Solar Panel Degradation
The gradual decline in solar panel output over time — typically 0.3–0.7% per year, with manufacturer warranties guaranteeing at least 80% output after 25 years.
Solar panels lose efficiency gradually due to UV degradation of encapsulant materials, light-induced degradation (LID — a rapid initial drop of 1–3% in crystalline silicon panels in the first weeks of exposure), and physical degradation from thermal cycling and moisture. After the initial LID period, panels typically degrade 0.3–0.7% per year.
Manufacturer performance warranties guarantee output at end-of-life — typically 80% at 25 years for standard panels, 92% at 25 years for premium manufacturers (SunPower guarantees 92% at 25 years; most others guarantee only 80%). The difference compounds: at 80% vs. 92% guarantee, a 10 kW system produces 1.2 kW less in year 25 — meaningful in financial modeling.
Degradation rates should be explicitly modeled in any payback calculation. A system modeled at 0.5%/year degradation produces 88% of year-1 output in year 25 (25 × 0.5% = 12.5% total loss). Real-world data from NREL suggests premium panels often degrade at 0.3–0.4%/year — better than rated.
Real-World Example
The financial model showed the difference between a 0.5%/year degrading panel (producing 318,000 kWh lifetime) versus a 0.3%/year panel (producing 333,000 kWh) was $2,100 in additional savings over 25 years at $0.14/kWh — enough to partially justify the panel upgrade cost.