Degradation rate is the rate at which solar panels lose efficiency over time. For instance, if a panel has a degradation rate of 1% per year, it will be 10% less efficient after 10 years of operation.
According to the National Renewable Energy Laboratory (NREL), the average solar panel degradation rate is around 0.8 percent
. Of course, this metric largely depends on the materials and technologies used by the manufacturer and varies from 1% to 0.5%. Some premium manufacturers like Panasonic, SunPower or Q CELLS, offer degradation rates as low as 0.3%. Solar panel degradation rates are constantly improving as solar panel technology gets better over the years.
There is a very small catch to linear warranties – they are only linear starting from year two. During the first year of operation the performance decrease may be as high as 3%, and even the best manufacturers set the target at about 2%. Most of the decrease happens immediately after the panels are put in operation. The cause is silicon impurities. The microscopic fractions of oxygen actively bond with boron during the first few hours of sunlight exposure, causing most of the year one efficiency drop.
To make the idea of degradation rate crystal clear, let’s take a 300W solar panel as an example. Given 0.8% annual degradation rate and a 3% first year drop, in year two such a panel will operate at 97% of its original output, which is 291W. In year three its efficiency will be 96.2%, meaning 288.6W output. So, to determine the projected output of your solar panels after a certain number of years, you can multiply the degradation rate by the number of years after year one and subtract that number, together with the year one drop, from 100%.
Actually, solar panel degradation is what performance warranty is about. But, as you might notice, performance warranty never guarantees 100% efficiency. Why is it so? Solar energy does have no thermodynamic limitations, since it is converted directly into electrical energy avoiding a step involving heat. However, there are still some issues limiting solar panel efficiency, such as indirect band gaps, resistive losses, etc.