Most high-quality solar panel products suffer from performance degradation at an annual rate of 0.4–0.5% per year during their specified normal operational life of 25–30 years. This percentage increases in areas with hot climates and roof photovol-taic systems and varies according to the quality, guarantee and reliability of the solar panel manufacturers. The aim of this research is to assess the degradation rates of solar panels in the city of Baghdad and to determine their impact on the investment feasibility of residential systems under hot climatic conditions. In this research, an evaluation of performance of photovoltaic solar panels working in a 2 kWp system connected to the electrical grid was done under the operational climatic conditions in the evaluation area (Baghdad, Iraq). The degradation rate of all photovoltaic system modules during the operation time from 2015–2023 is equal to 4.74% (0.593% / year). For comparison, a new monocrystalline solar panel of power 185.94 Wp with an old solar panel of monocrystalline type of power 183.33 Wp (which previously was installed in 2015) were installed at the same tilt angle of 30o, and evaluated during the operation months starting in March and ending in November of the year 2023. The degradation rates per year of an aged solar panel were determined to range from 0.441% to 0.850%, with an average value of 0.788% per year. After undergoing a correction process to align the maximum power values of the old and new solar panels, the corrected degradation rates per year values ranged from 0.391% to 0.684% per year, with an average value of 0.621% per year, which closely matches the degradation rate of all photovoltaic system modules at 0.593% per year.