Panels don't stop working after year one — but they do produce a little less every year. Here's what that actually looks like over a system's lifetime.
Efficiency and degradation are two separate things
Efficiency describes how much of the sunlight hitting a panel gets converted to electricity — most residential panels today fall between 18-23%. Degradation describes how that efficiency (and total output) slowly declines year over year from UV exposure, thermal cycling, and micro-cracking. A high-efficiency panel and a low-degradation panel aren't necessarily the same thing — check both separately with the efficiency calculator and the degradation calculator.
What warranties actually promise
Most tier-1 panel manufacturers warranty output at roughly 85-88% of original at year 25, implying an average degradation rate of about 0.4-0.6% per year. Premium panels with better cell technology and encapsulation sometimes push that closer to 0.3%/year. This is a gradual, predictable decline — not a cliff — so a panel producing 100% in year one is typically still producing somewhere around 90% a decade later.
Why this matters for payback and ROI math
Assuming flat year-one output for a full 25-year projection overstates lifetime production, which can make a payback calculation look slightly better than reality. It's usually a small effect in the first several years, but compounds meaningfully by year 20-25 — factor it in explicitly with the degradation calculator rather than ignoring it, especially when comparing a premium low-degradation panel against a budget option with a higher published rate.
Seasonal swings are a separate factor, and often bigger
Degradation happens slowly over years; seasonal production swings happen every year, and the effect is often much larger — a system at higher latitude can see summer production 2-3× its winter output due to day length and sun angle, not degradation. See the seasonal output calculator if you're trying to understand why your production varies month to month, separate from any long-term decline.
Frequently asked questions
Does a panel become useless once it hits its warranty year?
No — warranties specify a minimum guaranteed output level, not an end-of-life date; most panels continue producing well past their warranty period, just at a somewhat reduced output level.
Is a lower degradation rate always worth paying more for?
It depends on how long you plan to own the system — the compounding benefit of lower degradation is small in the first several years and grows more meaningful by year 15-25, so it matters most for buyers planning very long-term ownership.