Defined term
Payback period
Payback period is the time it takes for cumulative cash flow or savings to recover an initial investment.
Definition
In rooftop solar, simple payback usually divides net installed cost by first-year bill savings. A discounted payback calculation also accounts for the time value of money.
Payback is easy to understand, but it is only one view of the economics. It does not capture total lifetime savings, inverter replacement risk, panel degradation, financing cost, or home-sale timing by itself.