Choosing to get solar panels at home involves a lot of research to understand PV panel technology, price, installation, and the ROI. For homeowners wondering if solar panels are a good investment, a term that can sometimes create more confusion than clarity is efficiency.
What exactly does solar panel efficiency mean? How efficient are modern PV panels? And does higher efficiency mean more savings? This quick mythbusting guide will answer these common questions and help you better understand efficiency.
What Does Solar Panel Efficiency Mean?
Solar panel efficiency is measured as a percentage. This represents the percentage of the total sunlight hitting the panels that is converted into electricity.
New developments in photovoltaic (PV) technology and solar panel materials have historically increased solar panel efficiency ratings and are likely to continue to do so.
Higher efficiency doesn’t always mean more savings
So, how does solar panel efficiency impact your energy savings? Efficiency tells you how well panels turn sunlight into electricity. But it doesn’t necessarily mean higher efficiency panels will save you more on your power bill.
For example, a 22% efficiency panel will generate more electricity per square foot than an 18% panel, but if you have a larger rooftop, a solar home set up with lower efficiency panels could be just as cost-effective and cost less for the upfront purchase.
Efficiency matters most for homeowners with limited roof space who will need to maximize the amount of power they generate with fewer panels. Total power capacity also depends on the overall solar system, inverter and battery type, it’s not all about efficiency ratings.
The History of Solar Panel Efficiency
You might think solar is a new technology, but the first ever rooftop solar panels were installed in New York in 1883. They had an efficiency rating of just 1%. By the 1950s, panels converted 6% of sunlight into power.
In the last 70 years, this has almost quadrupled, with the most efficient solar panels in 2025 reaching over 24% efficiency. Today, most residential solar panels achieve 15–22% efficiency.
But, don’t be put off by the seemingly low percentage. In PV solar, every fraction of a percentage in efficiency increase represents a lot more power for your home. It also means homeowners can now generate more power from fewer panels, making solar suitable even for smaller rooftops.
Home Solar Power is Now More Efficient and Affordable Than Ever
While solar panel efficiency has increased, costs have plummeted. This means more electricity is produced at a much lower cost, and more financially realistic for US homeowners.
International Renewable Energy Agency Data shows that in the 1970s, solar panels cost about $100 per Watt. In 2024, it dropped to as little as $2.41.
New PV technology and materials, coupled with surging global demand for solar mean that prices are likely to keep falling. Soon, solar could be the most affordable electricity source in many parts of the world.
Do Solar Panels Need Direct Sunlight to Be Efficient?
Solar panels do not need direct sunlight to work. But more sunlight hitting the panel means more energy to convert into power for your home. There are also things you can do today to keep them running optimally year-round.
While most places will experience some overcast, grey days, during which solar panels still work, you can maximize efficiency by minimizing shade:
- Install your panels where shade is minimal. Clouds, neighboring buildings or trees cast shade can significantly reduce solar panel efficiency.
- Plan for changes over time. Trees grow, and different seasons affect shade and sunlight, so consider how this will affect panel performance.
- Get a Smart Monitoring meter or app. They can help you spot if your panels are working as efficiently as they should be, and ensure optimum energy output from your solar system.
Overall, solar panel efficiency is just one piece of the bigger picture when deciding whether to invest in solar for your home. While higher efficiency panels can be beneficial for smaller roofing areas, they aren’t the only factor that determines your long-term savings and energy output.
While costs have dropped significantly, technology has advanced, making solar power more accessible and practical than ever before. By considering efficiency alongside factors like system size, installation, and shading, you’ll be better positioned to choose the right setup for your home. With the right system in place, solar can be both a sustainable and cost-effective way to power your future.
Still have questions about switching to solar? Contact the Switch Together team.