Cascading solar energy utilization could provide access to ample supplies of clean energy and has thus attracted widespread attention. However, there are urgent challenges that need to be overcome. For example, where is the solar energy conversion potential, and how to reduce the spectral irreversibility? The mature and reliable study approach on the first law of thermodynamics has its limitations. For this reason, this paper develops a new study approach based on the second law of thermodynamics. Firstly, an ideal thermodynamic model is presented and validated, including solar photovoltaic and thermal (or thermochemical) processes. Furthermore, a description of an isolated system is provided. The incident solar radiation is reflected and concentrated by the mirror. When the concentration ratio is 30, the electricity and solar heat at 300 °C are co-produced. Correspondingly the optimal spectrum distribution could be determined for least entropy generation. As a result, an energy quality conversion potential of about 0.46 and an optimal product ratio of about 1 are disclosed. Finally, an evaluation coefficient is developed to explore the decrease of extropy generation while adopting a methanol-reforming reaction. In detail, the maximum value of the evaluation coefficient is about 0.15, correspondingly, the minimum entropy generation decreases by 13.1 W·m2·K−1 by enhancing solar heat quality. In addition, the optimal input energy ratio of fossil fuel to solar heat is determined at about 4.8, the solar energy quality conversion efficiency has been further enhanced by about 0.1 and surpasses 0.55. The results can be extended to consider non-idealities to explore the tremendous potential of the full spectrum of sunlight.