Simple Payback vs Discounted Payback
Simple payback counts years until cumulative savings equal cost. Discounted payback adjusts future savings for the time value of money, producing a longer but more accurate payback period.
Why It Matters
Simple payback is easy to understand but overstates the value by ignoring that a dollar saved 10 years from now is worth less than one saved today.
Related Tools
Related Terms
Payback Period
The time it takes for your cumulative savings to equal your initial investment in solar. Typically 6-10 years in the US.
Discount Rate
The interest rate used to calculate the present value of future cash flows. In solar economics, it reflects the homeowner's opportunity cost of capital — what return they'd earn elsewhere.
Net Present Value (NPV)
The total value today of all future solar savings minus the initial investment, discounted at a chosen rate. A positive NPV means the investment is financially worthwhile.