PV Performance Guarantees (Part 2):

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Proof of Performance & Guarantee Structures
  • PV Performance Guarantees: Proof of Performance and Guarantee Structures
    PV Performance Guarantees: Proof of Performance and Guarantee Structures
  • Meter reading
    While PV system production, as measured at the utility meter, ultimately determines plant revenue, this meter reading alone is not adequate to determine whether the asset is performing properly.
  • Results may vary
    While TMY data sets are good indicators of long-term PV system performance, according to the National Renewable Energy Laboratory the data can vary as much as ±10% in any given year and ±30% in any...
  • PV Performance Guarantees: Proof of Performance and Guarantee Structures
  • Meter reading
  • Results may vary

PV performance guarantees are intended to keep large-scale PV systems operating as expected and mitigate the risk to project owners and investors. The system owners must be legally at risk in order to claim the 30% federal investment tax credit. However, the owners are typically not in the business of designing and operating large-scale PV systems. The engineering, procurement and construction (EPC) contractor has this expertise. Therefore, the EPC contractor who designs and constructs a large-scale PV system is generally required to guarantee a predetermined level of performance.

In Part One of this article (“PV Performance Guarantees: Managing Risks & Expectations,” June/July, 2011, SolarPro magazine) we described the dynamic between the protagonists in performance guarantee negotiations in great detail. We also described the concepts and calculations that typically inform a performance guarantee—such as a project’s specific production or performance ratio—and considered guidelines for measurement, accuracy and proof. Having established this background, we now outline the major approaches to proof of system performance and discuss the hardware required for collecting plant metrics. We also describe the typical structures found in a performance guarantee and call out some structures that require special consideration.

Approaches to Proof of Performance

Because of the complex operational dynamics of PV energy plants, owners are anxious to apply a simple and exact method for proving performance. Here we outline the most common approaches.

Full-wrap product warranty. This type of performance guarantee asks the EPC contractor to manage the performance expectations and manufacturer warranties for the primary equipment, including PV modules, inverters and main collection gear (transformers, switchgear and substations). This “one neck to wring” approach asks the EPC contractor to handle product warranty issues and periodic system checkups. This model is essentially a pass-through of multiple product manufacturer warranties and usually includes workmanship warranty underwriting under an O&M contract. Some semblance of a full-wrap warranty is included in almost all performance guarantee structures.

Output performance guarantee. The only thing that matters with an output performance guarantee is system production at the meter. Although it offers a simple way to measure performance, such an arrangement implies a comparison to simulation, regardless of the near-term climate conditions, and has a tendency to place all of the risk assessment and risk responsibility on the EPC contractor.

Performance ratio guarantee. This type of guarantee attempts to draw a correlation between measured solar energy (and other site conditions) and system output—the classic modules-to-meter approach. Such a method often places all hopes on measurement accuracy and, as such, depends greatly on the appropriate performance measurements, or plant metrics. In this model, the complexity of the operating PV plant is not taken into account; it is replaced by a simple input/output determination. The performance ratio attempts to take climate out of the determination so that weather predictions are not needed. The performance ratio is instead tied directly to instrumentation and precise measurements of site conditions and system operation.

Calibrated performance guarantee. The final standard PV performance guarantee model is essentially a hybrid, a mix of expected or simulated plant behavior and real-time plant metrics. Although a calibrated performance guarantee tends to be complicated and expensive, this type of guarantee can help investors and developers achieve greater financial confidence. Such a model sets up an inherent need to measure, validate and mitigate problems with consistently underperforming systems.


It bears mentioning that most attempts to broadly characterize PV output fail in some respects and, conversely, most in-depth attempts tend to overcomplicate a relatively simple set of concepts. While it is hard to get it just right, a well-structured performance guarantee helps ensure a project’s success. Unfortunately, getting the performance guarantee structure just right is not as easy as it might seem. PV plants are input-dependent and temperature-dependent, with variable impedance and multistage current sources. The implications of all this variability are difficult even for veteran solar professionals to fully grasp. Understanding the following two key concepts is essential when crafting a PV performance guarantee.


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