The design and performance of solar energy systems for many potential applications (industrial/residential heat, electricity generation by solar concentration and photovoltaics) will be critically affected by local insolation conditions. The effects of urban air pollution are considered and reviewed. A study of insolation data for Alhambra, California (9 km south of Pasadena) shows that during a recent second-stage photochemical smog alert (≥0.35 ppm ozone), the direct beam insolation at solar noon was reduced by 40%, and the total global by 15%, from clean air values. Similar effects have been observed in Pasadena and are attributable primarily to air pollution. Effects due to advecting smog have been detected 200 km away in the Mojave Desert. Preliminary performance and economic simulations of solar thermal and photovoltaic power systems indicate increasing non-linear sensitivity of life cycle plant cost to reductions in insolation levels due to pollution.