Solar panels are an amazing technological achievement. They have no moving parts, they are very safe to operate and, if correctly installed, they can provide clean electricity for decades.

For most consumers, a particularly confusing aspect of solar panels is the term "efficiency" and what it actually means for the success of their solar investment.

Simply put, efficiency is the ratio that measures how much of the incoming sunlight is converted to electrical output by your solar panels. For example, if 100 Watts of sunlight falls on the panels, and 15 Watts of electricity comes out, the efficiency is 15%. Most solar panels in the market have efficiencies in the range of 10-15%.

Why do we lose efficiency when we "package" solar cells?

Building blocks of a solar array

Building blocks of a solar array

The building block of any solar panel is a solar cell. The solar cell is a type of semiconductor that generates electrical power when illuminated by sunlight using the photovoltaic (PV) principle. When we package together a whole bunch of solar cells we get a PV "module", a fancy industry term that simply means a small solar panel. Joining multiple modules gives us a bigger solar panel. A typical solar installation includes many of these panels strung together in the form of a PV "array".

Why is this all important to understand the efficiency of solar panels? Well, because at each step of this packaging and installation process, we lose a bit of efficiency. For example, if you purchase solar panels that are made up of solar cells with 15% efficiency, the panel itself will have a slightly less efficiency (due to the spacing between the solar cells). If these solar panels are installed on your rooftop as a PV array, the resulting efficiency will be even less than the average panel efficiency due to electrical losses, shading and other factors.

What is the most efficient solar panel today?

Since the invention of the photovoltaic principle in the 19th century, the efficiency of solar panels has been increasing dramatically. In the 1950s, researchers at Bell Laboratories produced solar cells with 6% efficiency. In the 1970s and 1980s, researchers experimenting with different types of materials and production techniques gradually increased the level of efficiency. Today, the most efficient solar cells have around 40% efficiency and researchers around the world are working hard to push this level even higher. Unfortunately, most commercially available solar panels are significantly below this record level of efficiency, but there is no doubt that future solar energy systems will be built using higher efficiency solar cells.

NREL Best Solar Cell Efficiency

Evolution of solar cell efficiencies as of December 2015 (source: NREL). Please click to enlarge.

What is multi-junction technology?

Solar cells are manufactured using different semiconductor materials. Each material can harvest a specific portion of the solar radiation spectrum. By overlaying cells made of different materials, we can increase the total amount of radiation that can be captured. As the sunlight passes through multiple layers of cells, each one optimized to absorb a certain wavelength of light, the overall efficiency can be increased drastically. Today, best performing traditional silicon solar cells have efficiencies around 25% (blue lines in the above chart), while multi-junction cells have surpassed the 40% level (purple lines). This sounds great, but increased efficiency comes at a price: multi-junction cells are much more complex and, as a result, more expensive than traditional solar cells.

Why do solar panels lose efficiency (degrade) over time?

A study performed by NREL revealed that the output of solar panels decreases by 0.5% to 0.8% every year. This is mainly due to the exposure of the panels to the elements, and in very arid climates, intense ultraviolet rays increase the level of degradation. Therefore, over the expected lifetime of a solar panel (20-25 years), it is natural that the efficiency will gradually decrease.

 Should I buy the most efficient solar panels on the market?

Increased efficiency means higher output per unit area of solar panels. Thus, if you have two brands of solar panels with the exact same dimensions, the one with the higher efficiency will generate more electricity. Alternatively, the two brands may have the same power rating, but the higher efficiency panel would be smaller, an important consideration for certain solar energy applications.

Although it is tempting to invest in the most efficient solar panels, this may not necessarily be the best investment decision. Some of the more efficient solar panels are billed as premium products with a higher price tag. If you have limited roof space, or you are interested in a specialty application such as solar energy for your boat or your cabin, then a higher efficiency panel may indeed be the best choice. On the other hand, if you have ample roof space, then the reliability of the panels and the price should be the main drivers of your decision.

If you are considering your solar panel options, why not take them for a spin using Sunmetrix GO? Our free tools will help you test drive different solar energy options at your location and give you a much better idea about how much electricity you can generate. And please remember that you are in this for the long-haul. A reliable panel purchased at a good price point can be your best solar investment, even if it's not the most efficient model on the market.