Effect of Degradation Rate on Payback Period and Economic Viability of a 125 kWp Rooftop Solar PV System

The performance of photovoltaic (PV) systems over time has a major impact on their economic feasibility, and the rate of degradation (Rd) is a crucial component in determining long-term energy production and financial returns. In this study, the payback period of a 125 kWp rooftop grid-connected solar PV system situated at 13.1596° N and 77.6362° E in Bengaluru, India, is examined in relation to an on-field degradation rate of 7.7% annually. The investigation demonstrates the sharp discrepancy between the observed rate and the predicted industry-standard deterioration rate of 0.5% year using simulations and real-world performance data. Results reveal that the higher degradation rate drastically reduces the system’s annual energy yield, increasing the Levelized Cost of Electricity (LCOE) and extending the payback period. Furthermore, the study underscores the importance of incorporating accurate degradation rates in financial modeling to prevent overly optimistic projections of economic returns. Strategies to mitigate degradation effects, such as adopting high-quality modules, implementing regular maintenance practices, and employing degradation-resistant technologies, are discussed. The findings provide critical insights into the economic performance of solar PV systems in real-world conditions, emphasizing the need for robust system monitoring and realistic financial modeling for sustainable investments in solar energy.