During the solar development phase, the project developers have to address different problems and find solutions for example obtaining the correct leasing permits, things related to finance, and so on. Warranty-related risks may not be a priority on the list. Solar projects represent a decade of investment. The ROI is directly related to the amount of electricity generated every year. If the system degrades over time easily then there will be a less long-term value to derive from the system. Warranty is a crucial part of the solar panel installation setup. PV module warranties are a strong guarantee from the manufacturer to the project owner for a period of 25 years. The two most important factors on warranty include the performance and the product warranty. Generally, performance warranties indicate the panels will perform 80 – 90% of their capacity for a given period of time. Product warranty on the other hand is based on the materials and quality. The enables customers to point out the damages and defects in the panel itself and also if it's working or not. In this article, the focus will be on third-party insurance warranties.
Most solar panels come with a 25-year warranty period. These are basically given out by tier 1 solar panel manufacturers. Tier 1 manufacturers are well-established big companies in the solar industry. When a warranty expires, they will still be producing power but at a reduced rate. Nevertheless, they can be still used to power appliances. A study was done by NREL (National Renewable Energy Laboratory), the article reviewed the degradation rates of flat plate terrestrial modules and systems throughout the past 40 years. The majority, 78% of all data, reported a degradation rate of <1%/year, so it’s more likely the average degradation rate still allows good panel performance even after 25 years. Manufacturers’ product warranties are like an important additional coverage for its business practices. In case of a solar panel fails, the manufacturer will ship another panel and bear the charges of shipping cost and labor cost to replace it.
25 years is a long time, there are many solar companies that have gone bankrupt and have gone out of business in a short period of time. In order for this not to happen, companies usually offer third-party warranties and other forms of protection. The solar market is very volatile and the chances of manufacturers going bankrupt is high this led to investors bearing the full risk of panel performance and the overall long-term profitability of their solar investment. Warranty risks possess a risk to the PV industry. They cannot be insured on an annual basis and the risks generally increase and change over time. In order for manufacturers to remain competitive and to be able to survive the competition, reliability is essential for growth. This led to an ever-increasing trend for module manufacturers to acquire third-party warranty coverage for their products.
Extended third-party warranties are available from different vendors. One example is Munich Re an international reinsurance company that provides reassurance coverage for solar panels registered by manufacturers with the company. This insurance guarantees profitability for PV projects. This mutually benefits both the manufacturers and the investors in different ways like it enables sales on a global level. People get to know more about the products and gain confidence in product performance and this positions the manufacturer as a reliable business partner. For people who invest it gives a sense of long-term security of solar investment. These third-party insurance policies might sometimes not suit the interest of the buyer because of different conditions. Before buying the insurance knowing the terms and conditions and understanding it will be helpful. A careful approach should be made, this can be done by comparing and understanding the different policies that are laid out.