A Critical Look at Module Warranties

Module warranties are an overlooked yet vital element of the solar industry. As the market continues to grow, the industry depends on reliable technology to compete with traditional energy sources. Under current warranty structures, the burden of cost falls too heavily on system owners. Module manufacturers need to better support their products with warranty terms that apportion costs responsibly to help build a sustainable industry that inspires confidence.

In this article, I propose significant structural changes to both commercial and residential warranties. The commercial market requires terms that effectively support large-scale power purchase agreements (PPAs), while the residential market needs options that support the consumer and smaller integrators. I also review problematic terms in standard warranties.

Commercial Warranties

A majority of distributed-generation solar projects under development utilize third-party financing, most notably under the PPA model. Under this model, asset owners are increasingly requiring system production guarantees from engineering, procurement and construction (EPC) contractors to ensure energy cost savings. These guarantees commonly include an annual evaluation of weather-corrected production. Compensation is paid to owners at agreed-upon true-up periods when performance falls short of modeled generation. EPC contractors are signing these guarantees and charging for O&M services even though current warranty structures leave them exposed for labor costs and reduced production while the claims process is negotiated.

My experience suggests that more support from equipment manufacturers is needed on large projects. Three changes in particular would benefit system owners and responsible EPC contractors. First, module manufacturers need to standardize warranty terms around a linear performance guarantee. Second, manufacturers should warrant blocks of modules rather than individual units. Third, systemic changes are needed in the way the industry deals with underperformance.

Linear performance guarantee. While linear performance guarantees have been around for approximately 4 years, they are far from the norm. The standard performance guarantee structure is stepped, with cliffs in year 10 and year 20 or 25. Manufacturers using this stepped performance warranty structure typically only guarantee 90% of nominal power output at the time of installation.

Pressure from industry professionals and the financial community has brought about improved performance warranty terms. As proof, eight of the 53 module manufacturers listed in the “2011 c-Si PV Desktop Reference Guide” (October/November 2011, SolarPro magazine) offer linear power warranties. While the exact terms vary by manufacturer, typically a linear performance warranty will guarantee 97% of nominal output power in year 1 and limit the acceptable change in power output to not more than –0.7% per year subsequently.

Underwriters take a conservative approach in evaluating project risks. With an industry-wide focus on bankability, module manufacturers offering linear power warranties will find that their products are more likely to be specified on projects. Manufacturers that do not offer a linear guarantee will inevitably be forced to change or get weeded out.

Module block warranty. Changing from a module-by-module to a module block performance warranty could simplify the claims process. Rather than system owners and manufacturers trying to identify individually underperforming modules, manufacturers should warrant the performance of discrete blocks of modules within the system. This could be achieved through agreement on methods of modeling and measuring performance.

The tool used to model performance and the inputs to that tool—including the characterization of the module and project-specific variables—must be defined. Performance must be measured with instrumentation of sufficient accuracy to determine whether the module block is underperforming. The variables to be measured include the irradiance, the module temperature and the voltage and current.

A common discrete block at which to model performance would be at the combiner box. Monitoring performance at this level is already common within the industry as it provides a costeffective degree of resolution. It would be simple and efficient to add modeling at this level.

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