Why "cost ÷ savings" gives the wrong year
The usual shortcut divides net system cost by first-year savings. That ignores two things that pull in opposite directions: electricity prices rise, and panels get slightly weaker every year.
On the default numbers — an 8.3 kW system at $2.60/W with a 30% credit, generating 10,906 kWh a year against a $0.17 tariff — the simple method says 8.15 years. Adding 3% annual rate rises and 0.5% yearly panel degradation brings it forward to 7.5 years. Rate inflation is the stronger of the two effects by a wide margin.
Where the generation figure comes from
kW × peak sun hours × 365 × (1 − losses). Peak sun hours are not daylight hours — they are the equivalent hours of full-strength sun, typically 3.5 in cloudier regions and over 6 in desert climates. The loss figure covers inverter conversion, heat, wiring, soiling and mismatch, and 20% is a realistic default. Sizing the system itself uses the same relationship in reverse.
What actually moves your payback
- Your electricity rate. The single biggest lever. Doubling the tariff roughly halves the payback period — which is why identical systems pay back in very different times in different states.
- Incentives. A 30% credit cuts nearly two and a half years off the default scenario.
- Cost per watt. Quotes vary widely for the same equipment. Getting three is worth more than optimising any other input here.
- Rate escalation. If tariffs rise faster than assumed, payback shortens; if they stall, it lengthens.
What this model does not include
It assumes you use or are credited for everything you generate at the same rate. In practice, exported power is often credited below retail, so a system sized well beyond your daytime usage pays back more slowly than this suggests. It also excludes inverter replacement — usually once in a 25-year life — maintenance, and any finance costs if the system is on a loan. Treat the result as the optimistic end of a range, and check your utility's export terms before sizing up.