diff --git a/CHANGELOG.md b/CHANGELOG.md
index ebd9fc4..7172e75 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -5,6 +5,16 @@ All notable changes to this project will be documented in this file.
 The format is based on [Keep a Changelog](https://keepachangelog.com/en/1.1.0/),
 and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.html).
 
+## [0.5.0] - 2026-06-29
+
+### Changed
+
+- `PVSystem.lid_loss` default changed from `0.0` to `None`. When `None`, the LIDLoss value is read from the PAN file. If you relied on the old default to override the PAN file, set `plant.lid_loss = 0.0` explicitly.
+
+### Fixed
+
+- `PVSystem.lid_loss` now correctly overrides the PAN file's `LIDLoss` value when explicitly set (previously the PAN file always took precedence).
+
 ## [0.4.0] - 2026-06-08
 
 ### Added
diff --git a/pyproject.toml b/pyproject.toml
index 4806909..a5b27d3 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -4,7 +4,7 @@ build-backend = "setuptools.build_meta"
 
 [project]
 name = "dnv-solarfarmer"
-version = "0.4.0"
+version = "0.5.0"
 description = "Python SDK for SolarFarmer, a bankable solar PV design and energy yield assessment tool by DNV."
 readme = "README.md"
 requires-python = ">=3.10"
diff --git a/solarfarmer/models/pvsystem/pvsystem.py b/solarfarmer/models/pvsystem/pvsystem.py
index 458a16f..ca6ece3 100644
--- a/solarfarmer/models/pvsystem/pvsystem.py
+++ b/solarfarmer/models/pvsystem/pvsystem.py
@@ -162,7 +162,9 @@ class PVSystem:
     module_quality_factor: Optional[float] = None
         Module quality factor (per unit) (default is 0.0, i.e., no quality loss).
     lid_loss: Optional[float] = None
-        Loss due to light-induced degradation (LID) (per unit) (default is 0.0, i.e., no LID loss).
+        Loss due to light-induced degradation (LID) (per unit). When set, overrides the
+        LIDLoss value in the PAN file. When ``None`` (default), the value from the PAN
+        file is used. If the PAN file also has no LIDLoss key, the SF API defaults to 0.0.
     module_iam_model_override: Optional[IAMModelTypeForOverride] = None
         Override for the module IAM model used in the calculation (default is None,
         which will use the values from the module's PAN file).
@@ -268,7 +270,7 @@ class PVSystem:
     ac_ohmic_loss: float | None = None  # Default depends on inverter type
     module_mismatch: float | None = MODULE_MISMATCH_FACTOR
     module_quality_factor: float | None = 0.0
-    lid_loss: float | None = 0.0
+    lid_loss: float | None = None
     module_iam_model_override: str | None = None
     constant_heat_coefficient: float | None = CONSTANT_HEAT_COEFFICIENT
     convective_heat_coefficient: float | None = CONVECTIVE_HEAT_COEFFICIENT
@@ -1528,11 +1530,16 @@ def generate_pan_file_supplements(
     plant: PVSystem, module_info: dict, bifaciality_factor: float
 ) -> dict[str, Any]:
     """Generate PAN file supplements based on the PVSystem data and module information."""
-    # LID loss value is taken from the PAN file if available, otherwise from the PVSystem default
-    try:
-        lid_loss = float(module_info["data"]["LIDLoss"]) / 100  # Convert percentage to per unit
-    except KeyError:
+    # plant.lid_loss takes priority when explicitly set (not None).
+    # Otherwise fall back to the LIDLoss key in the PAN file.
+    # If neither is present, lid_loss is None and the SF API defaults to 0.0.
+    if plant.lid_loss is not None:
         lid_loss = plant.lid_loss
+    else:
+        try:
+            lid_loss = float(module_info["data"]["LIDLoss"]) / 100  # Convert percentage to per unit
+        except KeyError:
+            lid_loss = None
 
     pan_file_supplements = {}
     pan_file_supplements[module_info["pan_filename"]] = PanFileSupplements(
diff --git a/tests/test_construct_plant.py b/tests/test_construct_plant.py
index 8e27e47..40bae29 100644
--- a/tests/test_construct_plant.py
+++ b/tests/test_construct_plant.py
@@ -4,7 +4,11 @@
 
 from solarfarmer import PVSystem
 from solarfarmer.models import PVPlant
-from solarfarmer.models.pvsystem.pvsystem import construct_plant, design_plant
+from solarfarmer.models.pvsystem.pvsystem import (
+    construct_plant,
+    design_plant,
+    generate_pan_file_supplements,
+)
 
 
 @pytest.fixture
@@ -170,6 +174,67 @@ def test_multi_dot_ond_filename_produces_correct_spec_id(self, bern_2d_racks_inp
                 multi_dot.unlink()
 
 
+class TestGeneratePanFileSupplements:
+    """Contract tests for generate_pan_file_supplements().
+
+    Priority rule: plant.lid_loss (when not None) > PAN file LIDLoss > None.
+    """
+
+    @pytest.fixture
+    def module_info_with_lid(self, bern_2d_racks_inputs):
+        """module_info dict built from CanadianSolar PAN (LIDLoss=3.00)."""
+        from solarfarmer.models.pvsystem.pvsystem import get_module_info_from_pan
+
+        p = PVSystem(latitude=46.95, longitude=7.44)
+        p.pan_files = {
+            "CanadianSolar_CS6U-330M_APP": f"{bern_2d_racks_inputs}/CanadianSolar_CS6U-330M_APP.PAN"
+        }
+        return get_module_info_from_pan(p)
+
+    @pytest.fixture
+    def module_info_without_lid(self, module_info_with_lid):
+        """module_info dict built from a PAN file with the LIDLoss key stripped out."""
+        import copy
+
+        info = copy.deepcopy(module_info_with_lid)
+        info["data"].pop("LIDLoss", None)
+        return info
+
+    def test_plant_lid_loss_overrides_pan_file(self, module_info_with_lid):
+        """When plant.lid_loss is set, it wins over the PAN file value."""
+        plant = PVSystem(latitude=0, longitude=0)
+        plant.lid_loss = 0.01  # PAN has LIDLoss=3.00 (0.03 per unit)
+        supplements = generate_pan_file_supplements(
+            plant, module_info_with_lid, bifaciality_factor=0.0
+        )
+        pan_key = module_info_with_lid["pan_filename"]
+        assert supplements[pan_key].lid_loss == pytest.approx(0.01)
+
+    def test_pan_lid_loss_used_when_plant_lid_loss_not_set(self, module_info_with_lid):
+        """When plant.lid_loss is None, the PAN file LIDLoss is used."""
+        plant = PVSystem(latitude=0, longitude=0)
+        assert plant.lid_loss is None  # verify default
+        supplements = generate_pan_file_supplements(
+            plant, module_info_with_lid, bifaciality_factor=0.0
+        )
+        pan_key = module_info_with_lid["pan_filename"]
+        assert supplements[pan_key].lid_loss == pytest.approx(0.03)  # 3.00 / 100
+
+    def test_lid_loss_is_none_when_neither_plant_nor_pan_provides_value(
+        self, module_info_without_lid
+    ):
+        """When neither plant nor PAN file has LIDLoss, supplements.lid_loss is None.
+
+        The SF API then defaults to 0.0 via panData.LIDLoss (C# double default).
+        """
+        plant = PVSystem(latitude=0, longitude=0)
+        supplements = generate_pan_file_supplements(
+            plant, module_info_without_lid, bifaciality_factor=0.0
+        )
+        pan_key = module_info_without_lid["pan_filename"]
+        assert supplements[pan_key].lid_loss is None
+
+
 class TestListPathInput:
     """Verify pan_files and ond_files accept list[Path] in addition to dict."""