A PV system, short for photovoltaic system, is a power system that converts sunlight directly into electricity using solar panels and supporting equipment. It’s what most people mean when they say “solar panel system” or “solar power system.” A basic residential setup includes solar panels, an inverter, wiring, and mounting hardware, though the exact configuration depends on whether you’re connected to the power grid, fully off-grid, or somewhere in between.
How Solar Panels Generate Electricity
The word “photovoltaic” combines “photo” (light) and “voltaic” (electricity). Each solar panel is made up of individual solar cells, typically built from silicon, a semiconductor material. When sunlight hits a cell, its energy knocks electrons loose inside the silicon. Those freed electrons flow through the material as an electrical current, which is collected by thin metal contacts on the cell’s surface.
This current comes out as direct current (DC), the same type of electricity a battery produces. Since your home appliances and the power grid run on alternating current (AC), the system needs an inverter to make the conversion. That basic chain, sunlight to electrons to DC power to AC power, is the core of every PV system.
Components of a PV System
Solar panels are the most visible part, but they’re only one piece. Everything else required to make the system functional is called balance-of-system (BOS) equipment. A complete PV system typically includes:
- Solar panels (modules): Individual cells wired together into panels, which are the building blocks of the system. As of 2025, the most efficient residential panels convert 22 to 25% of incoming sunlight into electricity. Monocrystalline panels are more efficient than polycrystalline ones.
- Inverter: Converts DC electricity from the panels into AC electricity your home can use.
- Mounting structure: Racks or frames that secure panels to your roof or to the ground.
- Wiring and conduit: Connects panels to the inverter and inverter to your electrical panel.
- Safety equipment: Disconnects, fuses, and grounding circuits that protect the system and your home.
- Batteries (optional): Store excess energy for use at night or during outages.
- Charge controller (battery systems only): Regulates charging to protect battery health.
Three Types of Inverters
The inverter is arguably the most important decision after the panels themselves, because it determines how efficiently your system performs under real-world conditions. There are three main options.
String inverters are the simplest and most affordable. Your panels are wired together in groups called “strings,” and all the power flows to one central inverter. The downside: every panel on a string is limited to the output of the weakest panel. If one panel is shaded by a tree branch, the entire string’s production drops. String inverters work well on roofs with consistent sun exposure and no shading.
Microinverters are small units attached to each individual panel, converting DC to AC right at the source. Because each panel operates independently, shade on one panel doesn’t drag down the others. They also let you monitor each panel’s performance individually and make it easy to expand the system later. The trade-off is higher upfront cost and more electronics on your roof.
Power optimizers split the difference. Like microinverters, they attach to each panel and optimize output individually. But instead of converting to AC on the spot, they “condition” the DC power and send it to a central string inverter for conversion. You get panel-level optimization with centralized conversion. This option is particularly useful for roofs that get partial shade during the day.
Grid-Tied, Off-Grid, and Hybrid Systems
PV systems fall into three configurations based on how they connect (or don’t connect) to the utility grid.
Grid-Tied Systems
The most common and least expensive option. Your panels feed electricity into your home, and any excess flows back to the utility grid, often earning you credits on your electric bill through net metering. When your panels aren’t producing enough (at night or on cloudy days), you draw power from the grid as usual. The one catch: grid-tied systems without batteries shut down during a power outage, even if the sun is shining. This is a safety requirement to protect utility workers repairing lines.
Off-Grid Systems
These operate with no connection to the utility grid at all. You need enough panels and battery storage to cover all your electricity needs, plus a backup generator for extended cloudy periods. Off-grid systems are the most expensive and complex option, but they make sense for remote cabins, rural properties, or locations where running utility lines would cost more than the system itself.
Hybrid Systems
A hybrid system connects to the grid and includes battery storage. During the day, your panels charge the batteries and power your home. If the grid goes down, the batteries kick in to keep your lights on. Hybrid systems cost more than simple grid-tied setups, but they provide backup power and let you use more of the energy your panels produce. They’re a good fit if you experience regular outages or want to maximize energy independence.
Mounting Options
Most residential PV systems mount directly to a pitched roof using racking hardware bolted to the rafters. This is the cheapest approach and doesn’t use any extra land. Flat roofs use ballasted systems, where weighted frames hold panels in place without roof penetration.
Ground-mounted systems are an alternative when roof space is limited or poorly oriented. Steel beams are driven into the ground, and panels are stacked two to four high on racking structures. If ground conditions are tricky (rocky soil or capped landfills, for example), helical piles or ballasted mounts work instead. Solar tracking systems take ground mounts a step further with motorized frames that follow the sun across the sky, boosting energy output. Single-axis trackers follow the sun east to west, while dual-axis trackers also adjust for seasonal angle changes. Commercial properties sometimes use solar carports and canopies, which double as shade structures for parking lots.
How Long PV Systems Last
Solar panels degrade slowly over time, producing slightly less electricity each year. The industry has long assumed panels lose about 0.5% of their output annually. But a recent study of 53 solar plants over roughly a decade found the actual degradation rate is lower, between 0% and 0.29% per year. At that rate, a panel would still produce over 90% of its original output after 30 years.
Most manufacturers back their panels with 25-year performance warranties, though the panels themselves often function well beyond that. Inverters have shorter lifespans, typically 10 to 15 years for string inverters and up to 25 years for microinverters. Batteries vary by chemistry: lithium iron phosphate (LFP) batteries last beyond 2,000 charge cycles at roughly 30% lower cost than other lithium-ion types, making them the go-to for home storage systems that need long lifetimes.
What a PV System Costs
According to the U.S. Department of Energy, the all-in cost of a residential solar panel system runs between $2.74 and $3.30 per watt. For a typical 8-kilowatt system, that works out to roughly $21,900 to $26,400 before incentives. The federal solar tax credit currently covers 30% of installation costs, which significantly reduces the net price. State and local incentives can lower it further.
Grid-tied systems without batteries sit at the low end of that range. Adding battery storage increases costs substantially, sometimes by $10,000 or more depending on the number of batteries. Off-grid systems are the most expensive because they require oversized panel arrays, extensive battery banks, and backup generators.
Measuring System Performance
Not all PV systems with the same panel wattage produce the same amount of electricity. The standard way to evaluate real-world performance is the performance ratio, which compares the energy your system actually delivers to the energy it would theoretically produce under perfect laboratory conditions. A system rated at 10 kilowatts won’t produce 10 kilowatts continuously because of heat, shading, wiring losses, inverter conversion, and weather. A performance ratio of 0.75 to 0.85 is typical for well-designed residential systems, meaning they capture 75 to 85% of their theoretical maximum.
Geography matters too. The same system will produce roughly 40 to 50% more electricity in Phoenix than in Seattle, simply because of differences in sunlight hours and intensity. Your roof’s orientation and tilt angle also affect output. South-facing roofs in the Northern Hemisphere are ideal, though east and west-facing installations still produce meaningful energy, especially with panel-level optimization from microinverters or power optimizers.