The efficiency of solar panels directly impacts the overall cost of solar energy by influencing how much electricity can be generated from a given area and the total number of panels needed for a system.
How Efficiency Affects Cost
- Higher efficiency means more power output per panel: Solar panel efficiency is the percentage of sunlight converted into electricity. For example, a panel with 20% efficiency converts 20% of incoming sunlight into usable electricity, while a less efficient panel converts less. This means fewer panels are required to produce the same amount of energy if the panels are more efficient.
- Reduced system size and installation costs: Because higher efficiency panels produce more energy per square foot, the overall system can be smaller. This reduces costs related to racking, wiring, labor, and space usage, which lowers the total installation expense.
- Cost per watt and upfront price: More efficient solar panels tend to be more expensive per watt than less efficient ones. For instance, some of the most efficient panels in 2025 have efficiencies around 22.8% and cost roughly $3.05 per watt, whereas slightly less efficient ones cost less but deliver less electricity per panel. Nonetheless, the higher upfront cost can be offset by better long-term energy production and savings.
- Trends over time: Over the past decade, solar panel efficiency has improved significantly — from about 15% efficiency in 2010 to around 19%-22% today — while solar panel costs have fallen by approximately 60% to 70%. This means that modern panels generate more energy at a lower overall cost than before, improving the economics of solar energy.
Summary Table
| Aspect | Impact of Higher Efficiency |
|---|---|
| Energy produced per panel | Increases, producing more electricity from less space |
| Number of panels needed | Decreases, leading to smaller system size |
| Installation & balance of system costs | Decrease, as fewer materials and labor are required |
| Cost per watt of panels | Usually higher, but offset by greater energy yield |
| Overall long-term cost of solar energy | Lower due to better utilization and savings on energy bills |
In essence, higher efficiency solar panels can reduce the overall cost of solar energy by enabling smaller, less expensive systems that produce more electricity, despite their somewhat higher initial price per watt. This improves the return on investment and helps make solar energy more affordable and accessible.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-efficiency-of-solar-panels-impact-the-overall-cost-of-solar-energy/
