If you have shopped for a solar PV system, you know that most salespeople will make system size the main focus. The system size will be measured in kiloWatts, most often DC Watts (STC), which is what you get when you add together the wattage of each panel in the solar array. Let’s say you have 20 345 Watt solar panels. Your system size in DC Watts would be 7.9 kiloWatts. (Some measure the size of the system in AC (CEC) Watts, but that is getting uncommon).
The unit cost of the system will be measured in cost per Watt. Here is an example: If the above 7.9 kW system is priced at $34,500, your unit cost would be exactly $5 per Watt. Cost per Watt usually is how homeowners compare proposals from competing vendors.
But, should it be? There are at least two reasons it should not: the cost-per-watt metric says nothing about the production capacity of the system in field conditions, and even less about the long-term production capacity of the system.
Without test data on system performance over time, you don’t know for how long your system will produce energy. It could be shorter than you think.
Once solar PV systems are subjected to real-world conditions, the elements go to work. Wind, rain, hail, dirt, and other pollutants begin to slowly wear down the components. Eventually the process leads to system failure. The only way to get a picture of the speed of the deterioration is to carry out lab simulations, where panels are subjected to the elements on an accelerated schedule that simulates the years of use you should expect from a solar PV system.
Without test data on various types of degradation, you don’t know how quickly your system will lose production capacity.
Degradation comes in two forms: Light-induced degradation and annual degradation. With commodity solar panels, which are the vast majority of solar panels in the market, light-induced degradation generates a 3% to 7% drop in production during the first 100 hours the system is in the field. (The chemistry in SUNPOWER solar panels is not subject to light-induced degradation). After that, annual degradation is typically around 1% to 1.5% for commodity panels.
Once you understand degradation, you can get a much better picture of the amount of energy a system will produce over time. At that point, you can calculate a more useful metric for system performance: cost per kilowatt-hour.
To calculate cost per kilowatt-hour, you need to pick a time span. A 20-year period is often practical, as this tends to be the contract period for a solar lease or PPA contract, which is how many companies choose to “sell” their systems.
Once you have a better idea of expected lifespan and system degradation, you will see that systems with a low cost per watt often look a lot less attractive. As their energy production drops over time, the cost per kilowatt-hour can be higher than what is expected from higher-quality systems. (In several independent tests, NO low cost system made it past the simulated ten year mark).
Every kilowatt-hour of electricity a system fails to produce in the future, is electricity you need to buy from the utility, at high future prices.