How to Read a Solar Quote: Seven Numbers That Decide Your Payback

Solar proposals are long, glossy and structured to make direct comparison difficult. Two quotes for the same roof will present entirely different headline figures — one leads with monthly payment, another with 25-year savings, a third with a percentage of your bill eliminated.

Seven numbers cut through all of it.

#1. Cost per watt

This is the only price figure that permits comparison. Divide the total system cost before incentives by the system size in watts.

A 7.2 kW system quoted at $21,240 is $2.95 per watt. Current US installed pricing generally falls between $2.75 and $3.35 per watt before incentives. Above $3.60 needs a specific justification — a difficult roof, premium equipment, a structural upgrade. Below $2.50 warrants a question about equipment quality and warranty backing.

If a proposal does not state system size in kW and total cost before incentives, ask. A proposal that avoids both is avoiding comparison.

#2. System size in kW

Sanity-check it against your consumption. Divide your annual kWh by roughly 1,300 to 1,600 (depending on your region's sun hours) to get the approximate kW needed for a full offset.

If you use 11,000 kWh a year in a moderate-sun region, you need roughly 8 kW. A proposal for 12 kW is either oversizing to inflate the contract or assuming an EV and heat pump you have not mentioned.

#3. Estimated annual production

Stated in kWh per year. Divide by system size to get kWh per kW installed — the specific yield.

Realistic values run 1,100 to 1,600 kWh per kW annually in the continental US, depending on latitude, orientation and shading. Anything above 1,700 is optimistic, and anything above 1,800 is not credible outside the sunniest southwestern locations with perfect south-facing tilt.

This number drives every savings figure in the proposal. If it is inflated by 15%, so is everything downstream. Cross-check it with the solar savings calculator using your actual sun hours and roof orientation.

#4. Utility rate assumed

The proposal converts kWh into dollars using an assumed rate. Check it against the rate printed on your own bill, including delivery and distribution charges, not just the supply component.

Then check the rate escalation assumption. Many proposals assume 4% to 6% annual utility inflation, which compounds into very large 25-year savings figures. Historical US residential electricity inflation has run closer to 3%. A proposal assuming 5.5% is not lying, but it is choosing the flattering end of a range.

#5. Degradation rate

Panels lose output over time. Quality modules degrade 0.3% to 0.5% per year, with a warranty typically guaranteeing 85% to 92% of nameplate output at year 25.

If a proposal omits degradation entirely, its later-year savings are overstated by 10% or more.

#6. Net cost after incentives

Total cost minus the 30% federal credit minus any state or utility rebate. Confirm two things: that the credit is applied to the correct base, and that you have enough tax liability to use it. The federal residential clean energy credit is non-refundable — it offsets tax owed. Unused amounts carry forward, but a household with minimal tax liability may take several years to realise the full value.

#7. Payback period and IRR

The proposal will quote payback. Check whether it is computed on gross or net cost, and whether it includes degradation and realistic rate inflation.

Better still, look at internal rate of return, which lets you compare solar against any other use of the money. A system with an eight-year payback typically returns 10% to 14% annually — and because you are avoiding a bill rather than earning income, that return is effectively tax-free.

#Three things proposals systematically omit

Roof condition. If your roof has fewer than ten years of life left, it needs replacing before the array goes on. Removing and reinstalling panels later costs $3,000 to $6,000.

Interconnection and permitting delays. Two to six months between contract and switch-on is normal. Savings do not start on the signature date.

Your utility's net metering rules. Full retail net metering makes the economics work. Where it has been replaced with a lower export rate, self-consumption matters far more and the payback calculation changes substantially. Check your utility's current tariff directly, not the installer's summary of it.

#How to compare three quotes in ten minutes

Build a table with cost per watt, system size, specific yield, assumed rate, assumed escalation, net cost and payback. Then re-derive payback yourself with consistent assumptions across all three. The ranking frequently changes once the assumptions are normalised — which is precisely why they differ.

Frequently asked questions