What is a solar panel derate factor?

If you're working on a DIY solar project, solar panel derating is a term you might come across. Here's an explanation of what it is, and the components that go into it.

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If you pay a solar contractor to install solar panels on your home, most of the nitty gritty technical terms are hidden away from you. They will give you an easy to understand proposal, and then one day you have shiny panels on your roof, generating electrons. It’s nice!

But if you’re undertaking a DIY project, all the calculations are up to you. One concept that you may come across is the solar panel derate or derating factor. This number is expressed as a fraction of the solar panel nameplate rating, and represents the amount of electricity you can expect to generate in the real world after all losses are accounted for.

For example, let’s say that you have a 350 watt solar panel. Using a derate factor of 0.77, you would end up with a real-world power generation of 269.5 watts (350 watts multiplied by 0.77).

How is a solar panel derating factor used?

If you are designing a solar panel system, one of the key things that goes into the calculations is understanding how much electricity you can realistically expect to generate. This allows you to correctly size your system and calculate the financial payback for the system.

Let’s say that you buy 10 solar panels with a 350 watt rating. You can’t simply assume that your maximum electricity generation will be 3,500 watts. Instead, because of the derate factor, it’ll be quite a bit lower than that in the real world.

If you simply went with the solar panel nameplate rating, you’d significantly undersize your system.

How is the derating factor calculated?

Right off the bat, there are probably two main things that you should understand:

  1. Derate factor isn’t a specification that you’ll find on your solar panel datasheet. Instead, it’s specific to your system.
  2. Although it’s often described as the solar panel derating factor, it’s actually calculated on your system in total.

This means that if you want your number to be as accurate as possible, you’ll have to understand all the components in your system and even your local climate.

For example, my home is located in Buffalo, NY, which is a pretty snowy climate. I would guess that I lose about two full weeks of power generation per year due to snow accumulation, which is 3.8% of the year. However, winter sunlight is shorter and less intense than summer, so to calculate my derate factor, I would probably reduce that a little, and estimate my annual losses due to snow to be 3%.

As you can see, that’s an estimation, and you’ll need to do the same for many - but not all - of the factors that go into the derating factor for your system.

What are the components of a derating factor?

You will find that there is different advice about what to include in the derating factor. Sometimes people only use the thermal coefficient of the solar panel. Thermal coefficient is how much the solar panel efficiency drops due to heat, and is listed on the solar panel datasheet using test standards such as PTC, NOCT, and CEC.

Thermal coefficient will be the largest loss factor in your system, but to be accurate you should try to include factors as well. A good reference is the documentation for PVWatts, which is the software used behind the scenes for The Solar Nerd calculator and many of the software packages that solar installers use to estimate your solar energy production. When you use PVWatts, it includes some default values for loss values described below.

Some of the values below are listed on the equipment specification sheets, making them easy to estimate. For others, you’ll have to make an educated guess or use a suggested value from PVWatts. They include:

Inverter losses

A solar inverter is the component in your system that transforms DC electricity from your solar panels into AC electricity that your home can use. Solar inverters are very efficient, but not perfect: a little electricty is always lost as heat. Fortunately, the efficiency should be listed on the product datasheet. For example, an Enphase IQ7 series microninverter is rated at 97% efficiency - or 3% losses, looking at it from the other side.


This is pretty much what it sounds like - dirt on your solar panels that blocks sunlight. Unless you just cleaned your panels, there will always be at least little dirt or pollen on your panels. A good starting value for soiling losses might be 2%, but if you live in a very dry and dusty climate and don’t wash your panels regularly, this could be significantly higher.


A light dusting of snow will blow off your solar panels, but in any appreciable snowfall the flakes will start to stick and pile up. This is more of an issue on flatter roofs, but sloped roofs will also accumulate snow. In my experience, it doesn’t take very much snow to block power production completely - about an inch or more will do it.

Obviously, snow is only a factor in some climates. Even among snowy climates, the amount of days of electricity production that you will lose in a year will vary a lot. For example, on the northwest coast you might lose only a couple days a year due to snow. In Buffalo, where I live, we get a lot more snow than that, so I might estimate that I lose 3% annually. But some places get even more snow than Buffalo, in which case you would need to adjust that value even higher.

Horizon shading

An ideal calculation assumes that you solar panels will generate electricity in the early evening until the sun dips below a perfectly straight horizon. However, unless you live on a farm in the prairies, the horizon is usually partly obstructed by trees, buildings, hills, and other objects. A study of this phenomenon showed that the average value for this type of shading is about 3%.

Obviously, your situation may be quite different. Maybe you do live on a farm. Or, maybe, your home is in a city, with tall buildings in the distance, in which case your shading may be higher than 3%.

Keep in mind that this isn’t system shading from nearby obstructions, such as a tree in your yard. That type of shading should be calculated separately, and not included in the derating factor.

Cell mismatch

if you look at the solar panels from some manufacturers, you might notice that they offer different wattage panels under the same product line. For example, LG sells panels under the NeON 2 line ranging from 330 watts to 355 watts.

This is because the solar cell manufacturing process naturally produces solar cells with slightly varying wattage. Those cells are tested as they come off the factory line and are “binned” according to their power output. Higher wattage cells are used to make the higher wattage panels, and lower wattage cells go into the lower output panels.

Even within a given bin, each solar cell may have different power output. This means that the individual cells in your solar panel will have slightly varying characteristics.

One of the properties of solar cells that are wired together in a panel is that the lowest output cell can reduce the power output of neighboring cells. This is what cell mismatch is: the power output of a panel, in some conditions, can be dictated by the lowest output cell in the panel.

You can read a little more about mismatch in this article. PVWatts uses 2% as a default value for mismatch losses.

Panel age

Solar panels lose power as they age. You can estimate what this power loss will be by reading the power warranty for your solar panel.

Many power warranties indicate that the first year loss due to aging will be higher, then steady in subsequent years. For example, SunPower warranties that their X-Series panels will lose no more than 2% output after the first year, and 0.25% for each year after that.

If you’re estimating the derate factor for when a panel is brand new, you would assume zero losses for panel age, but an appropriate number based on the warranty if you want to estimate the derating for when the system is older.

Light induced degradation (LID)

Light induced degradation happens when a solar panel is brand new and is exposed to the sun for the first time. There are different chemical and physical reasons why it happens, but you can kind of think of it as a solar panel getting “broken in”. LID results in a small loss of performance shortly after the panel is put into service, but LID degradation should stop progressing after a few weeks. PVWatts uses a default value of 1.5% for LID.

Thermal coefficient

Last, but most significant, is thermal coefficient. This is listed on a solar panel datasheet as a loss of efficiency for every one degree Celsius increase in temperature. For example, if your panel lists -0.5%/°C, it will lose 0.5% efficiency when it gets one degree C hotter.

By definition, this varies according to the temperature, so your derating factor will be different in the summer than in winter. Not sure what to use? Taking 20% off the nameplate rating of the panel would be a reasonable estimate. That is, if you have a 350 watt panel, you can assume that it will generate a maximum of 280 watts in the real world.

Adding it all up

Once you have values for all the factors in your derating calculation, simply total them up.

Here’s an example:

Thermal coefficient0.20
Inverter losses0.03

In this example, you can expect the system to generate a maximum of 68.5% of its nameplate rating. This means that you have 6,000 watts of solar panels in this system, you would realistically expect it to generate only 4,110 watts.

As you can see, the derating factor is a best-guess estimate that is particular to your system. It’s a helpful tool to help calculate what the real world performance of your system will be, but does require some educated guesses.

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