PV module warranties: separating fact from fiction

Every pv manufacturer must maintain a cash warranty, says 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
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.

Let’s start with workmanship warranties: this governs any defect that is the result of failings in the manufacturing process. These warranties span anywhere between 5 and 25 years, with coverage including repair, replacement, or refund at either a depreciated value or at the market price.

It is also important to point out that some defects can negatively impact performance from the moment that the modules are installed; while others may take a year or two to manifest. The reality is that ten years is more than adequate for workmanship defects to come to light and one may argue that longer coverage is redundant to the performance warranty.

Looking at more mature industries – gas turbine manufacturers typically offer no more than a two-year workmanship warranty – a longer warranty usually compensates for the lack of a robust, long-term performance track record.

Manufacturers also provide warranties covering the performance of a module. In case a PV module under-delivers on its power output promise, manufacturers should offer a combination of physical and financial remedies, although hidden clauses may minimize the amount of compensation paid out.

Many module manufacturers will include an option to repair or replace a low-performing module. Significantly, many manufacturers reserve the right to supply used or refurbished modules as replacements. The best policies, however, will offer new modules, free-of-charge, to supplement any shortfall in capacity if a repair is not possible.

Things get a little complex when asset owners seek monetary compensation because the OEMs that offer financial reparation – and many do not – have different ways of calculating their liability.

The commonly accepted approach is for manufacturers to pay the asset owner the value of the shortfall between the actual power output of the affected module and a predetermined power output threshold. This threshold is based on the market price of the module at the time of the claim or the original sales price of the panels - as module prices have steadily fallen, it’s easy to see which option would be of greater value.

Central to this calculation is the Power Warranty Start Value and the Warranted Degradation, which represent the manufacturer’s commitment to the amount of power a module will produce. A robust warranty will account for a Power Start Value of 98 percent in the first year – in other words, the manufacturer guarantees that the module will deliver at least 98 percent of its nameplate power output in the first 12 months of its operation. Modules delivering less than 98 percent are subject to remediation in line with the warranty terms.

Beyond the first year, the module’s performance warranty is benchmarked to the Warranted Power Output level. A module with a no more than 0.5 percent annual drop in power – which is what the industry’s leading OEMs offer – guarantees that the power output of a module will not reduce by more than 0.5 percent per year, from the second year of its operation. Once again, a degradation that exceeds this limit per year from the third year of operation will attract a penalty, requiring the manufacturer to compensate the asset owner for the shortfall between the actual power output of the affected module and the power output threshold. The payout will be based on the market price of the module at the time of the claim or the original sales price of the panels.

The bottom line is that a warranty is only as good as the remedies it offers. Decision-makers can ensure that they secure the best terms available simply by doing their homework and ensuring that, at the very least, someone picks up the phone when they call the helpline to make a claim.


You may also like

Siemens to accelerate industrial digitalisation in the Middle East
Following the announcement of a $500mn investment on digital initiatives within the Middle East, Dietmar Siersdorfer, CEO, Siemens Middle East talks to Utilities Middle East on how his company hopes accelerate industrial digitalisation in the region
Accelerating Innovation in Urban Water Management - Insights into the future
Robert Mankowski, Bentley Systems Vice President, Product Development talks to Utilities Middle East about latest innovations in urban water management
Battery storage – a solution for a brighter future
As regional utilities seek to meet their renewable energy targets, they must also address the intermittency of renewable energy sources with viable storage solutions, such as batteries, in order to ensure the sustainability of its uptake, says Robert Harward, Chief Executive, Lockheed Martin UAE
Claudia Vergueiro Massei appointed CEO of Siemens in Oman
Massei will focus on strengthening Siemens’ support of economic diversification and the digital transformation in Oman
Bahrain’s EWA launches solar-powered home
The house is the first to be connected to the government network with a net metering system, which allows individuals and establishments to install and use solar energy in their homes or facilities
Powering the future
Electricity and water are the main challenges of fast growing economy such as Dubai. With the emirate’s population projected to double by 2030, Dubai Electricity and Water Authority (DEWA) is leaving nothing to chance. From the largest solar park in the world, to the first ever coal power plant in the Gulf, DEWA is fully charged to power up the future of Dubai. Writes Baset Asaba

Most Popular