Short answer
Simple payback shows when cumulative savings and revenue nominally cover investment. It says nothing about later cash flows, time value or return. Discounted payback is stricter.
Important variables
- Investment after incentives
- Self-consumption and export
- Operating cost and degradation
- Discount rate for discounted payback
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Worked example
A €15,000 investment and stable €1,500 annual net benefit gives ten-year simple payback. If benefit declines or is discounted, economic payback is later.
Break-even: What changes the result?
Higher self-consumption shortens payback. Rising maintenance, degradation or a higher discount rate lengthen it.
Common mistakes
- Reading payback as return
- Ignoring post-payback cash flows
- Using gross revenue instead of net benefit
Terms in this guide
Sources & assumptions
- IEA PVPS — Photovoltaic Power Systems Programme (2026-08-17)
- RATIOXA — Methodology and formulas (2026-08-17)
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