Solar ROI Calculator Glossary: 22 Terms, Plain English
Solar financial models use a specific vocabulary. This glossary explains the terms you will meet in any PV return calculator — payback, IRR, NPV, LCOE, and the inputs that feed them — without the finance degree.
Output metrics
| Term | Plain definition |
|---|---|
| Payback period | The number of years until cumulative savings and export income repay the upfront system cost. Shorter is less risky. |
| IRR (internal rate of return) | The annualized percentage return of the project. Easy to compare against bank deposit or bond rates. |
| NPV (net present value) | The lifetime value created in today's money after discounting future cashflow. Positive means the project adds value. |
| LCOE (levelized cost of electricity) | Total lifetime cost divided by total lifetime energy, expressed per kWh. Below your retail tariff means solar is cheaper than grid power. |
| Specific yield | Annual generation per kWp of capacity (kWh/kWp). A quick quality check on local solar resource. |
| Performance ratio | Actual output divided by theoretically possible output. 0.75 to 0.85 is typical for a well-run system. |
| Lifetime net profit | Cumulative after-tax cashflow at the end of the project, the bottom-line surplus after all costs. |
Revenue and tariff terms
| Term | Plain definition |
|---|---|
| Self-consumption ratio | The share of generation used onsite. Self-consumed kWh offsets the full retail tariff; exported kWh earns less. |
| Retail tariff | The price you pay for grid electricity. The higher it is, the more valuable self-consumed solar becomes. |
| Feed-in / export tariff | The rate paid for surplus energy sent to the grid. Usually well below the retail tariff. |
| Net metering | A policy that credits exports at or near the retail rate, making self-consumption less critical. |
| Weighted tariff | The blended value of energy, mixing self-consumption and export rates by their shares. |
Cost, loss, and weather terms
| Term | Plain definition |
|---|---|
| EPC cost per watt | Full turnkey installed cost divided by capacity. Includes modules, inverter, racking, labor, and permitting. |
| Degradation | The annual drop in panel output, typically 0.4 to 0.8 percent per year over 25 years. |
| System losses | Reductions from shading, soiling, thermal, mismatch, wiring, inverter, and availability — usually 14 to 25 percent total. |
| POA (plane of array) | Irradiation on the tilted panel surface, the figure that actually drives generation. |
| Tilt factor | Adjustment for panel angle relative to horizontal, affecting how much sunlight is captured. |
| Discount rate | The rate used to value future cashflow in today's money. Higher discount rate lowers NPV. |
| Sensitivity | A test of how much the result changes when one input moves up or down. |
| O&M cost | Annual operations and maintenance cost, usually small relative to lifetime energy value. |
Why the vocabulary matters
Two quotes can show very different "returns" while describing the same roof, because they use different assumptions for cost per watt, self-consumption, or export tariff. Knowing these terms lets you compare proposals on equal footing instead of trusting whatever number is printed largest. The calculator outputs all of them together precisely so no single metric can be cherry-picked.
Definitions are simplified for screening purposes. Local tariffs, incentives, and policy terms vary by market and change over time. Always confirm current values with your utility and a qualified installer before acting on a model.
Frequently asked questions
What does solar payback period mean?
Payback period is the number of years until cumulative savings and export income repay the upfront system cost. Shorter payback means lower risk.
What is a good solar IRR?
Residential solar IRR above 10 percent is generally attractive; commercial projects may accept 7 to 9 percent due to scale and tax benefits.
What is LCOE in simple terms?
LCOE is the lifetime cost of the system divided by lifetime energy, per kWh. If your LCOE is below your retail tariff, self-consumed solar is cheaper than grid power.
What is the self-consumption ratio?
It is the share of generation used onsite. Self-consumed energy offsets the full retail tariff, while exported energy earns only the lower feed-in rate.