Industry Jargon: Understanding Solar Panel Derating Factor

Industry Jargon

For most homeowners, installing solar power isn’t something they want to tackle on their own. They’d much rather trust an experienced technical team to take care of the reins for them.

While there’s an obvious benefit in taking this approach, you can save a significant amount of money by going the DIY route. As long as you have the right materials and a detailed guide to follow, you may find that you’re more adept at it than you thought!

However, you may run into some confusing jargon along the way. One of those is the solar panel derating factor.

What does this mean, how do you calculate it, and why is it important? Read on for the details you need to know.

How Does the Solar Panel Derating Factor Work?

The solar panel derating factor is also known as the solar panel derate factor. This is a number that’s expressed as a fraction of the rating on your solar panel nameplates.

It represents the total amount of solar electricity that users can expect to generate from their systems in the real world, once all expected losses are accounted for. This rating exists because the number on your solar panel nameplate is the maximum amount of solar energy you can expect your panels to create.

In reality, there will be conditions, such as cloud cover, that hinder the panels from reaching that peak every time. Instead, they’ll fall just a little short of it.

How to Calculate the Derate Factor

To calculate the derate factor for solar panels, you will simply multiply the number on your solar panel nameplate by the designated derate factor.

Where does the number for this factor come from? In short, it’s specific to your home and your solar power system. There isn’t a one-size-fits-all derating factor that applies to all photovoltaic (PV) panels.

In addition, the derating factor isn’t applied to one single panel. Rather, it’s calculated for your entire system, which encompasses all of your individual panels, as well as accessories and components.

For instance, say that you purchase one 400-watt solar panel. By applying a derate factor of 0.77, you’ll find that the real-world solar power generation is actually around 308 watts. This calculation would appear as follows:

400 x 0.77 = 308

Not sure about all of this math? If you want to make sure you get an accurate solar panel derating factor, ask the experts at your local solar company for help!

How to Use the Derating Factor of Solar Panels

When planning how many solar panels you will need to handle the power needs at your home, remember to measure by the derate factor, not the number on the nameplate. These are best-case scenarios that aren’t always feasible.

This factor tells you how much solar energy you can realistically expect your system to generate. Not only does it help you size your installation more accurately, but it can also reveal how long it will take you to achieve financial gain from it.

For instance, say you purchase 10 solar panels, and all of them have the same 400-watt rating. Some homeowners would do the basic math and expect that their system could produce 4,000 watts of solar power. As a result, they could inadvertently undersize their system and wind up with a solution that doesn’t meet their long-term energy needs.

Components of Derating Factor to Consider

There are many different components that contribute to the derating factor of solar panels. You can choose to incorporate all of these if they apply. Let’s take a look at the most common ones.

Thermal Coefficient

Thermal coefficient refers to how much your PV panel’s output drops due to heat. You can easily find this information on the panel datasheet. This number is calculated through a variety of guidelines, including:

  • Standard Test Conditions (STC)
  • Nominal Operating Cell Temperature (NOCT)
  • California Energy Commission (CEC)

As you might expect, the thermal coefficient accounts for the largest power loss in your system. As such, some homeowners use this number interchangeably as their derating factor.

While you can do so, it doesn’t tell the full picture. Here are a few more important factors to keep in mind.


Soiling references the amount of dirt that can accumulate on your solar panels. While you might not expect much dirt to get on your roof, it’s more common than you might think.

Soiling includes dirt, debris, dust, and pollen. These particles can create a thin layer over your PV panels unless you clean them on a near-daily basis. The percentage of power loss for soiling isn’t usually greater than 2%, but it’s something to keep in mind.

Inverter Loss

When you install solar panels, you’ll also need to install a solar inverter. This is the part of the system that transforms the DC electricity generated by your panels into AC electricity that powers your home’s utilities.

Over the years, solar inverters have become increasingly tech-savvy and efficient. However, they aren’t foolproof. During the conversion process, you’re bound to lose a little electricity in the form of heat.

The good news? You don’t have to figure out how much you’re losing on your own. The datasheet for each PV panel should also list the expected efficiency rating, expressed as a percentage.

Subtract this number from 100% and that will reveal your total inverter loss. For instance, if your panel has an expected efficiency of 98%, then your inverter loss is 2%.

Horizon Obstruction

Do you live on a completely flat piece of land with zero natural obstructions? If so, then you can skip over to the next section. However, most of us don’t live on prairies with no trees for miles.

For this reason, we need to think about anything that might block the horizon line at your property. Are there trees in the distance? What about hills, light poles, or buildings?

In an ideal environment, your solar panels will continue to absorb solar power all throughout the day, right up until the sun sets. However, if there are obstacles in the way, then this output won’t be consistently at 100%. On average, experts estimate that most homeowners lose around 3% of solar production from obstructions at the horizon.

Keep in mind that if you live in the city, your percentage could be much higher. If you have a ton of tall buildings in the background, it could be around 5% or more.

Snow Accumulation

Due to their slight tilt and high elevation, most PV panels don’t get totally covered with inches of snow. As the sun warms up any snow that does stick, the precipitation will start to melt and fall away.

However, your panels won’t stay completely clean and dry, either. Especially for homeowners with flatter roofs, there will be light dusting on their surface. This can affect their solar output.

Once snow accumulates to around an inch or more, you could block solar production completely. For most homeowners, this isn’t a serious concern, as heavy blizzards are few and far between. Yet, there are some climates that experience a significant amount of snow on a regular basis.

This includes states in the northeast and midwest, which see can annual snowfalls that total a collective 100 inches or more! If you fall into this category, think about the number of weeks per year that you anticipate losing solar output to snowfall.

Then, divide that number by 52 (the total number of weeks in a year). That should give you your snow accumulation component. For instance, if you lose two weeks per year to snow, then this percentage would be 3.8%.

Varying Power Outputs

Say you purchase 10 solar panels to power your home. While you might expect them to all have the same capacity, they could differ a little. This is because the wattage of the PV cells can vary slightly.

Even when all of your panels are wired together, the lower-output cells will bring down the total output of your system. This is known as a mismatch loss and is usually calculated at around 2%.

Panel Age and Quality

Finally, take into account the age of your panels and their overall quality. If you purchase them brand-new, then this rating could be at 0%. Most manufacturers explain that age-related loss is the highest in the first year, and then tends to even out after that.

For instance, your panels may have an age-related loss of 2% after their first year. Then, that number will lower to just 0.25% in the second year, and so on. If you calculate the derating factor every year, consider how long the panels have been in place and adjust accordingly.

Putting It All Together

Once you have all of your solar panel derating factor elements in place, it’s time to add the numbers up! Remember that percentages are expressed with decimals, so 2% becomes 0.20.

Once you have that final number, subtract it from 100. For instance, say all of your factors equal 0.275. As a percentage, this becomes 27.5%. Subtract that from 100%.

This shows you that your panels will generate 72.5% of the power listed on their nameplate. Keep this information in mind as you size and strategize your system.

Want more tips like this? Check out our other Home guides!

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