A warranty is an agreement outlined by a manufacturer to a customer that defines performance requirements for a product or service. Although long warranty periods are a useful marketing tool, in 2011 the warranty claims expense was 2.6% of total sales for computer original equipment manufacturers (OEMs) and is over 2% of total sales in many other industries today.

Solar PV systems offer inverters with 5-15 year warranties and PV modules with 25-year performance warranties. This is problematic for the return on investment (ROI) of solar PV systems when the modules are still productive and covered under warranty but inverter failures occur due to degradation of electronic components after their warranty has expired. Out-of-warranty inverter failures during the lifetime of solar panels decrease the ROI of solar PV systems significantly and can cause the annual ROI to actually be negative 15-25 years into the lifetime of the system. This thesis analyzes the factors that contribute to designing an optimal warranty period and the relationship between reliability and warranty periods using General Motors (GM) and the solar PV industry as case studies. A return on investment of a solar photovoltaic system is also conducted and the effect of reliability, changing tax credit structures, and failure areas of solar PV systems are analyzed.