Panel manufacturer’s warranty
Performance warranty insurance is taken out by the manufacturer and protects the manufacturer in case of a performance warranty claim due to PV-modules not meeting the performance specifications. The insurance bears the costs incurred by the panel manufacturer to honor the guarantee. The insurance also optimizes the balance sheet structure of the panel manufacturer. The insurance is not subject to third party claims.
Solar panels have two separate warranties
The product warranty term usually is about 10 years and is supposed to protect your investment against bad construction of the solar modules. E.g. delamination, bending or short circuit. During the first ten years you are compensated for the material loss of your panels in case of a valid warranty claim, meaning you get a new panel but you have to take up the consequential losses such as labor, transport and business interruption (loss of income) yourself, leaving only a fraction of the costs compensated.
Performance output warranty
The performance warranty doesn’t say anything about the structural integrity of the panel, it even excludes any output loss due to a structural problem and in that case it refers to the (perhaps already ended) product warranty. The performance output warranty protects you against a (sudden) loss of performance while the module is still fully intact. There is a given depreciation line usually 90% performance output after 10 years and 80% after 25 years. This can be done in a stepped way or linear. Stepped means the 90% warranty already applies at day one and the 80% warranty kicks in at the first day after year 10.
Solar performance warranty insurance?
Some manufacturers have protected your warranty interest by a third party insurance, claiming that when they go bankrupt, and legally their warranty is gone, an insurer takes over. These insurances have many different conditions which may not be in your interest, for example:
- High deductible per claim, sometimes up to $ 250.000,- or more;
- Low overall limit of liability, no further claims paid after limit is reached;
- Overall limit of liability is reduced by deductible payments;
- The price of the manufacturer is reimbursed, not the commercial price you paid;
- Depreciation on the material value of 4% per year;
- Claims will be handled in China, by a Chinese insurer, according to Chinese law;
- Only material cover, mostly no compensation for consequential losses such as labor, transport or loss of income;
- The insurance is not subject to third party claims;
- The insurance terminates after bankruptcy of the manufacturer.
To know exactly what’s covered you really have to read and understand the details of the insurance, the terms and conditions. These terms and conditions are found in the policy wording and the policy schedule (document).
In the policy schedule you find the most important information, the limit of cover, the way the cover is provided and the deductible.
The biggest fundamental issue is that although it is the risk of the investor and in his interest to be well insured, this insurance is arranged by the manufacturer that has totally different interests, especially after a bankruptcy.
Inherent defect coverage
Due to the abovementioned issues Solarif has developed their own insurance to protect an investor against material loss and consequential losses due to inherent defect of the panel, for example delamination, bad soldering or short circuit in the junction box. Also business interruption (loss of income) is covered.
To provide such a cover Solarif has their own certification program to approve solar panels. If the outcome of the factory risk assessment meets our requirements the panels approved become certified and listed on our certified product list. Clients using a certified panel can take out our “Inherent defect” coverage as extension of our operational all risk insurance.
With the “Inherent defect” coverage the owner protects his solar project up to 20 years against damages due to inherent defect (a manufacturers’ defect) of the panels including material damage, consequential losses such as labor and transport costs, and business interruption (loss of income).
In case of an inherent defect the cover supports the warranty by paying the costs not paid by the manufacturer such as replacement costs, transport costs and loss of income. The full costs, included material costs of the panels, are compensated if the manufacturer is bankrupt, your losses are covered and your returns secured.
This cover is taken out by the owner on the project, it’s his policy. The owner is in charge, it’s his claim and his arrangement, no third parties involved and when he sells the project the insurance can be continued by the new owner. Therefor also the bankruptcy risk of the manufacturer, that has great influence on the future value of the project, is mitigated.