Rooftop solar has become one of the most compelling home investments available to American homeowners, offering predictable returns uncorrelated with financial markets, protection against electricity rate inflation, and significant environmental benefits. But the financial case varies dramatically by location, utility rate structure, and available incentives — making accurate calculation essential before committing to a system.
How Much Does Solar Actually Produce?
Solar production depends on three factors: system size, local peak sun hours, and system efficiency. The US average is approximately 4.5 peak sun hours per day, but this ranges from 3.0 in the Pacific Northwest and Alaska to 6.5+ in the desert Southwest. A 10 kW system in Phoenix produces roughly 16,500 kWh annually; the same system in Seattle produces about 9,600 kWh — a 72% difference driven entirely by location. System efficiency (performance ratio) applies a discount to theoretical production to account for real-world losses: inverter conversion losses typically account for 4–6%, wiring resistance 2–3%, soiling and bird droppings 1–4%, shading from trees or chimneys 0–15% depending on site, and temperature losses 5–10% (panels produce less as they heat up, and hot climates like Arizona paradoxically experience more temperature derating despite more sunlight). A well-designed, unshaded system achieves a performance ratio of 0.80–0.85. The NREL PVWatts calculator is the industry-standard free tool for modeling production at any US location using TMY (typical meteorological year) weather data.
The Role of Electricity Rates and Net Metering
Your electricity rate is the single most important variable in solar economics. At $0.10/kWh, a 10,000 kWh/year system saves $1,000/year. At $0.35/kWh, the same system saves $3,500/year — a 3.5× difference in annual savings with identical solar production. This is why solar economics in Hawaii ($0.45/kWh average), California ($0.28/kWh), Massachusetts ($0.30/kWh), and Connecticut ($0.28/kWh) are so much stronger than in Louisiana ($0.09/kWh) or Idaho ($0.10/kWh). Net metering policy matters nearly as much: under full retail net metering, you receive dollar-for-dollar credit for every kWh exported to the grid, effectively using the utility as a free battery. California's NEM 3.0 (effective 2023) slashed export credits by 75%, shifting the optimal strategy from oversizing solar to pairing solar with battery storage to maximize self-consumption. Twelve other states have already reduced or eliminated retail net metering. Before sizing a system, confirm your utility's current net metering tariff — it directly determines how much of your solar production translates to bill savings.