The single biggest issue that is paralyzing investors is ongoing market consolidation of original equipment manufacturers (OEMs). Half of all solar equipment manufacturers now in business are expected to go bankrupt or be acquired by competitors. Such market convulsions will be difficult for project developers and owners to weather if unprepared especially if the result is further erosion of confidence in the quality of manufacturer’s products. It is no secret that many in the industry are already claiming that manufacturers, in their effort to compete and remain viable, are cutting corners that affect the quality of their products. |
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| Similar concerns are now being raised about engineering, procurement and contracting (EPC) companies. Fear that some EPCs may be swapping out approved equipment in a solar project development for less expensive and less reliable materials fuels the worries. Such changes could go undetected if the EPC certifies their own work, but could affect the profitability of an installation if the energy output of a solar installation fails to meet expectations because of an equipment change. Although no one can point to an epidemic of quality deterioration taking place right now, these fears persist because of the uncertainty about potential long-term impacts of short-cuts undertaken today. Project developers, owners, lenders, investors and insurers can safeguard against such risks and possibilities by working to accurately evaluate and understand the variety of solar project risks that exist. It is important to ask: How will OEM market consolidation affect the long-term viability of solar installations being built today? Is equipment quality deteriorating because of manufacturers’ need to reduce costs and compete on thin margins? Will today’s manufacturers be in business five or 10 years from now and honor the equipment warranty? Does it make sense to invest in projects using older technologies or those that rely on disruptive technologies? What are the tools and strategies available to identify and mitigate risks? Do they adequately protect against risk? Consider solar panel certification. All solar panel OEMs seek certification to international standards, but such standards may not identify manufacturing or technological problems that may are after many years of use and threaten the rate of return from a solar installation. Most agree that current testing does not adequately replicate the wear-and-tear that solar panels face after years of exposure to the elements and cannot adequately predict a solar panel’s energy output for 20 years. Laboratorytesting companies are working to improve their methodologies and technologies to more accurately address these concerns. Project insurance can address this and other risks that cannot otherwise be easily and economically mitigated or predicted. Standard general liability and property insurance are the basic building blocks of a comprehensive insurance coverage program. General liability protects policyholders for claims of property damage and bodily injury to third parties. Property insurance covers a solar project against specific hazards and natural perils such as fires and windstorms. Specialized solar insurance goes further to recognize the unique exposures to financial loss faced by the solar industry. Policy coverages continue to be refined as the market evolves and risks emerge and are understood. Specialty coverage provides protection for each phase of project development. During installation, the following insurance policies are available: • Delay in start-up coverage. Provides a
financial backstop in the event that a
solar project is delayed from generating
energy as scheduled because of problems
during installation.
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