Why Location Is the Single Biggest Factor in Solar Production
Two identical 10 kW solar systems installed in different states can produce vastly different amounts of electricity — sometimes by a factor of two. The reason is solar irradiance: the amount of sunlight energy that reaches a given location. Geography, climate, and seasonal patterns all determine how productive your solar investment will be.
What Are Peak Sun Hours?
A peak sun hour is not a clock hour of daylight. It is a unit that represents one hour of sunlight at an irradiance of exactly 1,000 watts per square meter (W/m²) — equivalent to bright midday sun on a clear day. Engineers use peak sun hours to standardize solar production calculations across different locations.
For example, a location that receives 5 peak sun hours per day might have 14 hours of daylight, but much of that time the sun is low in the sky and producing weaker irradiance. Integrating the actual irradiance over the entire day yields the equivalent number of full-power hours.
The Solar Production Formula
You can estimate annual energy production with this formula:
Annual kWh = System size (kW) × Peak sun hours/day × 365 × (1 − System losses)
System losses typically total 14–20% and include:
- Inverter efficiency: 96–98% efficient, meaning 2–4% loss
- Wiring and connection losses: 1–3%
- Soiling: Dust and debris on panels reduce output by 1–5% depending on climate and cleaning frequency
- Temperature derating: Solar panels lose about 0.3–0.5% of output for every degree Celsius above 25°C (77°F). Hot climates hurt more than you might expect.
- Shading: Even minor shading can reduce system output significantly
- Mismatch and aging: Slight variations between panels and initial year-one degradation
The Temperature Paradox: Why Hot States Underperform Their Sun Hours
It might seem like Arizona would dominate solar production, and it does have the highest irradiance in the continental US. However, summer temperatures in Phoenix regularly exceed 40°C (104°F), and panels can reach surface temperatures of 60–70°C on a hot afternoon. At those temperatures, a panel with a temperature coefficient of −0.40%/°C loses roughly 14% of its rated output just from heat.
This means that while Arizona leads in annual production, the advantage over a well-sited California system is somewhat smaller than the raw peak sun hour numbers suggest. Choosing panels with a lower (less negative) temperature coefficient, such as −0.30%/°C, partially offsets this effect.
Solar Resource by Region
Southwest — Best in the Continental US (5.5–6.5 Peak Sun Hours/Day)
States: Arizona, New Mexico, Nevada, southern California (desert regions), western Texas
This region receives the highest solar irradiance in the continental US. A 10 kW system in Phoenix, Arizona with 5.5 peak sun hours and 16% system losses would produce approximately:
10 kW × 5.5 hours × 365 × 0.84 = ~16,900 kWh/year
At an average retail electricity rate of $0.14/kWh, that represents about $2,366 in annual savings before accounting for net metering.
Southeast — Excellent Performance (4.5–5.5 Peak Sun Hours/Day)
States: Florida, Georgia, South Carolina, North Carolina, Alabama, Mississippi, Louisiana, Arkansas, central and eastern Texas, Tennessee
Florida and Texas offer some of the best solar economics in the country due to their combination of high irradiance, large electricity demand for air conditioning, and strong net metering policies (particularly Florida). The same 10 kW system in Orlando at 5.0 peak sun hours produces approximately 15,330 kWh/year.
Midwest — Adequate Resource (4.0–4.5 Peak Sun Hours/Day)
States: Illinois, Indiana, Ohio, Missouri, Kansas, Nebraska, Iowa, Michigan, Wisconsin
The Midwest receives moderate solar irradiance and experiences significant seasonal variation. Summer production is strong, while winter months (particularly in the northern Midwest) see substantially reduced output. A 10 kW system in Columbus, Ohio at 4.2 peak sun hours produces approximately 12,850 kWh/year.
Northeast — Viable with Strong Economics (3.8–4.5 Peak Sun Hours/Day)
States: New York, Massachusetts, New Jersey, Connecticut, Rhode Island, Pennsylvania, Maryland, Delaware, Virginia
The Northeast has lower irradiance than the Sun Belt, but it often has the best solar economics in the country due to high electricity rates. Massachusetts averages over $0.25/kWh retail, meaning the same kilowatt-hour savings is worth nearly twice as much as in states with $0.13/kWh rates. New Jersey, Massachusetts, and New York have historically offered among the strongest solar incentive packages in the US. A 10 kW system in Boston at 4.0 peak sun hours produces approximately 12,260 kWh/year.
Mountain West — Variable Performance (4.5–6.0 Peak Sun Hours/Day)
States: Colorado, Utah, Idaho (southern), Montana (southern), Wyoming
Denver, Colorado receives excellent solar irradiance (around 5.5 peak sun hours) thanks to its elevation and relatively dry climate. The mile-high altitude reduces the atmospheric filtering of sunlight. Colorado has strong net metering policies and an active solar market.
Pacific Northwest — Lowest in the Contiguous US (3.5–4.0 Peak Sun Hours/Day)
States: Oregon, Washington, northern Idaho
Seattle averages approximately 3.8 peak sun hours per day when annualized. A 10 kW system there produces roughly:
10 kW × 3.8 hours × 365 × 0.84 = ~11,665 kWh/year
That is about 31% less production than the same system in Phoenix. While solar is still a viable investment in the Pacific Northwest — particularly given Washington State's relatively low electricity rates from hydropower and Oregon's incentive programs — the payback period is typically longer.
Production Comparison: Phoenix vs Seattle
| Location | Peak Sun Hours | Annual Production (10 kW) | Payback (est.) |
|---|---|---|---|
| Phoenix, AZ | 5.5/day | ~16,900 kWh | 7–9 years |
| Dallas, TX | 5.2/day | ~15,975 kWh | 7–10 years |
| Denver, CO | 5.5/day | ~16,900 kWh | 8–11 years |
| Boston, MA | 4.0/day | ~12,260 kWh | 7–10 years |
| Chicago, IL | 4.2/day | ~12,880 kWh | 9–13 years |
| Seattle, WA | 3.8/day | ~11,665 kWh | 12–18 years |
Note: Payback estimates assume 30% federal ITC, average installed cost of $3.00/W, and local electricity rates. Actual results vary.
States with the Best Solar Economics in 2025
The best solar states are not simply those with the most sun — they are the states where the combination of irradiance, electricity rates, net metering policies, and state incentives creates the strongest financial return:
- California: High electricity rates and strong irradiance, though recent NEM 3.0 changes reduced net metering credits
- Massachusetts: Very high electricity rates, strong state incentives (SMART program), excellent ROI despite moderate sun
- New Jersey: High electricity rates, Solar Renewable Energy Certificates (SRECs), aggressive net metering
- New York: NY-Sun incentive program, high rates, good net metering
- Texas: No state income tax on solar savings, high summer electricity demand, deregulated market in many areas
- Florida: Strong irradiance, no state income tax, full retail net metering policy
How to Use the NREL PVWatts Calculator
The National Renewable Energy Laboratory's PVWatts Calculator (pvwatts.nrel.gov) is the most widely used free tool for estimating solar production. Enter your address, system size in kW DC, roof tilt and azimuth (compass direction), and module type. The tool returns monthly and annual production estimates based on decades of historical weather data. Use it to independently verify any production estimate in a solar proposal.
Degradation Over 25 Years
Solar panels lose roughly 0.5% of their output each year due to gradual degradation of the photovoltaic cells. Over 25 years, a system producing 15,000 kWh in year one will produce approximately 13,200 kWh in year 25 — about 12% less. When evaluating long-term financial projections, ask for the total 25-year production figure, not just the year-one estimate.
Production Monitoring
Once your system is operating, monitor it regularly through your inverter manufacturer's app or web portal. Key things to watch:
- Compare actual monthly kWh to your proposal's projections
- Look for unexpected production drops that could indicate shading, soiling, or equipment issues
- Track year-over-year performance to detect early degradation
Most monitoring platforms from SolarEdge, Enphase, SMA, and other inverter manufacturers are free with your system purchase.