Solar Panel Degradation: 0.5% vs 0.8% Over 25 Years

0.5% vs 0.8%: what changes

The table below shows the 25-year gain and the payback period for five states. The 25-year gain is total savings minus the system cost, over 25 years.

State	Rate	25-yr gain	Payback	Year-25 output
Texas	0.5%/yr	$23624	14.3 years	88.7%
Texas	0.8%/yr	$21683	14.6 years	82.5%
California	0.5%/yr	$79631	7.4 years	88.7%
California	0.8%/yr	$77399	7.4 years	82.5%
Florida	0.5%/yr	$24658	14.1 years	88.7%
Florida	0.8%/yr	$22726	14.3 years	82.5%
Arizona	0.5%/yr	$26978	13.9 years	88.7%
Arizona	0.8%/yr	$26708	13.9 years	82.5%
New York	0.5%/yr	$55823	9 years	88.7%
New York	0.8%/yr	$52649	9.2 years	82.5%

These are model results, not quotes. Your numbers will differ.

Why the effect looks small

Payback is the point where savings equal what you paid. That usually happens in the first half of the system's life. Degradation compounds slowly, so the early years are barely affected. Most of the lost output shows up late, after you have already earned your money back.

California shows this well. Payback is 7.4 years at both rates. The difference only appears in the later years, when the 25-year gain is lower at 0.8%.

Arizona is also close, with $26978 versus $26708. In the example home, rising electricity prices partly offset the lost output. A kWh your panels do make is worth more later than it is today. If you want to test that idea, read solar payback if electricity prices rise.

Where degradation matters more

The gap between the two rates is biggest in Texas, Florida, and New York in our model. Texas drops from $23624 to $21683 and adds 0.3 years of payback. These are places where the payback is longer, or where the savings depend more on late-year output.

Degradation also matters more when:

• Your system cost is high, so payback already sits late in the life of the system.
• Your electricity price is low, so each lost kWh is worth less and the margin is thin.
• Your system is oversized and you rely on export credits. See oversized solar systems and annual true-up.

Costs vary a lot. Berkeley Lab reports a median installed price of $4.0 per watt for host-owned residential systems installed in 2024, with an 80% range of $3.0 to $5.2 per watt before incentives. Cash-purchased systems had a median of $3.5 per watt and loan-financed systems $4.7 per watt. See solar cost per watt and payback for how this moves the result.

How to use this when you get a quote

1. Ask for the panel's yearly degradation rate and the warranted output at year 25.
2. Put that rate into the solar calculator and compare it with a slower rate.
3. Check your state's local price on the electricity prices page.
4. Look at your state page under solar panels by state for local context.
5. Confirm how your utility credits exported power. Net metering and incentive programs vary by state and utility. DSIRE keeps a database of current programs at programs.dsireusa.org.

Also note the federal 30% Residential Clean Energy Credit (Section 25D) is not available for property placed in service after December 31, 2025, according to the IRS. Our example uses no incentives, so you can see the result without them. Read more in is solar worth it without the tax credit.

What we did not model

Our model uses one steady degradation rate. Real panels may lose more in the first year and less afterward. It also ignores inverter replacement, which can be a real cost over 25 years. Shading, roof direction, and snow can change output too. Our method is explained on the methodology page.

Bottom line

A faster degradation rate lowers lifetime savings, but in our example it changes the answer only modestly. Payback moved by at most 0.3 years across the five states. Spend more of your attention on the price per watt, your local electricity rate, and how your utility credits solar exports. Then use the degradation rate in your warranty as one more input, not the deciding one.