How degradation affects your solar energy system

Throughout your solar energy system’s life span, its performance will begin to degrade and continue degrading over time. Degradation occurs in just about any product, whether it is electronic or not, and solar panels are included as well. Understanding how degradation affects your solar energy system will give you an idea of how your system will perform in the long term, and the effects it has on power production and your savings.

Impact on energy production and savings

When degradation starts to affect solar panels, their power output will drop a small percentage every year. This degradation rate is generally seen as a trend for each year that the solar panels operate in your system. Solar panels don’t have a listed degradation rate on their specification sheets, due to the varying factors that can affect the degradation rate of the solar panel. With the loss in performance, you’ll see less energy generated by your solar energy system, therefore, fewer savings on your electricity bills. To explain how exactly degradation can impact the performance of your solar energy system and savings. We will use a hypothetical scenario, complete with a system, location, and energy prices to simulate the potential effects of degradation.

To set the scenario, the homeowner purchases and installs an 8 kW (kiloWatt) solar energy system for their home in Santa Fe, New Mexico at the start of 2022. The current average cost of electricity in New Mexico in 2022 is 13.6 cents per kWh (kiloWatt-hours). When simulating the potential annual generation of their system through the National Renewable Energy Laboratory (NREL)’s PVWatts calculator. The system is expected to generate roughly 13,894 kWh of electricity throughout the year. However, the solar panels have a degradation rate of 3.5% for the first year, and 0.30% percent for years 2 – 25. With this base information, we can calculate the potential effects of degradation.

Calculating the effects of degradation

When calculating the degradation of the solar energy system, the degradation of the first year will be different compared to the second year. This amount is higher than in other years as solar panels degrade fastest when exposed to ultraviolet radiation from the sun. This is known as the light-induced degradation (LID) effect. It can start to occur as soon as the panel is exposed to the sun for a few hours. Although, after this spike in degradation over a year, it will lower down to a lower, more stable rate.

This means that out of the 13,894 kWh of power produced in 2022. 3.5% is lost to degradation. Resulting in an annual amount of 13407.71 kWh for year 1, which equates to 486.29 kWh of electricity lost. This would equate to roughly $66.14 in savings lost in the first year of degradation.

Degradation from years 2 – 25

When installing a solar energy system from scratch, every component is set up and arranged to maximize its power output and efficiency. If your solar panels are mounted on your rooftop, you might have used up most of the available space with your existing panels. If your system is ground-mounted, you might not be as concerned about space. Although this comes with the possible issue of having to construct another foundation for your solar panels. Additional trenching will need to be done for new lines to your electrical system. Alternatives for solar panel locations can include solar carports, sheds, or gazebos.

What factors can add to the loss of savings from degradation?

Doing these calculations can show you just how much savings you stand to lose from degradation. Although, it’s worth keeping in mind that solar panels do degrade slower than other technologies. They tend to produce about 80% of their original power output by the end of the 25-year life span. However, the degradation isn’t the only thing that results in lost savings. When degradation is combined with inflating costs of energy, you could stand to see more losses in your annual electricity production.

It’s highly unlikely that energy prices will stay fixed year after year. Although, the changes in electricity prices year to year can vary as well. So accurately calculating that year’s cost of electricity with the inflated prices will give you a better idea of the savings lost. Using our hypothetical scenario, if the price of electricity from year 1 to year 2 inflated by about 5%, the amount of savings lost in year 2 would amount to $5.74 instead of $5.47 using the previous year’s rate.

How does degradation scale with the size of a solar energy system?

If your solar energy system is larger, you will generally be producing more electricity. Although it will feel the effects of degradation much more as more panels will have their power output degrading, compared to smaller systems. Although, panels with lower degradation rates won’t suffer as much in comparison. 

Even with increases in electricity prices and degradation, you will still see savings with your solar energy system operating over its lifespan. While it may not be the same as it was brand new, you can still save on your electricity bills and offset a sizable amount of your total energy use.

Why does degradation affect panels differently?

Degradation affects solar panel models and types differently. Even with the information and research done on solar technology, manufacturers won’t list a degradation rate on their specification sheets. As degradation rates are down to factors and real-life conditions out of the manufacturer’s control. Some of the reasons why degradation can affect panel types differently are:

Despite what we said above, solar panel manufacturers don’t often list a degradation rate on their spec sheets – mostly because the actual degradation rate of solar panels will differ from one system to the next due to real-life conditions that are outside of the manufacturer’s control.

Why do some solar panels degrade faster than others?

So we’ve established that all solar panels degrade throughout their lifetime – but why does panel degradation vary from one product, or one system, to the next? There are a few reasons, and we highlight some of the major ones below:

The technology of the solar panel

While solar panels all function the same, they generate electricity from sunlight through a semiconductor material. While they function the same, the different types of solar panel technologies have different degradation rates. Monocrystalline, polycrystalline, and thin-film panel types have different degradation rates. This is due to the differences in their semiconductor material, structure, and how the modules are made.


Solar panels go through testing and certification processes to make sure they can generate electricity for around 25 years. These tests can cover all sorts of climate and weather conditions. General climate conditions are tested, including humidity, hail ultraviolet light exposure, and much more. These certifications are listed on their spec sheets as well if they perform up to a certain standard. Although, harsher conditions can accelerate degradation in the solar panels.

Solar panel defects

The various types of solar panel defects that occur such as micro-cracks and hotspots can cause panels to degrade much faster than anticipated. Although defects can also lead to much more issues than solar degradation. Reduced performance and even the failure of the components can occur if left alone.

Is degradation covered in my solar panel’s warranty?

Solar panels do come with a power warranty offering to ensure their solar panels produce a certain amount of electricity over time. The real conditions and degradation that your panels go through may not line up with the warrantied degradation rate. As panels are properly tested before being installed, manufacturers will choose numbers that would be near the upper limit of the expected degradation.

While degradation can be a hard aspect of solar energy to specifically track and account for, it shouldn’t stop you from enjoying the benefits that solar energy can give you. You will still benefit from your solar energy system over a long period. Degradation is something that solar manufacturers account for and continually look to mitigate into the future.

Get started with solar energy today

If you are looking to start your transition to solar energy, we are here to help. Our website also has a free online estimate tool that generates a personalized report for you from a simplified questionnaire. That report will contain the potential savings you can net, and the cost of a solar energy system installed on your property. You can also contact us directly via phone at +1 (844) 354-8387 or via email at info(at)goelitesolar.com for more information regarding solar energy for your property.