What are the risks for PPA providers and how are they covered. What type of options are available to providers.
PPA’s have a wide range of exposures and some tend to be very complex so coverage needs to be tailored to the agreement and the covenants set forth in their contracts As PPA’s are typically tied a special purpose entity, usually an LLC or a limited partnership, who tends to retain ownership of the renewable energy system they need to provide Property or Inland Marine coverage for the system as well as General Liability for premises exposure. In addition to this we are currently investigating risk transfer policies that would offer to cover credit insurance and performance guarantee coverage
Whats are the risk for manufacturers?
Product liability is the biggest risk for manufactures in the form of bodily injury and property damage as a result of improper design or malfunction. If the manufacturer is foreign to the US then the courts will likely look to their US distributors or importers so this exposure must be considered by these manufacturing agents as a likely source or risk. An off-shoot of Product Liability is the warranty that the equipment will perform to or close to the efficiency posted on the equipment. In addition, manufacturers can protect themselves by purchasing Product Recall coverage which will cover the expenses related to the recall of their products
What are the risks for integrators / installers?
Renewable energy system contractors face a very unique exposure in that they are dealing with highly sophisticated and valuable equipment. In regards to Property or Fire coverage, they need to be vigilant about insuring the equipment in their care, custody and control as well as provide coverage for the building they are installing the equipment as most building Property Insurance policies DO NOT provide coverage if the building is undergoing construction. The contractor’s negligence is their biggest liability exposure and married with their technological exposure, the contractor must be made aware that they need both General Liability as well and Professional Liability in order to properly cover their activities. Mold coverage is also recommended if the contractor intends to do any mounting that penetrates an existing building, these may lead to unexpected water leaks which will cause a microbial infestation were clean up costs tend to be very expensive.
Is there standard documentation for alternative energy insurance?
PPA’s due to their complex nature, do not currently have a standard policy as most of these policies are custom tailored. With contractors and integrators, there are insurance solutions that tend to address all their liability needs to dealing with their unique exposures. I would recommend that contractors consider a policy that would not restrict their work on residential construction offers Professional Liability coverage and does not exclude Mold coverage
What are the risks for end users and are their hazard insurance policies affected by the installation of alt energy systems?
End Users should consult there current insurance agent and verify that the policy will cover the post installation property and liability of the new solar array. Most homeowners policies have been adaptive to the new technology and willing to take on the additional risk.
What are the risks to investors of Alternative Energy and how do performances guarantee insurance products alleviate these?
Emerging PPA developers that supply energy products often pay additional finance charges due to the relatively new medium of solar and wind energy, which negatively affects company financials. Customers, strategic OEMs and finance parties today are often looking for major insurers to assume these guarantees, in order to provide protection that someone will be there to pay for potential energy disruptions.
System Performance insurance coverage protects both project owners and lenders if the system, such as roofttop solar installation or ground mounted solar array, does not provide the energy capacity at the specified level and the predicted power generated and revenues are not met.
Moving into the future, do you see more or less risk as new technologies and energy sources develop?
Unfortunately we are seeing more risk as solar panels become more prevalent in our society, this has given rise to a new type of thievery- solar panel theft.
Thieves are taking advantage of technological advancements, such as Google Earth, to pinpoint their next targets. Their favorite targets are residential and commercial properties in remote areas, although no area is completely safe from these opportunistic thieves. The difficulty for the homeowner or business property owner is that these thieves, with the proper technological knowhow, can steal solar panels whether they are ground- or rooftop-mounted. SolarInsure’s internal claims data show a 17 percent annual increase in solar theft claims as of 2009. By taking the proper security precautions with your professional solar installer, you can protect your financial investment in your panels and avoid the hassle of insurance claims, potential increase in premiums and the overall compromising of your energy system.
Mike Smith is senior vice president, Sales and Customer Service, for SolarInsure and a member of SolarInsure's senior management team. Smith has more than 10 years of experience in insurance consulting, sales, marketing, advertising, product development and operations. At SolarInsure, he focuses on strategic positioning of the company, which includes identifying, promoting and distributing new products and services.