Solar energy is a widely available and sustainable renewable resource, offering high potential to meet growing global energy demands while reducing environmental impacts. Photovoltaic (PV) systems, which directly convert sunlight into electricity, are increasingly utilized across residential, industrial, and agricultural applications. However, the performance of PV systems is highly sensitive to operating temperatures, as elevated temperatures reduce voltage, power output, and overall efficiency. To address this challenge, this study presents an innovative integrated water-cooling solar pump panel system designed to enhance PV performance and sustainability. The system employs a novel water distribution mechanism that regulates the temperature of PV panels, maintaining optimal operating conditions and extending module lifespan. Numerical simulations using ANSYS and MATLAB were performed to assess the thermal and electrical performance of the PV system under varying irradiance levels ranging from 500 to 1000 W/m2, and at a fixed ambient temperature of 273.15 K. The results show that without cooling, the panel temperature rises significantly, reaching 327.5 K at 1000 W/m2, which reduces efficiency and limits power output. With the integrated cooling system, the average panel temperature is reduced to 303 K at the same irradiance, maintaining uniform thermal distribution across the module. The power output at 1000 W/m2 increases from 260 W without cooling to 327 W with cooling, yielding a maximum additional gain of 56.32 W per module. Across all modules, the average power gain is 29.21 W, totaling 87.61 W, resulting in a maximum efficiency improvement of 21.67% and an average increase of 12.98%. Assuming seven hours of daily operation, these improvements correspond to energy savings of approximately 0.6137 kWh/day, 18.4 kWh/month, and 6715.3 kWh/year. The study highlights the critical role of integrating cooling mechanisms with PV systems for applications such as agriculture, rural electrification, and water supply in off-grid and remote areas. The findings demonstrate that water-cooled PV panels significantly improve power generation, enhance energy efficiency, and support sustainable development goals related to clean energy, water access, and climate action. This research provides a practical and cost-effective solution to overcome thermal limitations in PV systems, offering valuable insights for optimizing solar energy utilization in hot climates.