What is Solar Panel Energy Conversion? Steps, Benefits, Limitations

Solar panel energy conversion or solar cell energy conversion refers to the process of converting sunlight into electricity. A solar panel contains many solar cells connected mainly in series to reach a useful voltage. These solar cells are made of a semiconductor material like silicon. The process of converting sunlight into electricity is the photovoltaic effect, which begins when sunlight hits the p-n junction of solar cells.

• Silicon absorbs some photons present in the sunlight. 
• The photons transfer their energy to electrons present in silicon.
• Excited electrons leave their place, leaving a hole behind.
• The now free electrons move in one direction through a closed circuit. 
• The flow of electrons creates DC (direct current) electricity.  

The amount of electricity a solar panel can produce varies based on how efficient the module is. Needless to say, different types of solar panels have different efficiencies. The higher the efficiency, the more electricity the solar panel can produce. For instance, the latest technology bifacial solar panels have an efficiency of 22% while monocrystalline solar panels have an efficiency between 19-20%. 

In this blog, we’ll walk you through the step-by-step process of solar panel energy conversion, how DC power generated by solar panels is converted to usable AC power and supplied to homes through a rooftop on-grid solar system, and compare different types of solar panels based on their efficiencies. 

TL;DR Summary Box: How Much Energy Does a Solar Panel Convert?

Solar panels are rated in watts. And energy conversion = panel kW × peak-sun-hours × performance ratio. 

Suppose your solar panel is 550 watts (0.55 KW) and your rooftop gets peak sunlight for 5 hours, and the performance ratio is 0.8. In this specific case, your panel will generate 1.76 kWh of energy per day. If the system is 3 KW in size, it will have around six 550-watt solar panels. This entire system will produce ~10.56 units* of electricity daily. 

*Please note: The actual energy units produced can vary significantly based on the actual peak sunshine hours your roof gets, the solar system size you’ve installed, shadows on your roof, temperature, pollution, dirt, and weather conditions in your city, the performance factor, type and efficiency of solar panels, type of inverter, height of the solar mounting structure, and tilt angle. On average, a 1 kW solar system in India can produce 1,400 to 1,450 units of electricity annually. 

Here’s a quick snapshot of everything that’s been covered in this blog in detail:

Main Topic	Quick Takeaway
How does the solar panel energy conversion or solar cell energy conversion happen?	Sunlight knocks electrons loose in the solar cells. These free electrons move in one direction, resulting in the production of direct current (DC) electricity.
What factors affect solar panel efficiency?	Heat, shading, dust, panel orientation and tilt, and gradual aging.
How is DC power converted to usable AC?	A solar inverter converts DC power generated by solar panels into AC power for the household supply.
What are the benefits of solar electricity generated by solar energy systems?	It reduces electricity bills by 90% or more, saves tens of lakhs of rupees over the 25 years of the system’s life, and reduces carbon footprint.
What are the disadvantages of solar renewable energy?	The upfront investment cost that goes into setting up a solar energy system is the biggest limitation.
Is it worth installing an on-grid rooftop solar panel system for homes?	Yes. On-grid solar systems typically pay back the investment cost in 3 to 5 years, reduce electricity bills by at least 90%, and save tens of lakhs of rupees over 25 years of their life.

How Does Solar Panel Energy Conversion Happen?

Solar cells in solar panels absorb photons from the sunlight falling on them. These photons knock electrons in the solar cells loose. The loose electrons start flowing in one direction, which creates the electric current. 

In order to truly understand how the solar cell energy conversion happens, you need to first understand what solar cells are, how they’re made, and the role of the p-n junction in the process of converting sunlight to direct current (DC).

What Are Solar Cells and How Are They Formed?

A solar cell is a thin slice of very pure silicon called a wafer. Manufacturers treat one layer of the wafer so that it has extra electrons. This layer is n-type silicon. Just beneath it, the silicon is doped so it has more holes. This is p-type silicon. Where these two regions touch, they form the p–n junction. 

At the p–n junction, electrons from the n side and holes from the p side naturally diffuse into each other. That leaves behind fixed charged atoms and creates a very thin zone with almost no free carriers, called the depletion region. Across this thin region, a built-in electric field appears. It’s like a gentle internal slope that always pushes electrons toward the n side and holes toward the p side. 

The built-in electric field separates the charges created by sunlight and keeps them from immediately falling back together. Without this field, the freed charges would recombine, and you’d get little or no usable current.

Now, let’s check out how solar panel energy conversion happens in simple steps.

Step-by-Step Solar Cell Energy Conversion

When sunlight falls on the solar panels, based on their efficiency, solar cells absorb some photons, and some are bounced off. The absorbed photons begin the photovoltaic effect that eventually leads to the generation of direct current (DC) power. 

Let’s now check out the solar panel energy conversion step-by-step:

• Step 1 – Sunlight falls on the solar panels: Silicon solar cells in solar panels absorb charged photon particles from the sunlight. 
• Step 2 – Charged photons transfer their energy to the electrons: Only photons with enough energy are absorbed by silicon in the solar cells. Each absorbed photon transfers its energy to the silicon and creates a matched pair: one free electron and one hole.
• Step 3 – The built-in field in the solar cells separates the charges (electron-hole pair): The internal electric field in the depletion region immediately pushes the new electrons toward the n side and the holes toward the p side. This separation keeps them from recombining right away and makes them available as electrical carriers.
• Step 4 – The charges created move towards the metal contacts: Electrons on the n side move through the silicon to the metal grid on the front. Holes on the p side move the other way to the metal contact on the back. These metal contacts gather the charge carriers with minimal loss.
• Step 5 – Current flows through the external circuit: When wires between the cell’s front and back contacts are connected and a device or load is included, electrons flow through the wire from the n contact to the p contact. That movement of electrons through the external path is direct current (DC).
• Step 6 – Many solar cells are connected in series to create a useful voltage: Individual silicon cells produce only 0.5 to 0.6 volts each. Hence, many photovoltaic cells are connected in series inside a single solar panel to add their voltages. These panels are then combined in series and/or parallel to reach the needed system voltage and current. The panel’s output is still DC power.
• Step 7 – The current produced by solar panels is always DC: The built-in electric field inside every cell always points the same way. Therefore, the separated charges always exit from the same terminals. With steady sunlight, that constant push makes the electron flow in one direction only, which is the definition of DC.

How is DC Power Converted to Usable AC Power For Homes?

Solar panels are the most visible parts of solar systems, and they convert sunlight into DC electricity, but they’re not the only component of a solar energy system. An on-grid rooftop solar panel system for homes consists of solar inverters that convert DC power into AC (alternating current) power. This conversion is mandatory because DC power can’t be used directly in homes. Household appliances run only on AC. 

In fact, even if it’s an off-grid solar system or a hybrid solar system, a solar inverter is a mandatory component since it converts DC power to AC power.

Let’s check out how DC power from solar panels is converted to usable AC power:

• DC power from solar panels moves into the solar inverter (for on-grid solar PV systems): In case of an on-grid solar energy system, the solar inverter converts DC to AC. The built-in MPPT solar charge controller in the inverter converts DC to grid-synchronized AC. The AC first powers household appliances. Any extra AC power is sent to the grid. The inverter continuously monitors grid limits and will automatically disconnect during abnormalities or outages to protect itself, your appliances, and the grid.
• DC power from solar panels moves into the solar inverter (for off-grid solar PV systems): The built-in solar charge controller in the inverter smoothens the DC from solar panels and sends some of it to the lithium battery bank for charging. At the same time, it converts some DC to AC to run the household appliances. 
• DC power from solar panels moves into the solar inverter (for hybrid solar PV systems): The inverter converts DC power from the panels to AC power to run household appliances. Any unused DC is sent to the built-in charge controller, which directs it to the lithium battery bank to charge it. If the battery bank is full, the hybrid solar inverter sends extra AC power to the grid. 

Solar Panel Energy Conversion Efficiency Rates

Different types of solar panels have different efficiencies. Modern and advanced bifacial Mono-PERC half-cut solar panels have efficiencies as high as 22.5%. This represents a massive improvement over the older technology polycrystalline solar panels (16-17%), which are now almost obsolete. Many advanced solar panel types, like Perovskite solar cells, have shown promising results in labs, with efficiencies reaching as high as 35%.

Here’s a detailed snapshot of different types of solar panels alongside their efficiency rates and lifespans. 

Types of Solar Panels	Efficiency	Lifespan
Bifacial solar panels	Up to 22%	25+ years
Mono-PERC half-cut bifacial solar panels	Up to 22.5%	25-30 years
Monocrystalline solar panels	19-20%	30-40 years
Polycrystalline solar panels	16-17%	20-25 years
Thin-film solar panels	11-12%	10-20 years
DSSC solar panels	~11%	~6 years
OPV solar panels	10-12%	~10+ years
Perovskite solar panels	25-35%	~2.5 years
CPV / HCPV solar panels	Up to 41%	20+ years
PERC solar panels	19-22%	25+ years

What Factors Affect Solar Panel Efficiency? 

Solar panels, just like any other piece of technology, are prone to age degradation. They usually suffer from a 1% annual degradation rate when maintained properly. If you compare this 1% degradation against the annual 3-6% electricity tariff increase in India, installing a rooftop solar for housing societies and homes will still end up saving tens of lakhs of rupees for you. 

Besides age-related degradation, the efficiency of solar panels is also affected by factors such as shading issues on the rooftop, dirt and dust accumulation, and temperature in your city. 

Let’s understand how different factors affect the solar panel efficiency in India:

• Temperature effects: High temperatures can reduce solar panel efficiency by 0.4-0.5% per degree Celsius above 25°C.
• Shading impact: Even partial shading can reduce the entire panel output by 20%. That is why it is very important that you let professionals conduct a thorough shadow analysis of your rooftop before installing a rooftop solar system at home. Based on that, experts can suggest the ideal tilt angle, type of panels, and type of inverters to ensure your system generates maximum possible power and you save 90% or more on your electricity bills.
• Dust accumulation: Solar panels that are not cleaned professionally for 2 years produce 30% less electricity by year 2 than systems that are periodically cleaned. Hence, the removal of dirt and dust is extremely important to ensure your panels produce the power which was promised.
• Panel orientation: Optimal tilt helps maximize solar exposure. In fact, solar panels in India should face the south direction since it receives maximum sunshine.
• Age degradation: As already explained, solar panels lose approximately 1% efficiency annually. Therefore, you must aim for high-quality installations by SolarSquare. The panels we install have a life expectancy of at least 25 years, and with our comprehensive after-sales services, our solar systems remain operational at 80% efficiency even after 25 years.

What Are the Benefits of Using Solar Electricity?

Using solar electricity in India means you won’t have to pay for powering your home ever again. Plus, going solar will also reduce your carbon footprint, which, in turn, can drastically improve the air quality index in India.

Let’s check out the benefits of using solar electricity in India in detail:

#1. You’ll Be Able to Protect the Environment

Installing solar PV systems is equivalent to planting many trees. The amount of carbon these systems offset can easily solve the problem of air pollution in India. 

Here’s a tabulated snapshot of how much carbon a solar system can offset.

Solar System Size	Equivalent to How Many Full-Grown Trees?	Carbon Offset in 25 Years
1 kW	39	25,872 kgs
2 kW	78	51,744 kgs
3 kW	118	77,616 kgs
4 kW	157	1,03,488 kgs
5 kW	196	1,29,360 kgs
10 kW	392	2,58,720 kgs

#2. You’ll Reduce Your Electricity Bills by 90% or More

Using solar electricity generated by solar panels doesn’t cost a dime. Once you pay for the solar system installation cost, you’re signing up for free electricity for as long as the system lasts (which is at least 25 years when maintained properly). 

As long as the system is sized correctly based on your annual energy consumption, it will be able to meet all your energy requirements. Many customers receive zero bills after going solar. 

Here’s a tabulated snapshot of the ideal solar system size based on a home’s energy consumption:

Solar System Size	Average Annual Electricity Units it Produces*
2 kW solar panel system	2,800 to 2,900
3 kW solar panel system	4,200 to 4,350
4 kW solar panel system	5,600 to 5,800
5 kW solar panel system	7,000 to 7,250
10 kW solar panel system	14,000 to 14,500

*Please note: A 1 kW solar system in India can produce 1,400 to 1,450 units of electricity annually. 

#3. You Can Get Power in Areas With No Grid

Off-grid solar systems are game-changers for Indian villages and remote areas where the power grid has either not reached or is very unreliable. Solar panel energy conversion in these areas can provide electricity to keep lights running and power solar water pumps that can irrigate crops and provide water for household chores and livestock watering. 

What Are the Limitations of Solar Energy?

The main limitation of solar energy is that it requires an upfront installation cost. However, when you do the math, you’ll realize that upfront investment in solar will reduce your electricity bills by 90% or more and save you tens of lakhs of rupees.

Plus, the cost of installing an on-grid rooftop solar panel system for homes breaks even in 3-5 years. After that, the system continues generating free, non-polluting electricity for over 2 decades. 

Another limitation of solar electricity is that it is weather-dependent. During cloudy and rainy days, the solar panel output will be less than the output during the summer season. However, the output from solar is never consistent. The reduced output during the rainy season is compensated for during the summer. The overall savings from going solar aren’t impacted by seasonal variation.

Is an On-Grid Rooftop Solar System Worth It? Solar Panel Price vs Solar Savings in 25 Years

Installing a rooftop on-grid solar system in India can reduce your electricity bills by 90% or more. In fact, you save tens of lakhs of rupees, and even a system as small as 2 kW is equivalent to planting 78 full-grown trees that can remove 51,744 kgs of carbon from the air in 25 years. All in all, going solar is great for your budget as well as the environment. 

Let’s give you a comparison between the estimated solar system installation cost in a city like Nagpur vs the money it will save for you in 25 years:

Solar System Size	Solar Panel Price in Nagpur With Subsidy (Starting Price – Indicative for Base Variant)*	Solar Savings in Nagpur in 25 Years*
2 kWp	~ Rs. 1.15 lakh	~ Rs. 11.05 lakh
3 kWp	~ Rs. 1.32 lakh	~ Rs. 16.58 lakh
4 kWp	~ Rs. 1.77 lakh	~ Rs. 22.11 lakh
5 kWp	~ Rs. 2.27 lakh	~ Rs. 34.43 lakh
10 kWp	~ Rs. 5.02 lakh	~ Rs. 68.86 lakh

*Please note: The above-mentioned solar plate price is indicative as of 13th August 2025 for the SolarSquare Blue 6ft variant. The final cost of installing an on-grid rooftop solar panel system at home depends on your DISCOM charges, product variant opted for, panel type, inverter type, mounting structure height, type of after-sales service, savings guarantee, roof height, etc. Prices are subject to change. Additionally, while calculating savings, we have considered the annual tariff escalation at 3% and the annual degradation at 1%. The actual final savings from solar panel installation depend on the types of solar panels you’ve installed and their efficiency, intensity of sunlight your rooftop receives, orientation of the panels and tilt angle, the pollution level and weather conditions in your city, the temperature, shadow on the roof, impact of dirt/dust, and how well you maintain your panels after installation.

No matter your city, you can use SolarSquare’s free rooftop solar calculator to get an estimate of how much money you can save in 25 years by installing SolarSquare’s rooftop on-grid solar systems.

Conclusion

Solar panel energy conversion or solar cell energy conversion results in the generation of DC electricity, which is converted to AC power to light up homes. However, the amount of energy produced differs based on the type of solar panels. Higher efficiency solar panels are able to convert more sunlight into electricity. 

Commercial rooftop systems and those for homes and housing societies in India usually use bifacial solar panels because these modules have a high efficiency and last for decades. Always opt for solar installation companies that offer strong after-sales services, ensuring your system continues to work at its maximum efficiency even after years of installation. 

For any further details, book a free solar consultation with SolarSquare.

FAQs

Q1. What is the energy conversion in a solar panel?

Ans. Energy conversion in a solar panel is the process of converting sunlight into electricity. Photons in the sunlight loosen electrons in the solar cells. These free electrons begin to flow in one direction through a closed circuit, resulting in the generation of direct current.

Q2. Do solar panels lose efficiency over time?

Ans. Yes. Solar panels have an annual degradation rate of about 1%. It means that solar panels can lose their power generation efficiency by up to 1% every year.

Q3. What are the disadvantages of solar energy?

Ans. Solar energy’s biggest challenge is the upfront investment cost that goes into setting up a rooftop solar system. However, the government offers a subsidy under the PM Surya Ghar Muft Bijli Yojana to homeowners and housing societies installing on-grid rooftop solar systems. This subsidy reduces the cost significantly. Moreover, the installation cost is recovered within 3 to 5 years. After that, you get free electricity. If you look at solar from a long-term perspective, it saves a lot more money than you invest initially. Plus, SolarSquare also offers its customers loans to install solar systems.

Q4. Do solar panels work in cold weather?

Ans. Yes. Solar cells are actually a lot more efficient when it’s cold. They just need sunlight to work. However, you need to ensure that snow doesn’t cover the panels directly as it will block sunlight. Always make sure sunlight hits the solar panels directly.

Q5. Do solar panels work at night?

Ans. No. Solar panels need sunlight to work. Hence, they can’t work at night. In on-grid systems, the bidirectional net meter imports grid electricity to keep the house powered at night. In off-grid systems, the energy stored in batteries is used at night.

Q6. Do solar panels work in the rain?

Ans. Yes. Although the power generation is less compared to a bright sunny day, solar panels continue to generate electricity even in the rain. This is because solar panels use light, not heat, to generate electricity. So, whether it’s cloudy or rainy, your system will always generate electricity.