Data approachEIA rates · NREL sun hours · 2026 federal policy · methodology
The median solar panel degradation rate is about 0.5% per year, according to the National Renewable Energy Laboratory (NREL). At that rate, a system that produces 10,000 kWh in year 1 produces about 8,870 kWh in year 25, which is 88.7% of its starting output. Over the full 25 years, total production is about 6% lower than an estimate that ignores degradation.
That makes degradation a small but compounding cost. A panel that loses 0.3% a year instead of 0.8% keeps meaningfully more output over the life of the system, and the gap grows every year. This guide explains what causes degradation, what the real-world data say, how to read a performance warranty, and how to put the numbers into your own comparison.
🔬 Causes
What Causes Solar Panels to Degrade Over Time?
Solar panels degrade because of the physical and chemical stress they endure outdoors for decades. The main causes are:
UV exposure. Ultraviolet light slowly breaks down the polymer encapsulant around the cells. Over time this can lead to discoloration or delamination, and moisture can then reach the cells.
Thermal cycling. Panels heat up in the day and cool at night. Repeated expansion and contraction can create micro-cracks in silicon cells that reduce current flow. Climates with large daily temperature swings, such as Arizona or Colorado, place more of this stress on panels.
Moisture and corrosion. Humidity that penetrates the module can corrode metal contacts and connections.
Potential-induced degradation (PID). Voltage differences between the cells and the grounded frame can cause leakage currents that cut output. In severe cases the loss can be large. Modern module designs and grounding practices have made PID far less common.
Light-induced degradation (LID). Some cell types lose a small share of output during their first hours or months of sunlight, then stabilize. This is why warranties often treat year 1 separately.
Soiling is different. Dust, pollen, and bird droppings reduce output, but the loss is temporary and comes back after rain or cleaning. It is not permanent degradation, though it can lower the kilowatt-hours you actually collect, especially in dry, dusty areas.
Cell design and materials matter. Newer designs use improved encapsulants and cell structures, and manufacturers often publish lower warranted annual degradation for them than for older module types. Check the datasheet for each model rather than assuming a technology name guarantees a specific rate.
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📊 Degradation Rates
How Much Do Solar Panels Degrade Per Year? Average Rates
The most-cited benchmark is NREL’s analytical review by Dirk Jordan and Sarah Kurtz, published in Progress in Photovoltaics in 2013. It compiled nearly 2,000 degradation rates from field studies over four decades. The median was 0.5% per year and the mean was 0.8% per year. The mean is higher because a long tail of lower-reliability products pulls it up. About 80% of the reported rates were below 1% per year.
Two cautions apply. First, much of the data covers older equipment, so the median is a benchmark and not a promise for any specific new panel. Second, your own result depends on the module model, installation quality, and site conditions. Use the warranted rate in the datasheet as your planning number and the NREL median as a sanity check.
The chart below models how output changes over 25 years at three annual rates. It uses the formula output in year n = (1 − rate)^(n − 1), with year 1 set to 100%.
Data visualization
Modeled solar panel output over 25 years. Year 25 output is 93.0% of year 1 at 0.3% per year, 88.7% at 0.5%, and 82.5% at 0.8%. Source: NREL (Jordan and Kurtz, 2013) median and mean rates; 0.3% is an illustrative scenario. Modeled, not measured.
Chart summary: Under the model, a system degrading at 0.3% per year retains 93.0% of its year-1 output in year 25, a 0.5% system retains 88.7%, and a 0.8% system retains 82.5%. The curves start together and spread apart every year, so the difference is small in the first five years and large by year 25. The table gives the same values at key years.
Year
0.3%/yr
0.5%/yr (NREL median)
0.8%/yr (NREL mean)
1
100.0%
100.0%
100.0%
5
98.8%
98.0%
96.8%
10
97.3%
95.6%
93.0%
15
95.9%
93.2%
89.4%
20
94.5%
90.9%
85.8%
25
93.0%
88.7%
82.5%
Output as a percentage of year-1 output, modeled with annual compounding.
The next chart converts those rates into 25-year energy for the 14,000 kWh-per-year example system used later in this guide.
Data visualization
25-year output of a 14,000 kWh-per-year system. Output is about 350,000 kWh with no degradation, 337,700 kWh at 0.3%, 329,800 kWh at 0.5%, and 318,400 kWh at 0.8%. Source: NREL (Jordan and Kurtz, 2013) rates applied with the compounding formula; illustrative system size.
Chart summary: A 0.5% system produces about 20,200 kWh less than the no-loss case over 25 years, which is 5.8%. A 0.8% system loses about 31,600 kWh, or 9.0%. The gap between 0.3% and 0.8% is roughly 19,300 kWh.
Location matters too. Heat, humidity, UV, and large temperature swings can all affect aging, but NREL’s data show low median rates across climates, and individual systems vary widely. Treat climate as a reason to prefer a strong warranty, not as a reason to assume a specific penalty.
📈 Payback Period
How Does Degradation Affect Lifetime Solar Savings and Payback?
Degradation matters more for lifetime value than for payback.
Lifetime output. Take a 10 kW system that produces 14,000 kWh in year 1 (an illustrative figure; yours depends on location, roof, and shading). Using the compounding model:
With no degradation, 25-year output would be 350,000 kWh.
At 0.5% per year, it is about 329,800 kWh, which is 94.2% of the no-loss total.
At 0.3% per year, it is about 337,700 kWh.
The 0.3% system produces about 7,900 kWh more than the 0.5% system over 25 years. At an illustrative $0.16 per kWh, that is about $1,260. Your own value depends on your local electricity rate, which you can find in the U.S. Energy Information Administration’s state data.
Payback. If a quote shows a 7-year payback based on year-1 production, accounting for 0.5% annual degradation moves it to roughly 7.1 years, or about one month later. Degradation alone does not change payback much. Electricity-rate changes, financing costs, and net metering rules usually matter more. Run your own numbers in a solar payback calculator and see our guide to solar payback period by state.
Incentives. The 30% federal Residential Clean Energy Credit (Section 25D) ended for systems completed after December 31, 2025, under the One Big Beautiful Bill Act. Purchases in 2026 no longer qualify for it, so savings estimates that assume it are out of date. Leased or power-purchase-agreement systems owned by third parties may still be eligible for a different business credit, and state and utility incentives vary. Check current rules in the state incentives directory and confirm details with a tax professional.
For a fuller return analysis that includes rate escalation, use the solar ROI calculator, and read our explainer on solar panel IRR. Ask any installer to show a production estimate that applies the warranted degradation rate across all 25 years.
📄 Warranty
How to Read a Solar Panel Performance Warranty
Solar panels usually carry two warranties, and they cover different things.
Product (materials) warranty: covers manufacturing defects. Its length varies by manufacturer.
Performance (power output) warranty: guarantees minimum output over time, typically 25 years or more. This is the one that addresses degradation.
When you read a performance warranty, check four things:
Linear or endpoint-only. A linear warranty states the guaranteed output for every year, for example a set first-year level and then a fixed maximum decline per year. An endpoint-only guarantee protects you at the final year but says little about the years in between. Confirm the schedule in the datasheet.
First-year drop. Many warranties allow a larger decline in year 1, mainly from light-induced degradation, and then a smaller annual rate. A headline annual rate does not show this, so read the year-1 figure.
Year-25 floor. The guaranteed output at year 25 is a simple number for comparing models. Premium warranties generally promise more than standard ones, but terms vary by model, so read each datasheet.
Who backs it. A warranty is only as good as the company behind it. Ask whether the parent manufacturer, a subsidiary, or a third-party insurer stands behind claims, and whether the warranty transfers if you sell your home. Some manufacturers have exited the U.S. market, which makes claims hard to pursue.
Before you sign, enter the exact warranted rate into a solar savings calculator to model the 25-year output.
🧮 Compare Panels
How to Compare Solar Panels Using Degradation Rate
Use the warranted degradation rate for each panel, not the average rate or a marketing claim.
Get year-1 production. Ask the installer for estimated year-1 kWh for your roof.
Apply a lifetime factor. Multiply year-1 kWh by 25 and then by the 25-year average retention for the rate. Using the compounding model, those factors are about 0.965 for 0.3%, 0.942 for 0.5%, and 0.910 for 0.8%. If a warranty allows a larger year-1 drop, model that separately.
Price the difference. Subtract the lifetime kWh of the lower-quality option from the better option and multiply by your electricity rate.
Compare to the price premium. If the dollar value of the extra kWh exceeds the extra upfront cost, the better panel pays for itself on output alone. Higher electricity rates and longer ownership improve the case.
Example: with 14,000 kWh in year 1 and a $0.20 per kWh rate, a 0.3% panel produces about 7,900 kWh more than a 0.5% panel over 25 years, which is worth about $1,580. A premium of $1,000 is justified on output; a premium of $3,000 is not.
Also compare efficiency, temperature coefficient, installer quality, and warranty backing. Degradation is one input, not the whole decision.
Sources and Methodology
Jordan, D. C., and Kurtz, S. R. “Photovoltaic Degradation Rates: An Analytical Review.” Progress in Photovoltaics 21(1), 12–29 (2013). NREL/OSTI record.
Retention values are modeled with annual compounding, where output in year n equals (1 − rate)^(n − 1) and year 1 equals 100%. Dollar examples use illustrative production and rate assumptions.
Federal credit status reflects the One Big Beautiful Bill Act (Public Law 119-21) as of October 2026. This guide is educational and is not tax or financial advice.
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The median solar panel degradation rate is about 0.5% per year. NREL's review of nearly 2,000 published field measurements (Jordan and Kurtz, 2013) found a 0.5% median and a 0.8% mean, because a minority of weaker products pull the average up. About 80% of the reported rates were below 1% per year. At 0.5% per year, output in year 25 is roughly 88.7% of year-1 output.
At 0.5% per year, panels produce about 95.6% of year-1 output in year 10, 90.9% in year 20, and 88.7% in year 25. At 0.3% per year the figures are 97.3%, 94.5%, and 93.0%. At 0.8% per year they are 93.0%, 85.8%, and 82.5%. These are modeled compounding values, and real systems vary with weather, shading, and equipment.
A product warranty covers manufacturing defects, and its length varies by manufacturer. A performance warranty guarantees minimum power output over time, usually over 25 years or more, and it is the document that addresses degradation. Look for a linear schedule that states the allowed output at every year, plus the permitted first-year drop and the guaranteed output at the final year.
Heat can speed up some aging mechanisms, such as encapsulant breakdown and thermal-cycling stress, but the size of the effect depends on the module design and the site. NREL's literature review found low median rates across climates, though individual systems vary widely. Do not confuse this with the temperature coefficient on a spec sheet, which describes temporary output loss on hot days rather than permanent degradation.
It can be, and you can test it with simple math. For a system producing 14,000 kWh in year 1, 0.3% annual degradation yields about 7,900 more kWh over 25 years than 0.5% does. At an illustrative $0.16 per kWh, that is roughly $1,260. If the price premium is lower than the gain at your own electricity rate, the upgrade pays off.
$150/month electric bill by state
System size and payback vary by electricity rate and sun hours — see your state.
18.19¢/kWh — US average residential price. Source: EIA Electric Power Monthly, Table 5.6.B (year-to-date through July 2026), residential average retail price (July 2026) (EIA)
Solar production
4.5 peak sun hours/day × 0.82 system derate. Approximate state-average daily solar resource (peak sun hours) based on NREL solar resource data (NSRDB); not location-specific — use NREL PVWatts for an address-level estimate. (NREL PVWatts)
Installed price
$3.00 per watt before incentives. Blended 2026 US residential installed price used by this site; EnergySage marketplace reported about $2.60/W (mid-2026); full-market medians are higher.
Federal tax credit
$0 for homeowner-owned systems installed in 2026 — the 30% §25D credit ended Dec 31, 2025 (IRS)
Net metering
National blend — solar assumed to offset 75% of the bill (87% in full-retail net-metering states, 55–70% elsewhere).
Estimates only — not tax, legal or financial advice. Get at least three installer quotes and confirm incentives with your utility and a tax professional.