Solar Panel Degradation: How Much Output Falls Over 25 Years and What It Means for Your Returns
What is solar panel degradation and why does it happen?
Solar panel degradation is the gradual reduction in electrical output over the life of the panel. It is a natural, unavoidable process. Solar cells are exposed to UV radiation, heat, moisture, and thermal cycling every day for decades. These conditions cause microscopic changes in the silicon structure that progressively reduce efficiency.
Degradation is measured as a percentage loss in output per year. A panel with 0.6% annual degradation that produces 100 units in Year 1 will produce 99.4 units in Year 2, 98.8 in Year 3, and approximately 85 units in Year 25. Understanding this helps you set realistic long-term savings expectations and factor it correctly into ROI calculations.
Degradation rates by panel technology
| Panel Technology | Typical Annual Degradation | Year 10 Output | Year 25 Output | Performance Warranty |
|---|---|---|---|---|
| Polycrystalline (older) | 0.7-0.8% per year | 93-94% of rated | 80-82% of rated | 80% at 25 years |
| Mono PERC (current standard) | 0.5-0.6% per year | 94-95% of rated | 85-87% of rated | 83-85% at 25 years |
| TOPCon (premium) | 0.4-0.5% per year | 96% of rated | 88-90% of rated | 87-90% at 25 years |
| Bifacial Mono PERC | 0.5-0.6% per year | 94-95% of rated | 85-87% of rated | 83-85% at 25 years |
How degradation affects your actual savings: a 25-year view
For a 3 kW Mono PERC system in Jaipur generating 5,000 units in Year 1, here is how output and savings change over 25 years at 0.6% annual degradation and 5% annual tariff escalation:
| Year | Output (units) | Tariff (Rs/unit) | Annual Savings |
|---|---|---|---|
| Year 1 | 5,000 | Rs 6.50 | Rs 32,500 |
| Year 5 | 4,882 | Rs 7.89 | Rs 38,519 |
| Year 10 | 4,741 | Rs 10.08 | Rs 47,789 |
| Year 15 | 4,603 | Rs 12.86 | Rs 59,195 |
| Year 20 | 4,468 | Rs 16.42 | Rs 73,364 |
| Year 25 | 4,337 | Rs 20.95 | Rs 90,866 |
| 25-year total | Rs 12.8 lakh approx |
Even with degradation reducing output by 13 percent over 25 years, rising electricity tariffs more than compensate. Annual savings in Year 25 are nearly 3x those in Year 1 in nominal terms. This is why the long-term financial case for solar remains strong even accounting for degradation.
What to check in your panel performance warranty
Linear performance warranty
Better than stepped warranty. Guarantees output at each year of the 25-year period, not just at the end.
Guaranteed output at Year 25
Standard is 80%. Premium panels guarantee 83-90%. Higher is better for long-term returns.
Manufacturer financial strength
A 25-year warranty is only useful if the company still exists. Choose established manufacturers.
Temperature coefficient
Lower is better for India’s hot climate. TOPCon panels typically have better temp coefficients.
PID resistance
Potential Induced Degradation is a real problem in hot, humid climates. Ask about PID resistance testing.
Local warranty service
Check whether the manufacturer has a service centre or partner in your state for warranty claims.