Example inputs and outputs
| Scenario | Gross upfront | Incentives | Net upfront | Year‑1 net | Payback |
|---|---|---|---|---|---|
| Conservative | $9,500 | $1,000 | $8,500 | $520 | ~16 yrs |
| Typical | $10,000 | $1,800 | $8,200 | $780 | ~11 yrs |
| Aggressive | $9,800 | $2,500 | $7,300 | $1,050 | ~7 yrs |
Formula used
- Net upfront = (Purchase + Installation + Fees) − Rebates − Fixed incentives − (Tax credit % × Gross upfront).
- Delivered kWh (Year 1) = Usable kWh × Cycles/year × (Efficiency % / 100).
- Energy value (Year t) = Delivered kWh₁ × (1 − Degradation)^(t−1) × Value/kWh × (1 + Escalation)^(t−1).
- Net cashflow (Year t) = Energy value + Backup value − O&M − Replacement (if scheduled).
- Cumulative payback: first year when cumulative net cashflow ≥ net upfront.
- Discounted cashflow = Net cashflow / (1 + Discount rate)^t. NPV = −Net upfront + Σ discounted cashflows (+ discounted residual if enabled).
How to use this calculator
- Enter purchase, installation, and any local fees.
- Add rebates, fixed incentives, and your tax credit percent.
- Estimate usable capacity, yearly cycles, and avoided cost per kWh.
- Set degradation and rate escalation for realistic long-term value.
- Choose a discount rate for NPV and discounted payback.
- Press Calculate Payback, then export CSV or PDF.
Payback drivers in year one
Year‑1 delivered energy equals usable capacity × cycles × efficiency. For a 10 kWh usable battery, 250 cycles, and 90% efficiency, delivered energy is 2,250 kWh. If avoided energy is $0.18/kWh, energy value is about $405 before any backup value. Incentives reduce net upfront immediately, so a $10,000 gross cost with $2,000 incentives starts at $8,000 net.
Degradation and rate escalation effects
Longer horizons depend on opposing forces. With 2.5% annual degradation, delivered energy after 10 years is about 78% of Year‑1. With 4% annual rate escalation, the value per kWh rises about 48% over 10 years. When escalation exceeds degradation, later‑year cashflows often grow, improving discounted payback.
Maintenance and replacement budgeting
Recurring O&M reduces net savings every year. A modest $120/year O&M costs $1,200 over a decade before escalation. If an inverter replacement of $900 occurs in Year 8, the cashflow dip may delay break‑even by one to two years. Modeling these events makes the payback estimate more conservative and finance-ready.
Reading NPV and ROI together
NPV discounts future cashflows using your opportunity cost. At an 8% discount rate, $1,000 received in Year 10 is worth roughly $463 today. A positive NPV suggests the battery beats the discount rate; ROI summarizes total benefit versus total cost across the horizon. A project can show a high ROI but still have a negative NPV when benefits arrive too late.
Interpreting break-even horizons
Simple payback uses undiscounted cumulative cashflow and is easy to communicate. Discounted payback is stricter and aligns with capital planning. If break‑even is not reached within the chosen horizon, extend years or reassess assumptions such as cycles, avoided rate, incentives, or replacement timing to test what changes materially move the outcome. For residential use, 180–300 cycles/year is common; paired with time‑of‑use arbitrage, avoided rates may range $0.12–$0.35/kWh. Use sensitivity runs to bracket decisions. safely.
FAQs
1) What does “simple payback” mean here?
It is the first year when cumulative undiscounted net cashflow meets or exceeds the net upfront investment, based on your assumptions.
2) Why can discounted payback be longer than simple payback?
Discounted payback reduces future cashflows using the discount rate. Later savings count less today, so break‑even can shift to a later year.
3) How should I estimate cycles per year?
Start from your operating plan: daily cycling for arbitrage, backup-only cycling, or a mix. If unsure, test a range like 180–300 cycles/year to see sensitivity.
4) What does degradation change in the model?
Degradation reduces delivered energy each year, lowering energy value. The calculator compounds degradation annually to reflect declining usable output over time.
5) When should I include a replacement cost?
Include it when a component is likely to be replaced within the horizon, such as an inverter or major service event, so cashflow and payback stay realistic.
6) What if there is no break-even within the horizon?
Try extending the analysis years or adjusting key drivers like avoided rate, incentives, cycles, or O&M. The chart helps identify whether the gap is narrowing.