Estimate system size, cost, savings, payback period, and 25-year ROI based on your electric bill and location.
The size of a solar system is measured in kilowatts (kW) and determined by your electricity consumption and local sun exposure. The basic calculation: divide your annual electricity usage (in kWh) by the annual production per kW of solar capacity in your area. A typical residential system in the U.S. ranges from 5 kW to 12 kW, producing 6,000 to 18,000 kWh per year depending on location.
The 0.80 factor accounts for real-world system losses including inverter efficiency, wiring losses, soiling, temperature effects, and panel degradation. Actual system efficiency typically ranges from 75% to 85% of the rated panel output.
Enter your monthly electric bill and your electricity rate per kWh (found on your utility bill or check the Electricity Cost Calculator for average rates by state). Select your peak sun hours based on your location: the Southwest U.S. averages 5.5 to 6.5 hours, the Southeast averages 4.5 to 5.5, the Midwest averages 4.0 to 5.0, and the Northeast and Pacific Northwest average 3.5 to 4.5 hours. The calculator estimates your system size, number of panels, installation cost, tax credit savings, payback period, and 25-year net financial benefit.
6+ hours: Arizona, Nevada, New Mexico, Southern California, West Texas. 5 to 6 hours: Colorado, Florida, Georgia, Kansas, North Carolina, Utah. 4 to 5 hours: Illinois, Indiana, Michigan, Missouri, New York, Ohio, Pennsylvania, Virginia. 3.5 to 4.5 hours: Maine, Minnesota, Oregon, Vermont, Washington, Wisconsin. Peak sun hours measure the equivalent number of hours per day that solar irradiance averages 1,000 watts per square meter, not simply the number of daylight hours.
The average installed cost of residential solar in the U.S. is approximately $2.50 to $3.50 per watt before incentives, according to data from the Solar Energy Industries Association (SEIA) and EnergySage. The primary cost components are panels (25 to 30% of total cost), inverters (10 to 15%), racking and mounting (10%), labor (15 to 20%), and permitting, inspection, and overhead (20 to 25%). Prices have declined roughly 70% over the past decade due to manufacturing scale and technology improvements.
The federal Investment Tax Credit (ITC) allows a 30% credit on the total installation cost through 2032. This is a dollar-for-dollar tax credit, not a deduction, making it one of the most valuable incentives available. Many states offer additional incentives including state tax credits, rebates, Solar Renewable Energy Credits (SRECs), and net metering policies that credit you for excess electricity sent back to the grid.
Solar is most financially advantageous when: your electricity rate is above $0.12/kWh (the national average is approximately $0.17/kWh), your roof gets good sun exposure (south-facing, minimal shading), you plan to stay in your home for 7+ years (past the typical payback period), and your state offers strong net metering policies. In states with high electricity rates like California ($0.30+/kWh), Massachusetts, Connecticut, and New York, the payback period can be as short as 4 to 6 years with total 25-year savings exceeding $40,000.
Solar panels are warrantied for 25 to 30 years and typically degrade at 0.3 to 0.5% per year, meaning a panel rated at 400W still produces roughly 350W after 25 years. After the payback period, the electricity generated is essentially free for the remaining 15 to 20+ years of the system's life. Home value studies by Zillow and the Lawrence Berkeley National Laboratory found that solar installations increase home sale prices by approximately $15,000 to $20,000 on average.