The average solar asset declines at 2.5% per year. This 14-page note reviews the causes. We find humid climates moderate Potential Induced Degradation, adding a relative headwind in coastal geographies and floating solar. But an exciting way to mitigate declines is emerging via smaller inverters.
Data into solar decline rates are presented on pages 2-3, describing how we have reached our 2.5% decline rate calculation based on 3,200 assets in the US, and plotting the average capacity factor of assets in Europe.
The impacts of solar degradation are quantified on pages 4-5, detracting from IRRs, adding to levelized costs and investment requirements. But this also creates an opportunity to understand and mitigate the declines.
What causes solar degradation? Our goal on pages 6-8 is to explain solar declines from first principles, underlining the main mechanisms of Potential Induced Degradation.
Cure by location is explored on pages 9-10. We find that humidity is a major moderating variable for solar declines. This helps the case for solar in hot, dry climates.
Cure by inverter strategy is explored on pages 11-13. Our work supports the shift from central inverters towards smaller inverters, possibly micro-inverters at utility scale.
Other cures, observations and conclusions are laid out on page 14.