Solar Panel Degradation and Your 25-Year Estimate

Overview

Every 25-year savings figure is a bet about how much less electricity the array will make in year 25 than in year 1. HelioCalc uses 0.5% per year, a common planning assumption for crystalline modules. That sounds negligible until you compound it: after 24 years, output is about 88.7% of new. On a system producing 9,000 kWh in year one, that is roughly 1,000 kWh less in year 25 — and it happens while your utility rate is assumed to be rising. The two curves run in opposite directions, which is why a year-by-year table is worth more than a headline lifetime number.

The compounding

Output in year y = year-one output × (1 − degradation)^(y−1). At 0.5% the factors are 0.995 in year 2, 0.951 in year 10, 0.905 in year 20 and 0.887 in year 25. At 0.7% — also typical in some warranties after the first year — year 25 is 0.845. On a 25-year cumulative basis that difference is a few percent of lifetime savings, which is comparable to the effect of choosing a slightly cheaper installer.

What a warranty actually says

A performance warranty typically guarantees a minimum percentage of nameplate output at year 25 (often 80–92% depending on manufacturer and tier), and a separate product warranty covers defects for 10–12 years. These are floors, not forecasts. A 25-year savings model should not assume the array fails at year 25 either — many systems keep producing — but it should not extend the analysis without an inverter-replacement assumption.

What the model leaves out

We do not model inverter replacement (commonly around year 12–15), soiling variance, module-level failures, snow cover, or a re-roof that requires removal and reinstall. We do model maintenance at $150 a year growing 2%, which is a placeholder rather than a quote. If you want a conservative case, raise degradation to 0.7% and raise maintenance; the sensitivity and year tables will show you the effect immediately.

Reading the year-by-year table

The table reports production, retail rate, bill savings, maintenance, net cash flow and cumulative position for each year. Watch the point where cumulative crosses zero — that is the interpolated payback — then watch the slope in later years. A steepening slope means escalation is dominating degradation; a flattening slope in a net-billing state usually means exports are being valued at a low fixed credit.

Key figures worth keeping

• 0.5% per year — HelioCalc's default degradation rate.
• 0.887 — the year-25 output factor at 0.5% annual degradation.
• 0.845 — the year-25 factor at 0.7% degradation.
• 80–92% — the typical range of 25-year performance warranty floors.
• 12–15 years — a common window for inverter replacement, which this model does not price.

How this shows up in a real estimate

Degradation and escalation pull in opposite directions, and the year-by-year table is where you can see which one is winning. In an average-rate state with 3% escalation, the rising retail rate usually dominates the falling output, so annual savings still grow. In a net-billing state where most surplus is valued at a low fixed export credit, the curve flattens. If you want a conservative case, raise degradation to 0.7%, raise maintenance, and lower escalation to 1% at the same time — then decide whether the project still makes sense on that worse set of assumptions.

Checklist before you decide

• Read the performance warranty curve, not just the year-25 number.
• Ask about the inverter warranty separately from the module warranty.
• Run the model at 0.5% and 0.7% degradation.
• Remember that a 25-year horizon is a modeling choice, not a system lifespan.
• Check whether the warranty transfers if you sell the house.