Summary
Solar photovoltaic panels, if they're made right in the first place, generally have long life spans. But in the analytical world of financing risk, how does an investor judge the strength behind a new technology or company that hasn't been around as long as the warranty term. The best way is to get some insurance and reinsurance muscle behind you as these new entrants are doing.
Analysis
Warranties and guarantees are assurances generally based on two major factors - the track record of technology and the financial strength of the offeror of the technology or whoever is financing the performance. One of the concerns of photovoltaic power in the public's eye has been the reliability of performance. A company guarantees its panels for 25 years or so, what does that mean?
If the technology has been around for more than 25 years or more in a commercial fashion, like crystalline photovoltaic technology, that's one assurance. Or if the technology has been offered by a large company who has been around more than 25 years, like a Sharp, GE or Bosch, that's another assurance.
But what if you have neither - a relatively new technology and/or relatively new or relatively small companies? Assurances from unfamiliar applications or companies don't encourage purchase. This is especially the case as photovoltaic systems are increasingly required to perform at a certain level, especially to please third party investors. New entrants, whether thin film or crystalline by a new company, can ameliorate this concern by coming in cheaper than the competition, but as the market gets more competitive, this is less of an advantage.
One solution is getting a reliable and noted insurance and, reinsurance company to back your product. Asian PV maker NexPower has teamed up with Munich Re and Marsh GmbH to acquire insurance protection of their product. In Photon International's September 2009 issues, Signet Solar has also signed up. This agreement will improve the "bankability" of the company's product in photovoltaic systems, especially those under third party financing.
The costs of the insurance can be negated by reductions of in-house charges of picking up warranty claims, as well as lower financial rates for more bankable products and systems.
Mark Burger consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
