Thursday, September 26, 2013

Protecting solar projects with Insurance

I read about this in the regular update I got from Renewable Energy World magazine and I thought it makes a lot of sense protecting your solar PV investment with insurance.

Insuring your solar project is always a wise move especially if you are to sign a 21-year contract with the local public utility. The article discussed mostly on large scale projects but with the emergence of many  individual rooftop solar PV installations in this country, it is a very interesting preposition for both the insurance companies and the individual investors.

Take a shelter! Image by REW

Think about the 12kWp solar PV on your rooftop worth RM120,000 which you've entered REPPA with TNB for 21 years.

Somewhere down the road, say, 10 years later, something happened to the panels, some vandals broke them, or the panels don't meet the promised performance on energy output. Your ROI could be prolonged further, or worse still, you could never recoup your investment.

So, where there is risk, there is mitigative measure required.

Why insure? Insurance premium will eat away my already thin profit margin!

Original Equipment Manufacturers (OEM) warranties would normally be already factored in during the project costing. These warranties are one of the most relied upon methods to reduce risk in the solar industry, but there are other things to consider, such as:
  • Warranties commonly exclude defects caused by failing to properly maintain the product, limit liability for damages and include disclaimers for implied warranties.

  • They also do not cover the cost of labor for repairs or shipping costs.

  • Manufacturers are the ultimate arbitrator of whether a problem with the equipment is deemed defective and covered by the warranty or not.

  • A warranty from a foreign manufacturer may be difficult to enforce if that company’s provisions are governed by laws and regulations of their home country.

  • A warranty could include a jurisdiction requiring privity of contract, which voids a warranty unless the party seeking to enforce its terms purchased the product directly from the manufacturer.

  • And the biggest concern, of course, is that the manufacturer may not exist to honor their warranty 5 or 10 years from now. It may be impossible to make a claim and have it honored once a company is dissolved.

TheGreenMechanics: A good reminder for prospective rooftop solar photovoltaic investors such as myself and you. Also, for the huge corporate players, but being the bigger investors themselves, this would have probably been taken cared of at the very beginning.

Further readings at Renewable Energy World

1 comment:

Alex Stephen said...

I disagree with the premise of your article but I still think its pretty useful. I still really like your site. Keep up the good work.
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