A unique concept of photoreference electrode developed for thin photoelectrochemical solar cells enables three-electrode characterization of quantum dot sensitized solar cells (QDSSCs) under operating conditions. Most QDSSCs utilize a polysulfide-based electrolyte, which lacks an efficient counter electrode (CE), resulting in significant performance losses. The three-electrode setup provides quantitative information regarding the potential losses associated with the CE as well as direct mapping of the effective potentials of the two cell electrodes throughout a voltage scan from open to short circuit. Moreover, the photoreference electrode method reveals a major effect of the CE quality on the recombination losses at the sensitized electrode. The method enables direct calculation of a recombination current, which arises from insufficient regeneration of the redox electrolyte by the CE. Consequently, improvement of the catalytic nature of the CE not only reduces potential losses in the photoelectrochemical cell, but it also improves the charge collection efficiency resulting in significant improvement of the overall cell performance.