Nov 2021

Hidden Traps

January 2021, California. The STS US office receives a message from Mexico. A major global developer with an extensive portfolio of solar projects in the region is experiencing excessive module power degradation and has heard that STS is providing field services to identify and mitigate the issue. The module supplier for this portfolio is amongst the largest in the world and, thanks to a trusted relationship, is supplying most of this developer’s module needs in Latin America. This time, however, the module quality is falling short of expectations, and the developer has had to deploy additional resources to closely monitor module performance and keep the degradation rate in check. This represents unexpected costs and threatens long-term financial returns for investors. 

Figure 1: Identifying a defect in the field is much more costly than identifying it in the factory

August 2021, California. For more than a year, STS has been monitoring the solar energy market for activities related to the allegations of forced labor affecting the industry. The Withhold Release Order (“WRO”) issued in June 2021 is now being enforced by the US Custom and Border Protection (“US CBP”), and a large US utility-scale developer has just been notified by its supplier that their module supply is being detained at the border. This comes as a surprise to the US developer who has spent millions of dollars on a critical supply of modules that may never make it into the USA, putting their entire solar assets portfolio at risk. The US developer is left with no tangible contractual recourse and is now looking to other suppliers to urgently bridge the procurement gap. 

Figure 2: New supply chain requirements are emerging

The module purchase agreement is usually the first recourse when events do not go as planned. These cases are, fortunately, still relatively uncommon in the PV industry. Nonetheless, the strength of a purchase agreement is revealed in the stress-cases just described. Small contractual details negotiated upfront often make a meaningful difference in how these cases are resolved. 

This article shares some of the minor, yet essential details that the buyer must pay close attention to when finalizing a purchase agreement. It is based on a decade-long experience of STS advising clients across the globe on how to avoid “hidden traps” in purchase agreements, delivering hundreds of conformity assessment projects, and supporting the purchase of tens of GW’s worth of PV modules, inverters, transformers and energy storage systems. 


Let’s take again the example of the portfolio of solar projects in Mexico affected by a lower-than-expected quality of the modules delivered. The contract was not unlike previous, similar contracts; modules even went through an extensive inspection process during manufacturing. Lenders and developers had grown comfortable over previous projects about the inspection firm and the contractual language. However, the inspection was not performed by an ISO17020-accredited inspection body, and the contract stipulated the use of the manufacturer’s Quality Control Plan (QCP) during manufacturing. The use of the manufacturer’s own QCP is, of course, ideal for them since they decide on the quality level that they will ultimately deliver. In most cases, the modules delivered are, indeed, of acceptable quality, and the developer can focus on the next project to be developed. However, in this case, there were “hidden traps”. The QCP was authorizing up to 7 cells with soldering defects on a single module. Soldering defects may reduce the performance of the module in the field, increasing the series resistance, and/or reducing the photocurrent. These defects may also cause hotspots with potentially catastrophic consequences if not kept in check during operations. Today all modern manufacturing lines have electroluminescence (EL) tools capable of identifying such defects. A qualified (accredited) inspection body can prevent them by following three main steps:

First, ensuring that the EL tools are properly calibrated before manufacturing. A qualified inspection body will verify the EL tools settings, during pre-production inspection, and ensure that the EL images created are not blurry or too dim to identify defects. 

Secondly, verifying EL images coming out of the production lines. This is done by selecting a subset of the production lot and performing pre-shipment inspection on that sample before releasing the lot.

Thirdly and maybe most importantly, special attention should be made on the details of the quality requirements stipulated in the purchase agreement (the “Requirements”). Negotiating these Requirements is tedious and requires a lot of attention to details and a lot of experience. 

It is a common “hidden trap”, for instance, to start the negotiation of these Requirements too late in the process, when prices and other contractual elements have already been agreed upon. Knowing that the buyer will not walk away from the deal at this late stage, we have seen some manufacturers trying to impose, their own quality control plan (QCP), or requesting the right to modify the QCP at any time, unilaterally. This risk is exacerbated in the seller’s market conditions that we are observing today. To avoid this “hidden trap”, we recommend starting the discussion on the Requirements as early as possible, and ideally during the on-boarding process of the potential supplier. We also recommend starting the negotiation with a thorough set of requirements sufficiently protecting the buyer, and, in particular, we recommend using the Industry Standard STS-STD-PVM1:2018© as basis for the negotiation. 

Figure 3: The STS Standard STS-STD-PVM1:2018© is a thorough description of manufacturing and dispatch approval requirements that may be used effectively as a start of quality requirement negotiation

It is our experience, for instance, that most QCPs are not thoroughly describing some elements described in STS-STD-PVM1:2018© (for instance, what happens in case of identification of non-conforming products). The Requirements should also avoid the main technology risks and be adapted to the latest technologies. We indeed see many draft requirements being copy-pasted from previous projects, and not taking into account the specificities of the products. As an example, the emergence of multi-busbar or multi-wire technology presents specific risks to the buyer, which should be correctly captured in the Requirements. One of such risks is associated to soldering defects. It is simply more difficult to solder multi-wires compared to 3, 4 or 5 busbars. The previous example of the portfolio in Mexico is here a good illustration. 

Figure 4: Soldering defects are more common in multi-busbar technologies
Figure 5: Example of rework rates for 5 busbars and 9 busbars (wire) technologies, in the same factory, showing the increased complexity of manufacturing multi-busbar modules.

Another example is the increased occurrence of “tree-shaped cracks”, a cell crack, branching in several directions. This type of cracks can lead to reduced performance and create hotspots. Multi-wire technology has a higher likelihood to create crack indentations at the edge of the wire, often branching in at least 2 directions. The small contact area of the wire with the cell (circular cross-section) creates a stress concentration, sometimes exceeding the fracture threshold of the material. In a Q1 2021 project, STS had the opportunity to analyze EL images taken at the end of the production line and after shipment on the same modules. Small microfractures, which were hardly visible on the EL image, had propagated into larger branching cracks. Most manufacturers are aware of this challenge and are working on solutions generally referred to as “segmented ribbons”, where some segment of the wire is flattened to reduce the stress at the edge of the cell. Others, unfortunately, opt for a reduction of the quality level in their own QCP to maintain the manufacturing yield. 

Figure 6: Modules based on multi-wire technology have a higher propension to the creation of tree-shaped cracks

Another quality-related “hidden trap” in purchase contracts is the language that the inspection firm should be selected by “mutual agreement”. At first blush, mutual agreements may sound reasonable in a purchase contract. However, this language effectively gives the manufacturer the opportunity to self-select the inspection firm. They may for instance select inspection firms which are not ISO17020-accredited, opening the door to potential conflicts of interest. The buyer should be the sole decision maker on which independent inspection body will conduct audits and inspections.


Let’s now move on to the second example described in introduction. In this case, the developer requested authorization to perform an audit of the supply chain of the manufacturer long before the facts. This audit was not accepted by the manufacturer. 

This second example is still developing, and the solution is not as obvious as in the first example. The Hoshine-focused withhold release order took many in the US industry by surprise. Developing a sustainable supply chain (resilient, bankable, cost-effective, socially and environmentally responsible) is an effort-intensive, long-lasting process. Yet, it is our belief that the wider PV industry would benefit from more transparent supply chains. The purchase contract is a good document to explicit requirements in terms of transparency and to encourage partnership between buyer and supplier. We recommend, for instance, purchase agreements to secure the right of the buyer to audit the supplier per international standards, such as ISO9001 and ISO28001. Not having the right to audit the supplier is a “hidden trap” that may create a blind spot for the developer, with some potentially damaging consequences.