I still picture myself standing on a super hot rooftop made of smooth stone just on the outskirts of Ahmedabad during 2018. It was the height of summer and it was definitely more than 43°C even under shade, though there were literally no shades there at all, and I was staring at a 500 kW huge solar setup that was only four years old at that time. Beside me was the plant manager, who was a very knowledgable guy of factory processes, was holding his calculator book in one hand and his phone in the other and looking worried.
“We are way below our target of production, ” he said to me, his forehead crinkled in a frown. “We don’t even achieve about five per thousand. Our monthly cost losses run to hundreds of thousands of rupees, and apart from that the solar firm with whom we had purchased the panels is completely not responding to our calls.”
After we connected the array of strings to a tester, the issue could hardly be explained more clearly. The solar panels had lost more than twice the amount of efficiency expected. Micro-cracks, potential induced degradation (PID), and hotspots had rendered a solar asset meant for 25 years a very dear and unproductive investment. Procurement only focused on the immediate cheapest solution i.e., initial CapEx and ignored the whole idea that long-term cost and revenue could only be tied to a plant’s lifetime operation.
That was a very painful and educational example, one of the reasons I changed the way I perceive energy acquisition through solar power, especially in the case of India’s B2B and industrial sectors where the competition is extremely close and the difference between the companies often lies in the power costs. When you decide to buy power with solar you can’t merely view it as a single transaction. Instead, one should perceive it as a capital expenditure project of about 25 to 30 years. An error in this regard will not merely rob you of low-cost electricity, but it will negatively affect your company’s balance sheet actively.
Frankly, getting a grasp of the solar panel’s effective lifetime plus figuring out the promises made by the solar panel companies is quite difficult to do. So, let us see what happens in the market, go past the marketing talk, and work on a strategy that will protect your capital while being the basis of your solar investment.
Lifetime and Wearing Down of Solar Panels: Degradation versus Catastrophic Failure
When someone asks me, “Do solar panels really last long?” I always correct them that the proper question is not about degradation or failure. A solar panel, on its own, will not fall down on any given day of its life due to something other than a lightning strike, a catastrophic hail storm or an incompetent install.
Contrary to what you might expect, they don’t break down because they don’t have mechanical components or moving parts, for that matter, unlike diesel generators or an industrial air conditioning unit.
Instead, they get weaker and weaker in light energy harvesting over time.
The gradual chemical and physical loss of solar energy harvesting capability by solar panels is called degradation.
Interpreting Degradation Trend
Each year that you leave your panels on a sunny spot of nature, their efficiency or their capacity to transform the same amount of light into current and electricity will fall slightly. In the case of high- quality monocrystalline and Tier-1 solar panels, the annual degradation rate according to industry standards has averaged 0.5% to 0.7%.
Here’s the way you look at it:
- Year 1: After initial stabilization, the panels will operate at 100% of their capacity.
- Year 10: A 0.5% annual drop will bring it down to about 95% of original output.
- Year 25: It comes close to the end, around 87.5% of nominal.
This is a product which is quite durable. But, and this is a very big but, this projection assumes that you have a top-of-the-line product and that you installed it in a perfect manner. In places with extreme weather conditions such as India, where the industry belt is, the solar panels have to face a lot of problems like thermal stress, dusty particles in the air, and changing climate. If you end up buying an untested module, this annual drop of 0.5% can easily go to as high as 1.5% or 2%. The asset becomes so poor performing by the 10th year that it would be impossible to get any return of investment.
LID and LeTID: the Degradations in the Beginning
There is one more important point which is not discussed enough, the degradation in the first 12 months and the degradation caused by temperature and light, called LID and LeTID. They are two industrial abbreviations, but they are important as they affect the first-year performance of your project.
- Light-Induced Degradation (LID): It occurs after the first period of light exposure, which may take a few days. In contact with boron and oxygen, silicon will quickly lose its effectiveness; the degradation can reach 2 or 3% of the nominal power.
- Light and Elevated Temperature-Induced Degradation (LeTID): This happens particularly for the region of hot climate, for example, Rajasthan and Gujarat. The solar panels contain high-quality silicon to ensure that there is no degradation when installed and put into service. However, many producers make solar panels using low-quality silicon. Hence, they tend to lose their power by 1 or 2% within 2 years, which makes them not cost-effective.
Only the very best manufacturers mention these facts clearly in the product specification. This way buyers can understand what is included in Solar Panel Warranty and Life Span right at the beginning. If the vendor promises that their modules’ efficiency won’t drop in their first year, he is either lying, or he is not an experienced solar guy. Either way, you’d better run for the hills.
Interpreting the Small Print: Double Protection Warranty?
It is easy to make a mistake here. I observe that even some of the most intelligent heads at procurement and well-experienced managers of the company finance are confused by the solar panel warranties. They think that the huge bold printed warranty label “25-YEAR WARRANTY!” they get at a solar company’s show, or from a brochure, will protect them completely during the next 25 years.
To my surprise, the solar industry seems to have a special technique for confusing the buyers which they call by the term ‘different warranty.’ It is no longer that solar panels come with one single warranty that works the way you expect. It is now a two-warranty situation where each of the two is valid under different conditions. In this case, it is necessary that to get a good result you first learn well what each of these warranty conditions entails to you. That is the only way you would be able to understand the interplay of Solar Panel Warranty and Life Span of your project as a whole.
1. The Product (or Material) Warranty
It is a classic type of warranty.
Such as physical defects, production flaws, premature breakdowns, etc. A broken cell, or a loose junction box, a peeling-off frame, these are all physical issues covered under this warranty.
Historically, the average warranty period for products within the industry was about 10 to 12 years.
Nowadays, the leading brand warranties have increased the duration to 15, and even top brands like Sunpower offer up to 25 years warranty for premium n-type tunnel oxide passivated contact (TOPCon) or heterojunction (HJT) modules.
Doubt that a vendor is only ready to provide a very weak 10-year protection period while your project is big scale industrial rooftop project. It is actually their way of saying that they are not confident about their product durability.
Warranty on Performance/Output Level (also called ‘power output warranty’)
One of the promises here is about the gradual deterioration of solar panel performance over time, which can be very much predicted using the formula for a linear decline we discussed previously.
As an example, a power loss warranty can commit to panel output degradation not dropping further the 98% level during the first year and the gradual annual power loss not being more than 0 5% after that period so a promise of about 80% to 85% performance at 25 years.
However, and more importantly, the snag is when your panel’s performance is dropped to the half during the fourteenth year due to a major break or defect, yet your warranty coverage only went to the 12th year, your warranty might not even provide any protection for you.
We all know what that is physical damage to a panel, a manufacturing defect, installation problem but in the industry language, they are all considered as ‘workmanship warranty’ issues. The performance warranty is only there to address the problem of gradual cell deterioration over time, which is a natural phenomenon (so-called degradation).
The problem is quite large and it is a very common occurrence for solar installations where the product is covered by some types of warranties but not necessarily by all of them.
That is a fundamental reason why it is necessary during solar PV contract negotiations to combine an adequately secured product warranty with a balanced perspective on your Solar Panel Warranty and Life Span, without overemphasizing either.
What About B2B Solar ROI: Financial Modeling Beyond Year 10?
We need to switch to monetary language here. A typical commercial and industrial solar power system in India is designed to be very attractive from a cost recovery point of view with a payback period of 3-4 year on paper. There can even be solar projects where the solar payback period is zero.
Still, it is not just the high grid prices, which is the driver here, as the solar project can be very profitable because these projects also enjoy tax incentives in the form of accelerated depreciation which further reduces the effective cost of capital.
But what about year 11, year 18?
Of course, it makes sense that the initial investment gives a quick ROI, but you can’t ignore what is happening in the long term either. A proper investment plan for the project will involve figuring out the net Present Value (NPV) and the Internal Rate of Return (IRR) that are to be achieved within a 25-year lifespan. Again, your results will rely largely on the efficiency of your solar panels which is going to degrade with use so that your PV system will be more or less productive after several years.
The Huge Difference That Power Loss Over Time Has on Profit
Let’s suppose we compare two bids that we have got for the development of a 1 MW solar power plant at the premises of a textile unit in the province of Maharashtra.
Low-cost, low-tier solar panels that would significantly increase the total number of projects but are going to be much more expensive on paper. On the downside of these panels is a 1 0% annual degradation which would result in 80% capacity utilization at year 20.
For the high-end option B we are looking at using the highest efficiency, best quality, industry-approved solar components with the lowest 0 4% annual power decline. The first cost is going to be a lot higher but the solar system will continue to generate electricity at almost the same level up to the 20th year.
In Option B, running the same numbers over two decades yields a scenario where Option B totally crushes Option A in total cumulative savings and Net Present Value (NPV). At the end of year 7, the initial 15% savings on CapEx of Option A is nullified due to the lower power output. You start to lose money from then.
The combination of a strong Solar Panel Warranty and Life Span of these modules reduces the long-term financial risk significantly. So it is not merely a matter of buying solar panels; it is about purchasing operational cash flows that are fairly predictable and long-term.
Actionable Sourcing Strategy: Vetting Manufacturers Like an Industrial Pro
To safeguard your enterprise against solar panel-related losses, you should develop a harsh vetting approach that you should use as if you were industrial professionals. Here are some of the key pointers to your next solar procurement cycle that you can use right away.
Step 1: Demand Bankability and Tier-1 Status
Never buy solar panels produced by a company that is not on the BloombergNEF (BNEF) Tier-1 Solar Module Manufacturers list. If the sun is not shining for you, neither is the case for them.
If there is such a case, then let me explain it in a different light: “Tier-1” does not actually indicate that the panels are somehow of a superlative quality. In reality, what the tiering system measures via BNEF is the bankability factor. This is a confirmation that the company has, for example, own-brand and own-manufactured models that have been installed by at least six different project developers whose sizes are greater than 1.5 MW and whose financing sources are commercial banks not directly relating to the developer itself. These bankings have happened over the last two years.
Why does that fact matter when it comes to your risk management over the long-term? Because when you need to claim a warranty in year 22, chances are that a solvent manufacturer will actually be around. If the manufacturer is bust by year five your warranty claim of 25 years is just a piece of paper with no value at all.
Step 2: Look for Independent, Accelerated Testing Reports
Be sceptical of only relying on the standard IEC (International Electrotechnical Commission) or BIS (Bureau of Indian Standards) certifications. They indicate bare essential safety and performance standards, they don’t reflect prolonged real-world stresses during 25 years of usage at a factory.
Therefore, if a vendor has no independent testing reports of this nature, they are hiding something, ask them for PVEL (PV Evolution Labs) Module Reliability Scorecard or reports from such third-party testers as Retc (Renewable Energy Test Center). The tests that would be executed by these labs on solar panels would not only be tough ones, but accelerated ones as well e.g:
- Thermal Cycling: Repeated switching of the solar panel temperature between -40 and 85 degrees Celsius several hundred times to locate joints with weak solder.
- Damp Heat: Exposing the solar panel to a high relative humidity of 85% and a temperature of 85 degrees Celsius for thousands of hours to simulate the testing of delamination.
- Mechanical Stress Sequence: Pressing, bending, and vibrating a module to find out how easily micro-cracks form under high winds or heavy snow.
If you find that a manufacturer is regularly ranked as a “Top Performer” in the PVEL scorecard, you will rest assured that their performance in reality will be very similar to the performance that was used in calculating the Solar Panel Warranty and Life Span.
Step 3: Verify ALMM Compliance for the Indian Market
If your business is going to install a grid-connected solar project in India, you absolutely must confirm that the solar modules are present in the Approved List of Models and Manufacturers (ALMM) issued by MNRE. This is done mainly to ensure that our country is self-sufficient when it comes to energy needs. Also, by imposing such a rule, the government is able to maintain quality standards of the products that are feeding the grids. In such a case, procuring a solar module that has not been approved under ALMM would only add one level complication after another, making it a total bureaucratic nightmare.
The Bottom Line: Optimize an Asset Rather Than a Commodity
The overall industrial solar scenario is undergoing a complete change and that too is happening very fast here in India. With the adoption of more efficient technologies like bifacial panels and n-type silicon solar cells, the long-term electricity production potential of solar has never been higher.
However, there are certain conditions that you have to fulfill for that to happen. You should focus on quality, long-term value, and reliable data when making your procurement decisions only then you’ll be able to get maximum benefits from the solar investments.
The solar panels need to stop being seen as just commodities that are procured through the lowest bidding, i.e. auctions. The solar modules should also be considered as a part of your infrastructure. You will get the necessary assurances only if you verify the certifications, press the manufacturers for providing you with their third party-test data, study the warranty terms, and so forth, and that can save you a lot financially in the long run. Your business will definitely be very grateful for this investment made in solar through solar panel warranty and life span.
