For thousands of years, man has banked on the
sun rising and setting each day. But the star’s reliability
doesn’t always translate into the ability to earn
a profit when it comes to turning sun rays into solar
energy. During the past decade, however, improvements
in solar development project economics
spurred dramatic industry expansion. But now new
threats are casting a cloud over industry prospects
and pressuring market growth.
A solar project’s bankability depends on numerous
variables: the cost of developing and designing
the project, equipment costs, financing, regulatory
conditions, and long-term power pricing among others.
In the past 10 years, technology improvements in
solar panels led to increased energy generation and
efficiency. This coupled with lower equipment costs,
regulatory measures to encourage renewable energy
generation and higher oil prices helped fuel recent growth in the solar industry. For investors,
solar development projects became highly
Today, however, the solar industry’s
own success is threatening its growth prospects.
Regulatory changes have eliminated
the grant in lieu of tax credit program for
renewable energy projects, reducing the
number of potential investors to those with a
tax appetite. In addition, as more manufacturers
poured into the industry, equipment
prices fell dramatically. While that made it
cheaper to build new projects the unintended
consequence is that many manufacturers
are struggling to compete. Market consolidation
among solar equipment manufacturers
is now a serious threat to sustaining
solar development project cash flows. As
manufacturers go out of business their
equipment warranties may become worthless.
In the event that equipment has a failure
there may be no way for a project developer
to recoup the costs of making a repair
to the equipment or the revenue from lost
energy generation. Such actions throw the
long-term viability of projects into question.
Such changes create additional pressure
for solar project developers to find
other ways to increase and protect project
margins. In addition, developers with significant
experience are looking to new horizons
for project developments. Unwittingly, they
may be overlooking risks that they don’t
know to look out for. Despite significant
experience, a developer may just not know
what they don’t know when working in a
new location or different environment.
Working in new surroundings
requires significant due diligence. Not only
must developers literally learn the lay of the
land, they also need to understand local regulations,
building codes and permitting processes.
Even disparities in climate conditions
can create havoc when project developers
fail to adequately account for unfamiliar
weather patterns. From the start-up
phase to decommissioning, developers must
keep their eyes wide open and employ
extensive risk management practices to
address these issues.
Comprehensive insurance protection
and warranty backstops available throughout
the project lifecycle can help. In a study conducted
on behalf of Assurant, Inc., researchers
found that many market participants in
the solar industry expressed a need for a
truly wide-ranging insurance policy that
would provide phase-specific protection.
They indicated that this coverage would help
alleviate investors’ concerns about the financial
stability of their development projects.
In response, Assurant developed a
solar insurance bundle that allows mid-sized
commercial solar developers to easily qualify
for and launch more projects. The company
partnered with the leading provider of
insurance for the renewable energy industry,
GCube Insurance Services, Inc., to provide
commercial solar project developers
across the U.S. access to the insurance
offering and warranty management program
at affordable prices.
The insurance offering works by
addressing key lender and investor requirements
to protect project cash flows that are
traditionally threatened when manufacturers
go out of business or a project’s energy generation
is compromised by equipment failure.
In addition to liability and property coverage,
the product offers single-source project
warranty management throughout the
lifecycle of a solar project. This eliminates
the potential confusion caused by having to
work with multiple carriers and manufacturers
to settle a claim should the need arise.
The streamlined process increases efficiency
and the speed at which claims are handled.
Being able to rely on an insurance
company to stand behind the project equipment
in the event that its manufacturer goes
out of business is critical to ensuring the
long-term financial viability of a solar project.
So too is securing business interruption
coverage. This unique protection reimburses
project developers for income from lost
energy production and from sales of solar
renewable energy credits lost as a result of a
While it is impossible to eliminate all
risks and hazards from solar project developments,
insurance can help improve their
ability to generate profits for the long-term.
These protections can take some of the variability
out of the factors that can derail projects
and act as a stabilizing force in the
industry, helping to create a strong foundation
for the industry’s continued growth.
About the author
is vice president of
new venture commercialization for
Assurant, Inc. In this role, she leads the
market launch of Assurant’s solar project
insurance, which provides a bundle of property,
liability, and warranty management to
commercial solar projects. Schwartz helped
developed the specialty insurance coverage
for the solar market while serving as vice
president of Assurant’s Incubation Team.
As vice president of the Incubation
Team, Schwartz led the company’s corporate
strategic initiative development process.
Schwartz and her team also generated and
implemented opportunities to leverage marketing
capabilities across the organization
on behalf of specific business units, designing
voice-of-the-customer, segmentation and
pricing and profitability analytics initiatives
Schwartz first joined Assurant in 1991,
serving as senior vice president of Marketing
for Assurant’s preneed life insurance business.
From 1999 to 2007, she served as executive
vice president of Corporate Communications
Group, Kansas’ largest privately held
public relations and marketing firm.