Solar panel degradation: How does it impact savings?

The word "degradation" can be scary, but don't let it frighten you too much: every product, from your cell phone to your shoes, degrades over time, and solar panels are no exception to this rule. Fortunately, solar panels degrade at a very slow rate relative to other technologies – in fact, even after 25 years, most solar panels will still generate at least 80 percent of their original solar power output!

Before installing solar panels on your roof, it's important to have a good grasp of what the performance of your system will look like throughout its lifetime and how solar panel degradation will impact solar electricity production and, consequently, savings. So let's dive right into it.

Let's say you're comparing solar panels and notice one that advertises a low degradation rate of 0.25 percent per year. A 0.25 percent degradation rate means that every year, your panels will operate at 0.25 percent of the output of the previous year. In other words, if your system generated 10,000 kilowatt-hours (kWh) in its second year, it may generate a modest 9,975 kWh (10,000 x 0.25% = 25) in its third year.

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. That said, you can get a rough sense of what to expect by looking at the manufacturer's power warranty offering. Every solar panel manufacturer offers this guarantee to ensure your panels will produce a certain amount of electricity over time. Generally, most solar panels degrade at less than 0.8 percent per year, and most manufacturers guarantee at least 80 percent of their products' original output by year 25.

Here are common examples of warrantied degradation rates and what that looks like in terms of original output by the end of a warranty term:

All panels degrade slowly – does it really make a difference if it's at 0.25 percent per year or 0.75 percent per year? More or less (literally), the difference will depend on the size of your system and the rate you pay for electricity.

First, let's take a look at what varying degradation rates mean for 6-kilowatt (kW) and 10-kW systems in EnergySage's home state of Massachusetts. (Note: for all the estimates below, we used the National Renewable Energy Laboratory's PVWatts calculator for solar electricity production numbers).

How degradation impacts electricity production by system size

Naturally, the larger your solar panel system and the more solar electricity it generates, the more kilowatt-hours you will lose each year because of degradation. In MA, a 6 kW system could experience an annual drop of production anywhere from 15 to 60 kWh; for a 10 kW system, these numbers jump to 30 to 100 kWh:

Total electricity loss for a 6 kW system by degradation rate

Total electricity loss for a 10 kW system by degradation rate

How degradation impacts solar savings

Generally, the more solar electricity you generate, the more you'll save on electricity bills – but how do your solar savings change from year to year as a result of degradation, and what extra value do panels with low degradation rates provide?

Consider the scenario above, where you have a 6 kW system in MA, and your panels degrade at about 0.25 percent per year. Given the low degradation rate, you're going to lose less than 20 kWh a year. Assuming electricity rates in MA remain constant (which they won't, but bear with us) at about 18 cents per kWh, you're looking at a bill savings loss of less than $4 from year to year. On the other end of the degradation spectrum (0.75 percent), you'd experience a loss of about 50-60 kWh per year and an extra $11 annually. When comparing your savings from one year to the next, a loss of $4 - $11 doesn't seem too bad. That said, when you consider what you would be saving in a world where degradation didn't exist (i.e., your panels continued producing the same amount of electricity for 25 years), the cumulative losses add up:

Cost of degradation, fixed electricity rate: 6 kW system in MA

Cost of degradation, fixed electricity rate: 10 kW system in MA

*Solar electricity production/loss estimates from PVWatts, numbers rounded
**Cost of degradation = annual kWh loss * cost of electricity (18 cents per kWh), numbers rounded to the nearest dollar

However, the likelihood that electricity rates will remain fixed for 25 years is...low (and by low, we mean really low). The more electricity rates rise, the more savings you'll miss out on due to degradation each year. Here's how that plays out for the same 6 kW system in Massachusetts, where electricity rates rise an average of 2.1 per year:

Cost of degradation with utility rate inflation; 6 kW system in MA

Cost of degradation with utility rate inflation; 10 kW system in MA

*Assumes an annual utility rate inflation of 2.1 percent per year, based on a 10-year MA average (EIA)

This is a bit of a double-edged sword; yes, the higher your electricity rates are, the more money you stand to lose because of degradation. On the other hand, the value of all the solar electricity your system continues to produce is higher, meaning more electricity bill savings!

All in all, solar panel degradation impacts solar savings, but not as much as you might expect. It especially seems like a small amount when compared to the thousands of dollars you'll likely save over the lifetime of your system.

In all the savings calculations above, we're assuming that your electricity usage remains stable throughout the lifetime of your system. Of course, this isn't usually how it works – if your electricity needs increase over time, and your panels produce less electricity each year, you'll pull more electricity from the grid and have higher utility bills as time goes on.

In preparation for degradation and/or an uptick in electricity usage, many people decide to install more solar panels than they initially needed. So let's approach solar panel degradation from a different direction: what system size would you need to ensure you can generate the same amount of electricity a 6 kW system would in year 1, after 25 years of degradation?

Oversizing system size by degradation rate: 6 kW in MA

*Assumes a 1.3 production ratio

If you're anticipating an increase in electricity consumption, lower degradation panels can provide extra assurance that you'll be able to meet future electricity needs and allow you to optimize space and install a smaller system to meet these needs. Plus, a smaller system may leave extra space on your roof should you need to add panels in the future. Don't be surprised if panels with lower degradation rates cost more upfront; that said, the investment may be well worth it if you're considering a future EV purchasing, adding people to your home, buying new electric appliances, or working towards whole-home electrification, and more.

Importantly, not everyone can oversize a solar panel system and those that can may face restrictions on how much they can oversize. Many utility companies limit sizes of grid-tied solar panel systems based on a customer's historical electricity needs. If this sounds like your utility company, that's even more of a reason to give low degradation panels a closer look: you won't need as large of a system to generate your electricity needs over time – and a smaller system is more likely to be within utility guidelines!

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:

Panel tech

It may surprise you to see just how much degradation rates can vary from one solar panel to the next, especially since they all perform the same function. And in a basic sense, yes – all solar panels generate electricity from sunlight and do so using a semiconductor material (e.g., silicon). However, degradation rates differ depending on the panel type–thin film, monocrystalline, polycrystalline–as well as the semiconductor material used, the layout of the circuitry within the panel, and the overall composition of the module.

We know...we just threw some electrical jargon at you. But to put it simply, companies build solar panels with different materials and in different ways that make them more or less susceptible to degradation over time.

Climate

All solar panels go through a thorough testing and certification process to make sure they're up to the task of generating electricity for 25+ years – part of these tests include a review of how panels perform in varying climates or weather conditions, including humidity, hail, ultraviolet light exposure, and more. So it's safe to say that if an installer sells a certain solar panel product, it's gone through these tests and can–for the most part–withstand whatever typical weather patterns throw their way. That said, panels that experience more extreme weather conditions will often degrade at an accelerated rate.

Solar panel defects

Lastly, solar panel defects–like microcracks and hot spots–can cause panels to degrade more quickly than expected. We have a whole separate article about some of the most common types of solar panel defects if you want to read more about that!

Sure, solar panel degradation is important, but it's definitely not the most important factor to look at as you compare your solar panel options! Also, keep in mind:

• Efficiency: a solar panel's efficiency rating indicates a panel's ability to convert sunlight into usable electricity. A panel with a higher efficiency rating will generate more electricity than a panel with lower efficiency, given the same amount of sunlight shining for the same duration of time.

• Warranty: solar panel warranties vary by manufacturer and product. Remember to review a solar panel manufacturer's warranty offering before installing their product on your roof–and this article has more information about what to look for in a solar panel warranty!

• Aesthetics: we think solar panels look good on any roof...but honestly, some panels are just prettier than others. The appearance of your solar panels might be particularly important to you if you install them on your street-facing roof.

If you're interested in solar panels with some of the lowest degradation rates (or at least warrantied degradation rates) in the industry, keep an eye out for products from the manufacturers below:

• SunPower: 2 percent in year 1, 0.25 percent  in years 2-25

• REC: 2 percent in year 1, 0.25 percent in years 2-25

• Panasonic: 3 percent in year 1, 0.26 percent in years 2-25

• LG: 2 percent in year 1, 0.33 percent in years 2-25

Community solar is a great way to save money compared to rooftop solar. By joining a solar farm project in your area, you can actually save 15 percent on your electricity bill by receiving credits. With community solar, most subscriptions involve no upfront cost, guaranteed savings, and allow you to cancel anytime without any penalty fees. Visit our marketplace to find a participating solar farm near you.

The best way to find the perfect solar panel for you? Compare multiple quotes from solar installers! Using the EnergySage Solar Marketplace, you can find local contractors near you and make easy side-by-side comparisons of all your solar options, including equipment. By shopping around first, you can find the right option at the right price. If you have a preference for one type of solar panel over another, simply note it in your account when you sign up so installers can provide quotes with that equipment.