The solar panel and photovoltaic cell industry has been facing some big challenges for years now. Prices have been falling and demand has continued to rise, and globally, product quality has been rising as well, which all should be great news for the industry. But as we revealed in this Warranty Week article from 2019, the solar manufacturers based in the United States are lagging behind their global counterparts in terms of quality, meaning more product failures, and higher warranty claims costs.

The lower quality of photovoltaic modules manufactured in the United States, reported by Photovoltaic-Institute Berlin, has affected the warranty costs of the U.S.-based companies in this article, especially the larger ones.

Anecdotally, most U.S. residents are likely familiar with "solar scam" stories, which are especially popular consumer advocacy pieces for local news networks. In our U.S. Power Equipment Warranty Report a few months ago, we detailed one such story, of a solar panel installer called Pink Energy, and the lawsuits in which they and generator and solar cell manufacturer Generac are embroiled. In short, so many of Pink Energy's solar panels failed that they went bankrupt trying to pay the warranty claims. Pink Energy says it's Generac's solar sotrage software at fault, Generac says it's Pink Energy's improper installation methods at fault, and meanwhile, homeowners are left with non-functional pieces of metal on the roof and large loan payments due at the bank.

We spoke to an American homeowner working in the green energy field, who expressed his misgivings of rooftop solar panels, despite his enthusiasm for electric vehicles and the new offshore wind farms planned for the urban centers of the east coast. He states that utility companies have occluded the process of homeowners selling solar energy back into the grid, initially one of the big selling points of adoption. And he said that since most homes don't have their own on-site battery storage, the excess energy produced on a sunny day often goes to waste, and on a cold winter day, they still need to buy energy produced from natural gas.

Solar power is also lagging behind other types of renewable energy in the United States. According to the U.S. Energy Information Administration, in 2022, just 3.4% of all energy generated in the U.S. came from solar panels, compared to wind's 10.2%, and hydropower's 6.2%.

Solar panel companies are trying to combat these perceptions by offering the reassuring guarantee of a very long product warranty, often underwritten by an insurance company. Those who attended Eric's Industry News Flash on the home and appliance industries at last April's Global Warranty Innovations conference likely remember his reporting that a new solar start-up, Violet Power, is now offering a 50-year warranty for all of its photovoltaic solar panels, the longest product warranty we've come across so far. (Hint: Eric's giving three more Industry News Flashes next month at the Extended Warranty & Service Contract Innovations conference in Chicago!)

Violet Power isn't alone, either. SunPower Corp., for example, offers a 30-year warranty on some of its solar panels, which was the old record holder for the longest product warranty. SunPower has only existed as a company for 38 years.

To create this report, we first compiled a list of all of the pure-play solar power manufacturers that report their warranty data. This eliminated companies like Generac, which primarily makes gas-powered generators but also offers solar storage solutions. This also eliminated companies like General Electric, which does make solar inverters as part of GE Renewable Energy, but also makes wind turbines, jet engines, and gas power infrastructure, among other things.

We identified nine solar manufacturers for this report. This includes five based in the United States, SunPower Corp., First Solar Inc., Enphase Energy Inc., FTC Solar Inc., and Pacific Green Technologies Inc.. We also found one Chinese manufacturer that publicly reports its warranty expense data, JinkoSolar Holding Co. Ltd., one based in Israel, SolarEdge Technologies Inc., one based in Canada, Canadian Solar Inc., and one based in Singapore, Maxeon Solar Technologies Ltd.

For each of the nine companies, we gathered three key warranty metrics from their annual reports and quarterly financial statements: total claims paid, total accruals made, and the ending balance in the warranty reserve fund. In addition, we gathered data for each manufacturer's product sales revenue. We used these totals to calculate the two expense rates we present for each company in this report: claims as a percentage of product sales (the claims rate), and accruals as a percentage of product sales (the accrual rate). Because we're looking at ratios in this report, we can compare larger companies to smaller ones, and compare JinkoSolar, which reports in Chinese yuan, to the other eight, which all report in U.S. dollars (even the Israeli, Singaporean, and Canadian manufacturers).

SunPower

Our first two manufacturers, SunPower and First Solar, both have been reporting their warranty expenses for the longest period. Both have published their warranty expense data in 78 consecutive quarterly reports, so these are the most extensive data sets we have available for this industry. Figures 1 and 2 both show the solar industry's persistent pattern, with accrual rates usually exceeding claims rates by a wide margin, but claims eventually catching up.

Figure 1 shows the quarterly claims and accrual rates of SunPower Corp. The company was accruing around twice what it was spending in claims for about its first decade of reporting, but claims costs have skyrocketed especially since 2018. Lower revenues during the pandemic also helped drive up the claims rate to a high of 6.3% during the first quarter of 2021.

SunPower offers a 25-year warranty for "everything on your roof," including the solar panels, micro-inverters, racking, and service, and a 10-year warranty for "everything not on your roof," such as storage and monitoring. So we have to remember that a solar panel installed in 2004, at the beginning of our data frame, is still under its product warranty.

There's always a lag time between accruals and claims, but for this industry, it can be 10 or 15 years between when accruals are set aside and when the repairs for that product become necessary. SunPower was clearly aware of this, because it continued to accrue funds into its warranty reserves, despite low claims. After the spike in the claims rate from 2018 to 2021, we're sure they are very glad they had those funds set aside for when they became necessary.

Now, revenues are back on the rise for SunPower after the pandemic lull. In the second quarter of 2023, claims totals were just 1.3% of product revenue, and accruals were 2.2% of revenue, returning back to the normal pattern.

First Solar

First Solar has a similar pattern, except its claims rate first caught up to accruals back from 2010 to 2014. It looks like a similar pattern emerged during the pandemic, but things seem to be back under control for First Solar as well.

Both SunPower and First Solar saw claims costs fall at the beginning of the pandemic, when it became a safety risk to send repair technicians to homes, and then subsequently saw claims totals rise in 2021.

First Solar's recent big spike was actually in the first quarter of 2022, and mainly seems to be a result of lower revenue. Even still, First Solar is a great example of how solar companies can master their warranty expenses and keep costs consistent and low. That spike in the claims rate was just from 0.4% to 1.6%, still well below the industry's average, and on par with typical average claims rates for any manufacturer. It just looks like a big peak in claims because First Solar's claims rate usually stays below 1%, which is atypical and exemplary for the industry.

Comparatively, SunPower has a usual range of accrual rates between 1% and 3%, and claims rates between 0% and 2%, except for 2018-2021, when that range rose to 2% to 6%. First Solar's typical range of accrual rates is 0.5% to 1.5%, and claims rates between 0% and 1.5%, even including that recent peak. In short, First Solar is much less volatile, and expense rates that are high for the company would be low or average for any of its compatriots in this report.

Enphase Energy

Enphase Energy manufactures solar micro-inverters and battery energy storage systems. As we will see with the Israeli SolarEdge in Figure 6 as well, it seems that the inverters and power storage manufacturers tend to spend a little more on warranty expenses than the solar panel and photovoltaic cell manufacturers do. In Figure 3, Enphase has a wider range of claims and accrual rates, and higher averages, than either SunPower in Figure 1 or First Solar in Figure 2.

In the most recent quarter for which we have data, the second quarter of 2023, Enphase had a claims rate of 0.7%, and an accrual rate of 2.3%. That's pretty average. But it was only at the beginning of 2021 that the company's accrual rate even exceeded its claims rate, for the first time since 2013.

It should go without saying that if you're spending more money than you're putting aside for eight years, your warranty reserves will dwindle. But strangely, Enphase was spending around twice what it was putting aside in accruals for almost every quarter in that eight-year period, but didn't run out of money. We found that Enphase has frequently added extra accruals to its warranty reserves through "changes in estimates," which don't show up in Figure 3.

It looks like Enphase has gotten a handle on this disparity in the past year and a half. The future will reveal whether the manufacturer continues to make normal accruals, or go back to spending more than it puts aside for warranty costs.

FTC Solar

Our next company, FTC Solar, was only founded in 2017, and started reporting back in the fourth quarter of 2020. FTC doesn't manufacture solar panels; it makes solar tracker systems, technology, and software. Solar trackers move the panels around with the arc of the sun to help maximize energy production.

Figure 4 is a great example of what can happen to newer, less-established companies in a field like this.

In the third quarter of 2022, FTC Solar had a claims rate of 50%, and an accrual rate of 90%. This mainly seems to be the result of really low product revenue that quarter. In the second quarter of 2022, the accrual rate was 6.2%, and the claims rate was 5.9%. These are still really high proportions of product revenue, and breaks the typical pattern of accruals exceeding claims.

Pacific Green Technologies

Our next company, and final U.S.-based manufacturer, Pacific Green Technologies, also has produced some strange statistics since it started reporting at the beginning of 2019. In the most recent quarter, the company reported no product revenue, so we had to leave that quarter blank in Figure 5, since you can't divide by zero.

Pacific Green has chosen not to make any warranty accruals in seven of the last 10 quarters, over the past two and a half years. Its warranty reserve balance has been dwindling, and stood at just $400,000 on June 30, 2023. By comparison, the company spent about $200,000 on claims just in the second quarter of 2023. Assuming the company's reported $0 in accruals that quarter is truly accurate, they would have halved the reserve fund during that one quarter alone. The reserve balance has fallen during each of the past 10 quarters, but there's likely some creative accounting and changes in estimates at play here as well.

During the most recent quarter for which we could calculate expense rates, Pacific Green's claims rate was 13.3%, and the accrual rate was 7.2%.

International Manufacturers

Figure 6 shows SolarEdge, the Israel-based solar inverter and tracker company that reports in U.S. dollars. As with Enphase in Figure 3, the average claims and accrual rates are higher than what is typical of the solar panel manufacturers. But at least SolarEdge's accruals have stayed above its claims.

SolarEdge has the largest warranty reserve fund of any of the nine companies in this report, and also had by far the highest claims and accrual totals. Its accrual and claims totals have almost doubled in the past two years, but the expense rates have stayed relatively consistent, so the company is actually showing a lot of strong growth, and an impressive mastery of its warranty costs.

The consistency is impressive, but accruals are a little high, around 6% to 10% of product revenue, and claims are a bit high too, around 2% to 4% of revenue. This is even a little higher than direct competitor Enphase. But comparing Figure 6 to Figure 3 shows that SolarEdge is much less chaotic, though it is spending a higher proportion of its revenue on warranty costs.

Our next three companies, JinkoSolar (Figure 7), Canadian Solar (Figure 8), and Maxeon Solar Technologies (Figure 9), all report on an annual basis, rather than quarterly.

We put JinkoSolar's expenses on the same scale as SolarEdge's to really illustrate the difference. But JinkoSolar makes solar panels and photovoltaic cells, not inverters or battery storage.

JinkoSolar's claims rate has stayed at about 0.3% for all four years it has reported, while the accrual rate has remained at about 1%.

As an interesting aside, apparently, U.S. Customs has been blocking the import of JinkoSolar products since 2021, due to concerns about the use of forced Uyghur prison camp labor, and in May 2023, the FBI and Homeland Security raided their manufacturing facility in Florida.

Canadian Solar accrued about 1% of its product revenue from 2004, when it started reporting, to 2012, despite the claims rate never exceeding 0.1% during that period. They must have noticed, and dropped accruals to 0 in 2013; since then, claims have often exceed accruals, most noticeably in 2020. Their reserve balance was dwindling until the end of 2020, but has increased again since then.

Finally, we're looking at the Singapore-based Maxeon Solar, which was launched as a spin-off company from SunPower in 2020.

Maxeon's claims have exceeded its accruals in all three years it's reported its warranty data. But the company's warranty reserve balance has barely budged from year to year, so perhaps they're still crafting their formula and getting creative with changes in estimates.

Certainly, this is an industry that seems to defy many of the hard rules of warranty accounting, even the most basic: accrue more than you spend on claims. Both the solar and wind power industries have had their share of challenges, but the expense rates of the solar manufacturers are especially erratic. With 30- and 50-year product warranties, these companies have plenty of time to master their accrual methodologies.