What is Solar Panel Efficiency and How Much Does it Matter?
A common consideration of those shopping for a solar energy system is the efficiency ratings of different panel options. Naturally, homeowners are interested in using the best components, and the efficiency rating of a panel is often the simplest way to quantify performance. But what exactly does the efficiency rating indicate, and how much does it actually matter when comparing panels?
What is Efficiency?
Solar panel efficiency refers to the amount of sunlight that a solar panel can convert into usable electricity. It's represented as a percentage and is calculated by dividing the electrical output of the solar panel by the total solar energy input from the sun. The more sunlight that can be converted into electricity, the higher the efficiency percentage. Today, most monocrystalline silicon solar panels have efficiency ratings of roughly 20%, meaning the panel is able to convert one-fifth of the sun’s energy into electricity. This may not sound like a high conversion rate, but the earliest silicon solar panels produced in the 1950s were only six percent efficient, so the progress has been substantial. Panel efficiencies will continue to improve - some lab tests have achieved efficiencies of over 40% using materials and manufacturing methods not currently scalable or economical - but the relevant comparison for consumers today is not between efficiency ratings of the past and future, but between competing efficiencies of contemporary panels. How much do panel efficiencies differ and how much should you care?
If the difference between panel efficiency in the 1950s (6%) and the 2050s (35%?) is substantial, the difference between present-day panels is relatively small. 95% of monocrystalline silicon solar panels installed today have efficiencies between 19.7% and 21.6%. This means at the upper end of performance, solar cells are converting about 22% of sunlight into electricity and at the lower end, cells are converting about 20%. So while differences exist, they are fairly marginal. Still, given the option, wouldn’t you want 2% more energy production? Of course, but using more efficient panels won’t necessarily increase your system’s production.
The most common misunderstanding about panel efficiency is the belief that a panel with higher efficiency will produce more energy than a panel with lower efficiency. Panels come in different wattages and dimensions. Two panels of the same wattage (e.g. 400w) will produce the same amount of energy, regardless of efficiency differences. With all other things equal, a 10 kW system of Panel A will produce the same as a 10 kW system of Panel B, despite their efficiency differences. Efficiency differences will impact the physical footprint of the system. A 400w panel with higher efficiency requires less space to produce the same amount of energy as a 400w panel of lower efficiency, so the space required to install a more efficient system is reduced. The value of higher efficiency is the capacity for more generation within a smaller footprint. That being said, how does this space differential practically play out when actually installing a solar array?
Case Study
With efficiency differences being narrow, the variation in dimensions between like-wattage panel types is often small. In application, higher efficiency may not actually allow you to install more wattage on your roof. For example, take Panel A and Panel B, both are actual panels being used today.
Panel A, 400w. Efficiency: 20.4%. Dimensions: 74” x 41.1”
Panel B, 400w. Efficiency: 21.6%. Dimensions: 71.7” x 40”
Both panels will produce the same amount of energy, but Panel A, with 1.2% less efficiency, is 2.3” longer and 1.1” wider. Let’s suppose we are installing a solar array on the roof plane pictured below, which is 41’ wide with a goal of maximum production.
Panel A System
22 x 400 watt panels can be installed, or 8.8 kW
Panel B System
22 x 400 watt panels, 8.8 kW
Though the Panel B array is 12” narrower, it doesn’t provide enough extra space for additional panels to be installed. The system size remains 8.8 kW and will result in the same amount of energy production as the system using Panel A. In this scenario, the higher efficiency of Panel B provides no practical benefit.
Let’s take an even more efficient option, Panel C
Panel C - 445w. Efficiency: 24.1%. Dimensions: 70.4” x 40.7”
Panel C is physically smaller than Panel A, comparable in size with Panel B, and will produce 45 watts more than both.
Panel C System
Panel C: 22 x 445w = 9.79 kW
With Panel C, we’re now capable of fitting an extra 990 watts on the same roof. Here, the higher efficiency allowed for more energy production from the same area.
The key here is that efficiency differences aren’t meaningful in any scenario where they don’t ultimately impact total system size. Overall system size may remain unaffected for two reasons:
The system size is not restricted by space.
The system size will be equally restricted by space, despite efficiency differences.
If someone wants to install solar on a large roof surface but their energy production target is modest and will only require using part of the roof area, higher efficiency provides little added value. There are many situations in which the right-size system for a homeowner does not require using all of the eligible roof area.
In situations like the above comparison between Panel A and B, the panels were equally space restricted; the difference in efficiency was not significant enough to result in a larger system being installed.
Weighing Cost
Whether prioritizing higher efficiency makes sense ultimately falls to a cost-benefit analysis. Panels with higher efficiency typically cost more, sometimes significantly so. Using the panels above, let’s say the entire system can be installed for $3.00/watt using Panel A, $3.20/watt using Panel B, and $3.40/watt using Panel C. These prices don’t necessarily reflect market pricing, but help us consider the impact of cost.
Panel A - 8.8 kW, 20.4% Efficiency, $3.00/watt
System Cost: $26,400
Post-Tax Credit Investment: $18,480
Year 1 Production: 11,595 kWh
30-year Savings: $91,410*
Net Cost Benefit: $72,930
Savings/Investment: 4.95
Panel B - 8.8 kW, 21.6% Efficiency, $3.20/watt
System Cost: $28,160
Post-Tax Credit Investment: $19,712
Year 1 Production: 11,595 kWh
30-year Electric Savings: $91,410*
Net Cost Benefit: $71,698
Savings/Investment: 4.64
Panel C - 9.79 kW, 24.1% Efficiency, $3.40/watt
System Cost: $33,286
Post-Tax Credit Investment: $23,300
Year 1 Production: 12,900 kWh
30-year Electric Savings: $101,699*
Net Cost Benefit: $78,398
Savings/Investment: 4.37
*Using a starting rate of 18 ¢/kWh, 3% annual price increase, 0.5% annual power degradation. Excludes additional incentive income.
Investing in solar can be viewed as buying avoided future costs. Using Panel A, you pay $18,480 (post tax-credit) today in order to avoid paying $91,410 for energy costs over the next 30 years. Or, for $1, you buy $4.95 in future savings.
As noted, using Panel B didn’t allow for a larger system size to be installed, or higher energy generation, yet it came at a higher price point. In this instance, paying more for higher efficiency would’ve resulted in a higher cost for the same benefit.
Using Panel C allowed for a larger system size on limited space and more energy production. Note that the cost of this system is higher both because you are paying a higher $/watt and you are installing more wattage. This system yields more savings over its life, but the price of the savings is higher compared to the other systems.
In review:
Despite significant gains in efficiency over time, the differences between modern panels are relatively small.
Higher efficiency will not create a difference in production between equal wattage panels or systems, but will reduce the footprint of the installation.
Panels with higher efficiency often cost more. If the added efficiency is not buying more production within a restricted amount of space, there is little benefit.
When space is restricted and maximum production is the goal, higher efficiency may allow for more energy generation that could pay for itself over time, if the price is right.
