Thermodynamic efficiency limit is the absolute maximum theoretically possible conversion efficiency of sunlight to electricity.
Theoretically the maximum conversion efficiency that can be possible using solar cells is 86% which is limited by Carnot limit. The solar cells operate as Quantum energy conversion devices, which are subject to Thermodynamic efficiency limit. If the photons hitting the solar cell have less energy which could be below the band gap of the semi conductor, then that photon cannot generate the electron‐hole pair.
Hence that energy of photon could be wasted as the heat energy. If the photons have the energy above the band gap energy then a fraction of the energy above the band gap energy can be converted into useful output.
If the photon has greater energy than the band gap energy, then the excess energy above the band gap energy would be converted as heat.
If the solar cells are made of multiple band gap regions of the semi conductor (absorber) materials, then the efficiency of the solar cell could be improved by dividing the solar spectrum in to smaller regions, where the thermodynamic limit would be higher for each region.