First, the official Volvo explanation of this phenomenon is explained in the owner's manual (which is available online):

Althernator warning light

My car was suffering this problem, and being the thorough person I am, I went whole hog to try to fix it. I first tested the alternator, which was done by testing the positive terminal on the back of the alternator with a multimeter, with the negative multimeter lead on a good engine ground. The result was good charging in the first 30 seconds of engine operation (13+ volts read), but after that the voltage dropped down to 12, then less than 12, then sporadic jumping voltage that was all over the place.

Okay, says I, so I swapped out the brushes with a known good set, still the problem persisted.

Okay says I, my wagon is an 87 model, last of the biodegradable wiring harness years, so I went ahead and bought a new wiring harness from Dave Barton and put that in. That harness included the large and small red wires for the back of the alternator. Also, though my alternator-to-engine ground was fine, I added another ground wire just for good measure (a braided ground from the auto parts store--around $3 with the wiring terminals on each end already installed). Still, same problem with the electrical system when tested by multimeter.

Okay, says I, I will now replace the entire exciter wire circuit from the back of the instrument gauge to the alternator--so I fabricated the wire and installed it, still the problem persisted.

Okay, says I, my battery is new and is OEM Volvo, so I go to the dealer and they swap it out with another new battery, no questions asked. Still the problem persisted.

Okay, says I, I will rule out the alternator and so I got a new Bosch alternator from FCP and installed it, still the problem persisted.

Okay, says I, I will resolder the connections on the instrument cluster circuit board, replace all the light bulbs in the board, and still the problem persisted.

Okay, says I, I will order a replacement board from David Samuels on eBay, which he sent promptly and I installed, and still the problem persisted.

Okay, says I, I will replace the various positive and negative battery cables, plus the 25 amp fuse and the flimsy OEM fuse holder with a new, weather proof model. Still the problem persisted.

Okay, says I, at that point I was so frustrated that I applied for two auto loans and had leads on two nice-but-used cars at local dealers near my house, but the bad vibes I got from dealing with the car dealers motivated me to get back out there and really try to solve the problem. Plus, Thanksgiving was coming fast and it wouldn't be the same without the old 240 wagon, which is truly a family member in our household.

Okay, says I, I remembered late one night that I had read somewhere on the Brickboard about a bad harmonic balancer, and so I went outside in my robe, thinking this was the last ditch attempt to diagnose the problem, and with the engine off I stuck my hand down to the harmonic balancer and tried to turn it. It was totally loose, the rubber insert was completely failed and all of the sudden, with refreshing clarity and hope instantaneously, I understood the problem.

Okay, says I, I undo all the ersatz repairs (mostly the unorthodox exciter wire repair), wake my wife up and tell her everything's going to be okay, get online and cancel the auto loans, go to FCP and look at the brand of the harmonic balancer they sell (MTC), realize that I don't want MTC parts for my Volvo, go to bed, wake up at 7:00AM, be at the Volvo parts counter at 7:30AM, ask for the harmonic balancer for my 87 245, get a funny, doubtful look from the parts guy, get a surprised and incredulous look from the parts guy when the computer tells him they have one in stock, wait while he goes back to the warehouse to pick out the part, smile with the parts guy when he brings back a beautiful, heavy OEM harmonic balancer, then frown (while the parts guy laughs) while I pay about $180 for it.

Okay, says I, as I rush home and install the harmonic balancer in a record 30 minutes on a hot engine. Multimeter shows 14 volts charging on first startup. I am happy. Wife is happy. Volvo is happy. Volvo parts guy is happy. Bank loan officer is sad. Used car dealer is sad.

In summary: new alternator, new wiring harness, new gauge circuit board, new brushes, new battery, new cables, new fuse... pretty much a new charging system on this car. The faulty part was a non-electrified (but essential to the electrical system) harmonic balancer pulley. Oh, and now I have a beautiful VDO/Volvo voltmeter in the accessory gauge cluster, and I pay attention to it.

kourt