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PV module warranties: separating fact from fiction

on Oct 1, 2017


Timo Moeller, global director for customer support, product field performance, and commitments, First Solar
Timo Moeller, global director for customer support, product field performance, and commitments, First Solar

Negotiating photovoltaic (PV) module warranties can seem like a complicated task with blurred lines separating fact and fiction. Making the wrong choices could see a project saddled with hidden clauses, often unnecessary coverage, and false promises.

The warranty usually reflects a manufacturer’s confidence in its product, and it needn’t be a leap of faith if asset owners, lenders, developers, and EPC (engineering, procurement, and construction) firms focus on three critical factors.

PV module manufacturers tethering on the edge of financial bankruptcy are by no means a rarity. What impact does this have on warranties? Every manufacturer must maintain a cash warranty reserve to cover warranty claims, but this can be a challenge when the bulk of its financial resources are devoted to servicing debts.

As a result, manufacturers often resort to buying Original Equipment Manufacturer (OEM) insurance to cover warranty obligations. Often touted as a benefit, the reality is that insurance-backed warranties could add to the cost of the modules, while the inclusion of a third layer – and fine print designed to limit payouts – can slow down the claims process.

Critically, these insurance-backed warranties do not always offer Third Party Rights, which allow affected asset owners to receive payments in case of the OEM’s bankruptcy. And the risk of bankruptcy in the PV business is real: Bloomberg New Energy Finance noted that First Solar was the only “quoted pure-play module company in the ‘safety zone’” in its PV Module Bankability 2016 report.

Some PV warranties include clauses that may be unnecessary, even redundant, making them look like something that they are not.


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