net investment.
Year-1 annual generation140000 kWh/yrFirst-year AC energy output.
Self-consumption share70 %Portion of generation used on-site at the retail tariff; the remainder is exported at the export tariff.
Retail (self-consumption) tariff9 currency/kWhValue of one self-consumed kWh.
Export tariff4 currency/kWhValue of one exported kWh.
Tariff escalation3 %/yrAnnual change in tariffs; can be negative if regulated tariffs are expected to fall.
O&M cost1 % of CAPEX/yrAnnual O&M as a percentage of CAPEX.
O&M cost escalation5 %/yrAnnual inflation applied to O&M cost.
Module degradation0.55 %/yrAnnual reduction in generation.
Analysis period25 yearsNumber of years modelled (also the row count of the cash-flow table).
Discount rate0 %Set above 0 to also compute discounted payback and NPV/IRR; 0 gives an undiscounted-only analysis.

Formula inputs & variables for ROI & Payback Period

These are the named quantities used by this calculator. When the source formula does not define a mathematical symbol, OneCalcApp keeps the real input label instead of inventing one.

Variable / inputUnitMeaning in this calculation
System CAPEXcurrencyTotal turnkey installed cost.
Subsidy / incentivecurrencyDeducted from CAPEX to get net investment.
Year-1 annual generationkWh/yrFirst-year AC energy output.
Self-consumption share%Portion of generation used on-site at the retail tariff; the remainder is exported at the export tariff.
Retail (self-consumption) tariffcurrency/kWhValue of one self-consumed kWh.
Export tariffcurrency/kWhValue of one exported kWh.
Tariff escalation%/yrAnnual change in tariffs; can be negative if regulated tariffs are expected to fall.
O&M cost% of CAPEX/yrAnnual O&M as a percentage of CAPEX.

How the ROI & Payback Period works

The ROI & Payback Period uses System CAPEX, Subsidy / incentive, Year-1 annual generation, Self-consumption share, Retail (self-consumption) tariff, Export tariff, Tariff escalation, O&M cost, O&M cost escalation, Module degradation, Analysis period, and Discount rate to calculate Simple payback, Discounted payback, Net investment, Lifetime net savings, Lifetime ROI, NPV, and IRR. Its engine applies Net CAPEX = CAPEX − Subsidy; the worked values below come from that same live calculation rather than a separately typed example.

With System CAPEX 1000000 currency, Subsidy / incentive 0 currency, Year-1 annual generation 140000 kWh/yr, Self-consumption share 70 %, Retail (self-consumption) tariff 9 currency/kWh, Export tariff 4 currency/kWh, Tariff escalation 3 %/yr, O&M cost 1 % of CAPEX/yr, O&M cost escalation 5 %/yr, Module degradation 0.55 %/yr, Analysis period 25 years, and Discount rate 0 %, the main worked-example result is Simple payback = 1 years.

How each ROI & Payback Period input is used

System CAPEX

The ROI & Payback Period worked example uses System CAPEX = 1000000 currency. This value is passed directly into the calculation, with an allowed minimum 1. Total turnkey installed cost.

Subsidy / incentive

The ROI & Payback Period worked example uses Subsidy / incentive = 0 currency. This value is passed directly into the calculation, with an allowed minimum 0. Deducted from CAPEX to get net investment.

Year-1 annual generation

The ROI & Payback Period worked example uses Year-1 annual generation = 140000 kWh/yr. This value is passed directly into the calculation, with an allowed minimum 1. First-year AC energy output.

Self-consumption share

The ROI & Payback Period worked example uses Self-consumption share = 70 %. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 100. Portion of generation used on-site at the retail tariff; the remainder is exported at the export tariff.

Retail (self-consumption) tariff

The ROI & Payback Period worked example uses Retail (self-consumption) tariff = 9 currency/kWh. This value is passed directly into the calculation, with an allowed minimum 0.01. Value of one self-consumed kWh.

Export tariff

The ROI & Payback Period worked example uses Export tariff = 4 currency/kWh. This value is passed directly into the calculation, with an allowed minimum 0. Value of one exported kWh.

Tariff escalation

The ROI & Payback Period worked example uses Tariff escalation = 3 %/yr. This value is passed directly into the calculation, with an allowed minimum -10 and maximum 15. Annual change in tariffs; can be negative if regulated tariffs are expected to fall.

O&M cost

The ROI & Payback Period worked example uses O&M cost = 1 % of CAPEX/yr. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 5. Annual O&M as a percentage of CAPEX.

O&M cost escalation

The ROI & Payback Period worked example uses O&M cost escalation = 5 %/yr. This value is passed directly into the calculation, with an allowed minimum -10 and maximum 20. Annual inflation applied to O&M cost.

Module degradation

The ROI & Payback Period worked example uses Module degradation = 0.55 %/yr. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 2. Annual reduction in generation.

Analysis period

The ROI & Payback Period worked example uses Analysis period = 25 years. This value is passed directly into the calculation, with an allowed minimum 1 and maximum 40. Number of years modelled (also the row count of the cash-flow table).

Discount rate

The ROI & Payback Period worked example uses Discount rate = 0 %. This value is passed directly into the calculation, with an allowed minimum 0 and maximum 25. Set above 0 to also compute discounted payback and NPV/IRR; 0 gives an undiscounted-only analysis.

ROI & Payback Period formulas and result interpretation

Formula 1: relationship used

In the ROI & Payback Period, Net CAPEX = CAPEX − Subsidy. The quantities in this relationship come from the named inputs or from an earlier calculation step shown in the worked example.

Formula 2: relationship used

In the ROI & Payback Period, Savings(t) = E₁ × (1−d)^(t−1) × Tariff × (1+e)^(t−1) − O&M. The quantities in this relationship come from the named inputs or from an earlier calculation step shown in the worked example.

Formula 3: relationship used

In the ROI & Payback Period, Payback = first year where Σ Savings ≥ Net CAPEX (interpolated). The quantities in this relationship come from the named inputs or from an earlier calculation step shown in the worked example.

Formula 4: relationship used

In the ROI & Payback Period, ROI = (Σ Savings − Net CAPEX) / Net CAPEX × 100. The quantities in this relationship come from the named inputs or from an earlier calculation step shown in the worked example.

Simple payback

For the displayed ROI & Payback Period worked example, Simple payback is 1 years. Verify System CAPEX, Subsidy / incentive, and Year-1 annual generation and their units before relying on this output.

Discounted payback

For the displayed ROI & Payback Period worked example, Discounted payback is n/a (0% discount rate). Verify System CAPEX, Subsidy / incentive, and Year-1 annual generation and their units before relying on this output.

Net investment

For the displayed ROI & Payback Period worked example, Net investment is 1,000,000. Verify System CAPEX, Subsidy / incentive, and Year-1 annual generation and their units before relying on this output.

Lifetime net savings

For the displayed ROI & Payback Period worked example, Lifetime net savings is 34,081,074. Verify System CAPEX, Subsidy / incentive, and Year-1 annual generation and their units before relying on this output.

Lifetime ROI

For the displayed ROI & Payback Period worked example, Lifetime ROI is 3,408.1 %. Verify System CAPEX, Subsidy / incentive, and Year-1 annual generation and their units before relying on this output.

NPV

For the displayed ROI & Payback Period worked example, NPV is —. Verify System CAPEX, Subsidy / incentive, and Year-1 annual generation and their units before relying on this output.

IRR

For the displayed ROI & Payback Period worked example, IRR is 106.41 %. Verify System CAPEX, Subsidy / incentive, and Year-1 annual generation and their units before relying on this output.

ROI & Payback Period accuracy, checks and limitations

  • ROI & Payback Period units check: confirm System CAPEX (currency), Subsidy / incentive (currency), Year-1 annual generation (kWh/yr), Self-consumption share (%), Retail (self-consumption) tariff (currency/kWh), Export tariff (currency/kWh), Tariff escalation (%/yr), O&M cost (% of CAPEX/yr), O&M cost escalation (%/yr), Module degradation (%/yr), Analysis period (years), and Discount rate (%) before calculating.
  • ROI & Payback Period result check: compare Simple payback, Discounted payback, Net investment, Lifetime net savings, Lifetime ROI, NPV, and IRR with the substituted formula steps and the displayed rounding precision.
  • ROI & Payback Period: This is an estimate, not a lender offer. Verify fees, taxes, rate changes, eligibility and repayment terms in the official product documents.

Understanding the result

Read the main result together with supporting checks, assumptions, limits and intermediate values.

For a manual check, repeat the first equation, confirm the units and change one input at a time.

Common mistakes when using ROI & Payback Period

  • Do not mix units for System CAPEX (currency), Subsidy / incentive (currency), Year-1 annual generation (kWh/yr). A unit mismatch changes the input magnitude even when the typed number looks reasonable.
  • Do not replace the displayed Net CAPEX = CAPEX − Subsidy relationship with a different convention without also changing the underlying assumptions; compare like-for-like methods when checking the result.
  • Do not treat Simple payback = 1 years from the worked example as a universal answer. It belongs to the displayed example inputs and must be recalculated for the actual case.

When the ROI & Payback Period is useful

ROI & Payback Period is designed for cases where System CAPEX, Subsidy / incentive, Year-1 annual generation, Self-consumption share are known and you need Simple payback, Discounted payback, Net investment. The page keeps the live calculator, calculation method and worked example together so the result can be checked instead of treated as a black-box number.

Use the calculator for the scope described by its inputs and notes. The displayed method is Net CAPEX = CAPEX − Subsidy. If the real project or decision needs factors that are not represented here, treat the result as an estimate and add the missing checks separately.

System CAPEX and Subsidy / incentive: what changes the answer

The worked example uses System CAPEX = 1000000 currency, Subsidy / incentive = 0 currency, Year-1 annual generation = 140000 kWh/yr, Self-consumption share = 70 %. With those values, Simple payback is 1 years. Changing an input should be interpreted according to that field's unit, range, option and hint rather than by the number alone.

For this calculator, the main input roles are: System CAPEX (currency): Total turnkey installed cost. Subsidy / incentive (currency): Deducted from CAPEX to get net investment. Year-1 annual generation (kWh/yr): First-year AC energy output. Self-consumption share (%): Portion of generation used on-site at the retail tariff; the remainder is exported at the export tariff.

How to sanity-check a ROI & Payback Period result

Start by confirming the entered values and units, then compare the substituted working with the displayed formula or calculation steps. Pay particular attention to Simple payback, because it is the first worked-example output shown by the live engine.

Finally, compare the result with the assumptions, warnings and related calculators on this page. A nearby calculator can be useful as a cross-check when it measures the same workflow from a different input or output direction.

Next logical calculator

Continue with ROI Calculator

ROI Calculator covers the same practical workflow from a related calculation angle, making it a useful cross-check after ROI & Payback Period.

Open ROI Calculator

Design Assumptions

  • • 100% of generation is self-consumed or credited at full tariff.
  • • Constant O&M as a percentage of CAPEX (no inverter replacement modelled separately).
  • • No discounting — this is a simple (undiscounted) payback.

Engineering Tips

  • ◆Add an inverter replacement in year 12–15 (≈ 8–12% of CAPEX) for a realistic model.
  • ◆For bankable studies use IRR/NPV with a discount rate rather than simple payback.
  • ◆Verify subsidy eligibility and net-metering caps before quoting payback to a client.

Warnings

  • ▲Escalation above ~6%/yr flatters payback — keep it conservative.
  • ▲Export-only plants often earn a lower feed-in rate than the retail tariff.

Standards & References

IEC 61724-1 (yield measurement)IEC 62548IS 16221 (PV safety)

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