Marsh solution to solar energy project financing

Solar panel

Marsh has developed an insurance contract that provides coverage for photovoltaic project companies and operators against default risk on long-term guarantees for modules by manufacturers.

According to the broker, the product has been designed to improve financial viability for photovoltaic systems, especially when combined with an all-risk insurance policy against damage to property and a reduced yield risk policy against decreased output.

Dr Michael Härig, head of the power team at Marsh Germany and developer of the previous solutions for hedging photovoltaic projects, said: "Project companies looking to expand solar energy production are increasingly concerned about their ability to obtain finance.

"As well as improve financing capabilities, this new contract could help in negotiations over interest rates levels, providing opportunities for additional savings. As risks change, it is imperative that the insurance market provide these kinds of tailored hedging solutions not covered by traditional insurance."

Modules comprise around 60% of the costs of a photovoltaic system. Typically, module manufacturers provide their customers with a long-term performance guarantee, usually for 25 years. However, the retention of a guarantee's value is dependent on the manufacturer's continued existence and ability to pay. If the module manufacturer becomes insolvent, not only is there no right of recourse, but any performance guarantee insurance taken out by the manufacturer also expires when it stops paying premiums.

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