Break-even is the moment cumulative cash in from your microgrid equals what you spent to build it. Everything before that date is recovery; everything after is return. The arithmetic is simple; the inputs are not. This article walks through the equations WattQuick uses so you can audit a proposal line by line.
Inputs the model needs
| Input | Role |
|---|---|
| Initial setup cost | Total installed capex after incentives are already subtracted (or enter gross cost and reduce it manually) |
| Monthly savings from self-production | Average utility bill reduction from on-site generation and storage dispatch |
| Monthly maintenance | O&M, monitoring, scheduled service, and reserve for inverter replacement |
| Annual energy inflation | Expected yearly increase in the value of each avoided kWh |
Net monthly benefit:
M_net = monthly savings − monthly maintenance
If M_net ≤ 0, payback never arrives—fix the savings estimate or maintenance assumption before chasing break-even years.
Year-by-year cash flow with inflation
We apply inflation to the value of savings, not to maintenance in the default model (conservative O&M is often flat or rising slower than energy). For year y (starting at 1):
Annual_net(y) = M_net × 12 × (1 + i)^(y − 1)
where i is annual energy inflation as a decimal (3% → 0.03).
Cumulative cash through N years:
Cumulative(N) = Σ Annual_net(y) for y = 1 … N
Break-even in fractional years
Find the smallest year k where cumulative cash meets or exceeds setup cost C₀. If cumulative crosses during year k:
Break-even (years) = (k − 1) + (C₀ − Cumulative(k − 1)) / Annual_net(k)
That interpolation treats savings as earned evenly through the crossing year—reasonable for monthly bill impacts, less exact if savings are seasonal.
Example
- C₀ = $45,000
- M_net = $275/mo ($3,300 in year 1)
- i = 3%
Year 1 cumulative = $3,300; year 2 ≈ $3,399; the sum reaches $45,000 around year 12–13 depending on rounding. Plug your numbers into the tool for precision.
Cumulative ROI at 10 and 20 years
ROI here is return on installed capital, not annualized IRR:
ROI_N% = (Cumulative(N) − C₀) / C₀ × 100
Positive ROI_N means you have recovered capex and earned surplus by year N. Compare 10- and 20-year figures to solar-only quotes that stop at simple payback—microgrids are long-lived assets.
What this model does not include
- Finance charges or lease payments (treat as higher effective C₀ or separate line item)
- Tax on savings, depreciation benefits, or carbon credits
- Export revenue when net metering pays for surplus
- Battery replacement at year 10–15 (add a lump-sum maintenance spike in advanced models)
- Resilience value during outages (qualitative upside)
Sanity checks before you trust the output
- Divide year-1 savings by kWh self-consumed—does implied $/kWh match your bill?
- Stress-test with 0% inflation and with +2% above your baseline
- If break-even exceeds asset life, revisit storage size or export strategy
Break-even is not a marketing headline—it is cumulative cash geometry. Enter honest maintenance, escalate savings with the rates you actually pay, and the calculator returns years to parity plus decade-scale ROI you can defend in a lender packet or HOA meeting.