Solar Panel efficiency, is it that important?

Tuesday, June 1, 2021

What is solar panel efficiency?

So how do you, in this day & age, determine the quality of a solar panel? Is it the output, the overall efficiency, it's longevity or a combination of all the above?

In this presentation we will be looking at solar panel efficiency and what it actually means, so let's get stuck into it.

The efficiency of a solar panel is the measure of the amount of solar energy which falls on a panel surface converted into electricity. Over the last few years average panel conversion efficiency has increased from 15% to 20% and this has resulted in the power output of a standard size panel to increase from 250W up to 340W.

How is solar panel efficiency determined?

Basically there are two main factors: the cell efficiency, based on the design and type of silicon used, how the cells are configured, connected and the physical size of the actual panel itself.

The actual cell efficiency is determined by cell structure and the base silicon material utilised and is calculated by what is known as the fill factor (FF), product of Voltage and Current.

Some examples of panel efficiency

Table 1

How is panel efficiency measured?

Total Panel efficiency is measured under standard test conditions (STC) which are based on a cell temperature of 25°C, solar irradiance of 1000W/m2  and an air mass of 1.5. The efficiency (%) of a panel is calculated by the maximum power rating (W) at STC, divided by the total panel area in metres.

How important is it to have the most efficient panel?

Panel efficiency is really important if you have limited roof or ground area for the designed array, installation labour cost reductions outweigh the lower cost/watt of a less efficient panel and installation material costs reductions outweigh the lower cost of a less efficient panel. All factors need to be considered.

What is also important

There are various measures to determine the best panel for you that include: the total production of the panel over its designed lifetime which relates to the initial output degradation of the panel after the first year and the total degradation of the panel over its designed lifetime.

Some output examples

In Table 2 below, we have a selection of solar panels at different wattages and different overall systems sizes. In the sixth column we show degradation percentages for the first year ranging from 2 to 3% and after that the degradation from year 2 - 25  varies between 0.25% per year to 0.55% in the worst case scenario. 

The last column shows the total output per kW installed over 25 years in MWh. As the system sizes are different due to individual panel wattages varying from 340 watts to 450 watts the output per kW installed is necessary.

Table 2

Table 3 below shows various system sizes from 50 kW up to 1000 kW with an assumed levelised cost of electricity at $0.30/kWh

Table 3

Very important questions to ask: 

We have established that solar panel efficiency plays a role in the selection process as does the rate of output degradation. 

But there are other questions we need to ask such as:  

  • Do I have enough roof/ground area for panels with average efficiency
  • What is the cost per watt for the entire installation of the panel in question?
  • What is the total production of the system after 25 years?
  • Will my business be around in 25 years?
  • Is the panel manufacturer a reputable one?

Some examples...

Option 1: Average Efficiency Panels

As a business owner you have been quoted $1.40/watt + GST for a 500 kW system using tier 1 panels. The panel’s efficiency is good at 17% but is not the best on the market. The degradation in output after the first year is 2% and after that 0.7%/year up until 25 years. There is plenty of roof area for the panels in question.

Option 2: High Efficiency Panels

The second option offers a system price of $1.50/watt + GST for 500 kW system using, again tier 1 panels and the panel efficiency is excellent at 21.7% Degradation in output after the first year is 2% and after that 0.25%/year up until 25 years.

Which option is the better value...??

The results...

Table 4

The results, analysed

The most obvious difference is that the upfront cost of Option 2 is $ 50,000 more than Option 1, but the savings are $121,646 more than Option 1.

Option 2 sounds better...


We need to factor in the time value of money to make a more accurate assessment:

For example if the business instead invests the $50,000 difference @ 5.50% compounded monthly for 25 years this adds up to $147,133.58... which exceeds the difference between the two options by $25,487.58

At 4.95% would get $121,911.13 in interest which exceeds the difference between the two options by $265

The circumstances of two individual businesses may lead one to Option 1, and the other to Option 2 - when it comes to deciding on these kinds of investments, individual circumstances are important. One thing is for sure, though, you must bear in mind that the efficiency of your solar panels can significantly impact the 25-year yield of your system, so you must make sure this is factored into your analysis and decision making...


Solar panels have become more efficient in the last few years (now commonly > 20%), and if limited space is a factor, panel efficiency is an extremely important consideration when determining the best panel for your application.

Many things must be looked at in regards to choosing the right panel and at the end of the day it is up to the business involved to do their due diligence in regards to a cost benefit analysis concerning the make up of your solar system itself, or even looking at other options altogether.


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