How Credible Is the 25-Year Photovoltaic (PV) Performance Warranty?—A Techno-Financial Evaluation and Implications for the Sustainable Development of the PV Industry

Abstract

To support the bankability of PV projects, PV manufacturers have been offering some of the longest warranties in the world, typically in the range of 25–30 years. During the warranty period, PV manufacturers guarantee that the degradation of PV modules will not exceed 0.4–0.6% each year, or the buyer can at any time make a claim to the manufacturer for replacement or compensation for the shortfall. Due to PV popularity, the performance warranty terms have become more and more competitive each year. However, long-term PV operating data are very limited, and the bankruptcy of PV manufacturers has been quite common. Without a proper methodology to assess the adequacy of the warranty fund (WF) reserves of PV manufacturers, the 25-year performance warranty can reflect an empty promise. To ensure sustainable development of the PV industry, this study develops a probability-weighted expected value method to determine the necessary WF reserve based on benchmark field degradation data and a prevailing degradation cap of 0.55% per year. The simulation results show that, unless the manufacturer’s degradation pattern is significantly better than the benchmark degradation profile, 1.302% of the sales value is required for the WF reserve. To the best of our knowledge, this is the first study that provides WF reserve requirement estimation for 25-year PV performance warranties. The results will provide transparency for PV investors and motivation for PV manufacturers to engage in continuous quality improvement, as all such achievements can now be reflected in the annual report results of manufacturers.