Quick definition
Every solar panel loses a small amount of output capacity each year it's in service, a natural consequence of long-term sun and weather exposure on the materials inside the panel. Degradation rate is the annual percentage of that decline, and manufacturers publish it as part of a panel's performance warranty.
It's a slow, predictable process, not a sign of failure or damage.
At a glance: a panel rated for 0.5% annual degradation would still be producing roughly 87 to 88% of its original output after 25 years.
Why it matters
Degradation rate directly shapes how a system's production estimate looks over its full lifetime, not just in year one. A production estimate that only accounts for a panel's brand-new output would overstate what the system actually produces 10, 15, or 20 years down the road, which matters a lot for accurately projecting long-term savings and payback period.
Degradation rate is also one of the clearest ways to compare panel quality across brands. A panel with a lower, tighter degradation rate holds onto more of its output over decades, which can translate into meaningfully more total lifetime energy production compared to a panel with a higher rate, even if both started with identical day-one wattage ratings, a long-term pattern NREL's own photovoltaic lifetime research tracks across real field-aged modules.
It's worth being clear about what degradation rate doesn't mean. It doesn't mean a panel suddenly stops working at the end of its warranty period, and it doesn't mean identical panels from the same batch will degrade at exactly the same pace. Real-world factors like installation quality, climate, and specific manufacturing variation all introduce some spread around the published rate. For the numbers behind Degradation rate, the real world vs nameplate output gap calculator in our Performance & Output section walks through the calculation step by step.
Where you'll see this
The panel degradation calculator projects a specific panel's output at any point in its lifespan based on its published degradation rate.
For a longer view, the 25 year degradation curve tool charts expected output across a panel's full warranty period. To see what that gradual decline actually costs in real savings over time, the savings loss from panel degradation tool translates the same curve into dollar terms.
This term comes up in every panel spec sheet, in production warranty documentation, and any time a solar quote's long-term savings projection needs to account for gradually declining output. The Department of Energy's homeowner guide explains what to look for in panel warranties, including the output guarantees that cover degradation.
Related terms
Frequently asked
Most modern panels degrade around 0.3 to 0.5% per year after an initial slightly larger first-year drop, commonly listed as roughly 2% in year one. Premium panels sometimes advertise even lower long-term rates.
This is a well-documented pattern called light-induced degradation, where a panel's output stabilizes slightly lower shortly after first exposure to sunlight, then settles into its normal, slower annual decline for the rest of its life.
No. A 25-year warranty period is typically the point where a manufacturer guarantees a minimum output level, often around 80 to 85% of original rated capacity, not the point where the panel stops producing power entirely. Panels usually keep generating electricity well past their warranty period, just at reduced output.
Some variation is normal even within the same production batch, though reputable manufacturers keep this variation tight. Real-world degradation can also be influenced by installation quality, local climate, and how well a system is maintained over its life.