Resources / Solar panel degradation

Solar Panel Degradation Rate: What to Expect Over 25 Years

Solar panels do not last at 100 percent forever. They lose a small fraction of output each year. That slow decline is built into every credible payback and LCOE calculation — and the difference between 0.3 percent and 0.8 percent annual loss is larger than it looks over 25 years.

What degradation is

Degradation is the annual reduction in a panel's power output. A panel rated 400 W that degrades 0.5 percent per year produces about 398 W after year one and progressively less thereafter. It is expressed as a percentage per year and applies to the whole project life in a cashflow model.

Typical rates

The performance warranty usually guarantees 80 to 87 percent output at year 25, so a well-specified system is still producing the large majority of its original power at end of life.

Why small differences compound

Degradation is applied year after year, so the gap between rates widens over time. Over 25 years, 0.3 percent annual loss leaves roughly 93 percent of original output, while 0.8 percent leaves about 82 percent — an 11-point gap. Because late-year generation still earns savings or export value, that gap translates directly into lower lifetime energy, lower NPV, and a slightly longer payback.

What accelerates degradation

• Heat — high operating temperatures stress cells and encapsulant.
• Potential-induced degradation (PID) — voltage stress in some system configurations.
• Microcracks — from handling, thermal cycling, or hail, growing over time.
• UV and moisture ingress — poor encapsulation lets the elements in.
• Cheap materials — lower-tier backsheets and encapsulants age faster.

Quality manufacturing, certified testing, and a solid warranty reduce these risks more than any marketing claim.

How degradation affects your model

In the calculator, degradation reduces each year's energy, which flows into revenue, payback, IRR, and LCOE. A slower-degrading panel keeps more late-life output, gently lifting NPV and IRR. The effect is modest year to year but real across a 25-year project. It is also why a premium panel with lower degradation can justify a higher cost per watt in a long holding period.

What the warranty covers

There are usually two warranties: a product warranty (defects, often 10 to 15 years) and a performance warranty (guaranteed output, often 25 years). The performance warranty is what protects against excessive degradation — if output falls below the guaranteed curve, the manufacturer owes a remedy. Check the exact guaranteed percentage and the claim process, because a warranty you cannot enforce is worthless.

Degradation rates are typical ranges, not guarantees, and vary by manufacturer, batch, and operating conditions. Confirm the exact annual rate and year-25 guarantee on the datasheet, and model your real assumptions in the calculator rather than relying on a single headline number.