Degradation Rate

The degradation rate is the percentage at which a solar module’s power output declines each year due to natural aging, environmental exposure, material fatigue, and system stresses. All solar panels lose performance over time, but high-quality modules degrade more slowly and maintain better long-term energy yield.

Degradation rate is a critical parameter in solar forecasting, financial modeling, proposal accuracy, and long-term project ROI. It directly impacts performance projections, PPA pricing, warranty expectations, and system lifetime energy output. Solar designers, EPC teams, and developers rely on degradation rate assumptions when modeling annual production using tools such as Solar Designing and financial engines like Solar ROI Calculator.

Key Takeaways

Degradation rate is the annual decline in solar panel output.
Most modern panels degrade 0.2%–0.6% per year, depending on technology.
Accurate modeling of degradation is essential for financial projections, system design, and warranties.
Climate, material quality, and installation workmanship all influence degradation.
Tools like SurgePV help incorporate degradation into design and forecasting.

What Is Degradation Rate?

The degradation rate expresses how much a solar panel’s power output declines each year, typically in % per year.

Example:

A module with a 0.5% annual degradation rate will lose roughly 0.5% of its output every year after installation.

It is used in energy modeling, warranties, bankability assessments, and system lifetime estimates. Most solar manufacturers provide a 25–30 year performance warranty tied directly to degradation rates.

Key related terms include Module Degradation, Annual Output, and Performance Ratio.

How Degradation Rate Works

Solar degradation is not random—it follows a predictable pattern influenced by cell type, encapsulation materials, climate, and operating conditions.

1. Year 1 (Light-Induced Degradation)

Most modules experience an initial drop (0.5–3%) caused by stabilization of the silicon structure.

2. Annual Linear Degradation

After the first year, degradation follows a near-linear path.

3. Material Fatigue Over Time

Heat cycling, UV exposure, humidity, electrical load, and mechanical stress cause performance decline.

4. Energy Modeling Incorporates Degradation

PV simulation tools model degradation year-by-year to calculate lifetime energy output.

5. Warranties Are Based on Degradation

Panels guarantee a minimum percentage of power remaining after 25–30 years (e.g., 80–92%).

Types / Variants of Degradation

1. Light-Induced Degradation (LID)

Occurs during the first hours/days of sunlight exposure. Most common in monocrystalline PERC panels.

2. Light and Elevated Temperature-Induced Degradation (LeTID)

Affects PERC cells under high heat and humidity.

3. Potential-Induced Degradation (PID)

Caused by voltage stress between cells and the frame, reducing output significantly.

4. Thermal Degradation

Long-term effect of temperature swings and heat stress.

5. Mechanical Degradation

Cracked cells, delamination, hail impacts, or flexing reduce power output.

6. UV Degradation

Degradation of backsheet or encapsulant reduces efficiency.

How It’s Measured

1. Annual Degradation Percentage (%/year)

The most common measurement, based on lab tests or field data.

2. Performance Warranty Threshold

Manufacturers specify guaranteed output after 25 or 30 years.

Example:

92% after 25 years → ~0.32%/year linear degradation.

3. Field Data Comparison

Real-world monitoring systems track output decline over time.

4. Electroluminescence (EL) Imaging

Used to detect microcracks and PID-related degradation.

5. Energy Modeling Tools

Software incorporates degradation curves in lifetime simulations.

Typical Values / Ranges

Real-world degradation varies by climate:

Hot & humid climates: higher (0.6%–1.0%)
Moderate climates: lower (0.2%–0.5%)
High-altitude cold locations: increased mechanical stress but slower heat-related aging

Practical Guidance for Solar Designers & Installers

1. Use realistic degradation assumptions

Most residential/commercial projects assume 0.4–0.6%, depending on panel type.

2. Apply degradation in financial models

Tools like Solar ROI Calculator depend on accurate long-term yield modeling.

3. Review manufacturer warranty documents

Ensure degradation aligns with guaranteed performance.

4. Reduce PID risk

Proper grounding and high-quality inverters help minimize PID-related losses.

5. Use shading analysis to reduce accelerated degradation

Modules exposed to hotspots degrade faster — see Shading Analysis.

6. Include degradation in proposal workflows

Accurate annual production curves improve proposal transparency.

7. Monitor systems for abnormal degradation

If output drops faster than modeled, conduct EL imaging or inspection.

Real-World Examples

1. Residential Solar System

A homeowner installs 7 kW of monocrystalline panels with a 0.5% degradation rate.

After 25 years, the system retains ~88% of its original output.

2. Commercial Flat-Roof Project

A 300 kW system using TOPCon panels degrades at 0.3% per year, improving long-term ROI and reducing LCOE.

3. Utility-Scale Solar Farm

A 50 MW project in a hot, humid climate models 0.8% degradation due to higher thermal stress—affecting PPA pricing and revenue forecasting.