SAN FRANCISCO -- Do consumers need to pay someone to manage their solar equipment warranties? The answer will determine whether there will be a growing market for warranty management plans, which are novel and starting to pop up in the residential market.
Assurant announced two warranty management plans this month for U.S. homeowners and are offering them through solar panel maker and system integrator Aleo Solar and Connecticut's Clean Energy Finance and Investment Authority, which just launched a new $60 million solar fund. Homeowners who need repairs or replacements of their solar energy equipment, such as panels, inverters and mounting gear, would call Assurant, who will pay for labor and shipping and coordinate the warranty claims with manufacturers, said Jeanne Schwartz, vice president of new venture commercialization at Assurant.
What's more, if a manufacturer is no longer in business, Assurant's plan will still honor the original warranty and arrange for fixing the problem. This provision is attractive given the dozens of solar panel and inverter manufacturers who have gone out of business or been scooped up because they couldn't stay in business on their own for much longer. A good example of the latter is Hanergy's purchase of three struggling makers of copper-indium-gallium-selenide (CIGS) thin films just over the past year.
"Homeowners may like the idea of clean energy, but they really don't have an idea of how it all works," Schwartz said. Assurant's plans "provide them with a peace of mind and assurance that they will have a worry-free solar experience," Schwartz said.
Having a one-stop place to make warranty claims also could be appealing because anecdotal evidence shows that making a warranty claim can be difficult, said Shyam Mehta, senior analyst at GTM Research. The dispute centers on the performance guarantee and the willingness of some manufacturers to fight and refuse to compensate.
Solar warranties typically deal with the guaranteed performance of the solar panels, inverters and other gear over time as well as at manufacturing-related defects. Major solar panel makers generally offer a 10-year warranty on workmanship and specify how much power they expect their products to produce over 20-25 years. Inverter manufactures typically offer workmanship warranties ranging from five years for central and string inverters to 25 years for microinverters.
As the solar market grows, banks and utilities that buy power from solar project owners often require insurances from project developers and owners. Insurance plans are more common for installations in the commercial and utility markets. But given that solar energy market is still relatively new and there aren't a lot of long-term field data and insurance claims, insurance underwriters and brokers have struggled to craft coverage, according to this study by the National Renewable Energy Laboratory.
Warranty management plans aren't common in the residential market. They target homeowners who own their own solar energy systems or otherwise have to deal with equipment warranties. If they get solar through leasing or power purchase agreements, in which the financing companies are responsible for the health of the equipment, then they wouldn't need to mess with warranties themselves. Solar leasese and power purchase agreements have become popular, but their dominance may not last. Solar equipment is becoming cheaper and more banks are offering loans to allow consumers to buy and own.
Homeowners could cover their rooftop solar through their homeowners' policy. The Connecticut's new solar fund is offering property and liability insurance, along with a warranty management plan, from Assurant. The state expects to support 1,500 residential solar electric system installations, 400 residential solar water heating projects and 40 commercial projects. Assurant will cover the residential solar panel and water heating systems.
For Aleo Solar, Assurant is offering only the warranty management plan, which can then be marketed by installers who sell Aleo's products. (See my video interview with Shane Messer, executive vice president of sales and marketing at the North American subsidiary of Germany-based Aleo, during Intersolar in San Francisco earlier this month).
The annual premiums for the warranty management plans will vary, depending on factors such as the types and manufactures of equipment and locations of the installations. The premiums generally range from 0.5 percent to 1 percent of the price of the residential systems, said Vera Carley, a spokeswoman for Assurant.
Assurant entered the solar market only in early 2012 and started in the commercial, rather than residential, market. For commercial systems, the premiums for warranty management run from 0.3 percent to 0.8 percent.
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