PHOTOVOLTAIC INSTALLATIONS Equipment Overview / Property Insurance Exposures and Underwriting Considerations

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1 PHOTOVOLTAIC INSTALLATIONS Equipment Overview / Property Insurance Exposures and Underwriting Considerations November 8, 2011

2 Presenters Equipment Overview / Property Insurance Exposures and Underwriting Considerations Robert Beck Senior Vice President, Engineering Corporate Insurance Partners Munich Reinsurance America, Inc. Rick Pizzella Principal Engineer Emerging Technologies The Hartford Steam Boiler Inspection & Insurance Company 2

3 Agenda Introduction Photovoltaic Equipment Overview Property Exposures Questions and Answers 3

4 PHOTOVOLTAIC EQUIPMENT OVERVIEW

5 What are Photovoltaics? Photovoltaic (PV) cells (or solar cells as they are often called) are semiconductor devices that convert sunlight into direct current (DC) electricity. 1950s era PV cell laid over a modern crystalline silicon cell Photo Courtesy of DOE/NREL 5

6 PV Cell Types PV Cells Old and New Multicrystalline Thin Film Crystalline silicon Thin film Multi-junction CIGS Single Crystalline Photos Courtesy of DOE/NREL 6

7 Crystalline Silicon Cells built on a siliconwafer substrates Generally ~350 microns thick Proven technology BP Solar s Product Line of Crystalline Silicon Modules for Residential and Commercial Buildings More efficient than thin film Commercially used cells 13-19% efficient More expensive than thin film Photo Courtesy of DOE/NREL 7

8 Thin Film Inexpensive substrates used e.g., stainless steel coil stock A thin layer of PV material is then applied to this substrate Generally ~3 microns thick Thin Film Solar Cell Example PV materials include Amorphous Silicon (a-si) CdTe CIGS Commercially used thin-film cells are 7 14% efficient Photo Courtesy of DOE/NREL 8

9 PV Configuration Definitions PV Cells are configured into modules Modules are configured into factory sealed units called panels Panels are connected in series into strings Strings are connected in parallel to form arrays A failed panel must be replaced with a panel having exact characteristics to avoid mismatch 9

10 PV System Configurations Stand-Alone PV System Grid-Connected PV System Source: 10

11 Standard PV Hardware Inverter (power conditioning unit) Convert DC electricity to AC Panel mount keep the panel oriented towards the sun Combiner boxes consolidates strings Storage store extra energy (batteries) Fuses, disconnects, and diodes Photo Courtesy of DOE/NREL 11

12 PV Hardware Inverter (PCU) << Large Inverter Microinverter >> Used to convert DC to AC Should be at least 90% efficient 10 year life expectancy Microinverter alternative Photos Courtesy of DOE/NREL 12

13 Mounting Systems Fixed Fixed Position Cost effective but inefficient The racks & panels are set in one position (typically angled at 30 o facing southward) Rack System Ballasted Racks Penetrating Racks Fixed Position Flat Panel Ballasted Array Photo Courtesy of DOE/NREL 13

14 Mounting Systems Tracking Single Axis Solar Tracker Dual-Axis Solar Tracker Single Axis East to West Multi Axis East to West Horizon Photos Courtesy of DOE/NREL 14

15 Building Integrated PV (BIPV) PV systems are being integrated into building components and materials PV integrated into building awnings, windows and rooftop shingles << Awning Windows >> << Shingles Photos Courtesy of DOE/NREL 15

16 Energy Storage Battery banks Mainly used in stand-alone systems Additional hardware required Charge controller Battery Bank Installations Photo Courtesy of DOE/NREL 16

17 PV Cooling Heat degrades PV performance Panels are cooled using: Heat sinks Specially designed aerodynamics that promote cooling Hybrid panels with water jacket Photo Courtesy of DOE/NREL 17

18 PHOTOVOLTAIC INSTALLATION EXAMPLES

19 PV Installation Types Residential Non-Residential (Commercial) Utility Type 19

20 Residential Installations Single-family residential homes Multi-family residences Photos Courtesy of DOE/NREL 20

21 Non-Residential Installations Hyatt Regency New Brunswick, NJ Rooftop PV Solar Fixed flush mounted panels Peak power 421 kw Area 32,000 sq. ft. Tracking none 21

22 Non-Residential Installations Munich Re Princeton, NJ Photo Courtesy of Munich RE Solar Parking Canopy 2.5 MWp Photo: Artist rendering of a SunPower Corp. solar power canopy similar to the one planned for Munich Reinsurance America, Inc. s Princeton area headquarters. 22

23 Non-Residential Installations Other Stand-Alone Installations Portable trailer PV generator Farm water pump PV system Photos Courtesy of DOE/NREL 23

24 Utility Type Installations Waldpolenz Solar Park, Germany Bavaria Solarpark Peak Capacity: 40 MWp Area: 495 acres Panels: 550,000 - First Solar (72W) Type: Thin Film CdTe Peak Capacity: 10 MWp Area: 62 acres Panels: 57,600- Sharp (200W) Type: Crystalline Silicon Inverters: Siemens 24

25 FIRST PARTY PROPERTY EXPOSURES

26 Solar Projects Underwriting Considerations Design Standards & Manufacturing Insurance Coverage Risk Management Hazards and Insured Perils Contractual Issues 26

27 Design Standards and Manufacturing 27

28 Design Standards and Manufacturing Solyndra Files for Bankruptcy 28

29 Design Standards and Manufacturing Considerations Use established manufacturers Avoid experimental, prototypical PV Understand equipment and warranty Inherent defects Serial defects (loss history?) Material degradation Errors & Omissions Turnover in manufacturers Ensure availability of spares or make replacements contingencies if spare parts are no longer available? Bottom Right: Integrated Circuitry & Power Connectors 29

30 Design Standards and Manufacturing Considerations Electrical standards (current?) Suitable designs for emerging and rapid technology change Properly designed for climate (temperature, lightning, wind, snow & ice) Structural standards - static and dynamic loads Site layout construction/ repair issues Age (old vs. new equipment and parts) Single Axis Solar Tracker Dual-Axis Solar Tracker Photovoltaic Concentrator Photos Courtesy of DOE/NREL 30

31 Insurance Coverage Federal Production Tax Credit (PTC) renewed through 2012 Investment tax credits = 30% Modified Accelerated Cost Recovery (Tax Deduction) 50% depreciation bonus (tax deduction) Federal grant programs Federal loan guarantees Renewable Portfolio Standards (RPS) Renewable Energy Certificates (RECs) State Feed-in-Tariff Net Metering State and/or Utility Loan Programs The need for coverage is driven by the growth due to incentives. 31

32 Insurance Coverage Considerations Existing Solar Installation Retrofit Into Existing Property New Construction Physical Damage, Delay in Startup, Testing Special Covers Photo Courtesy of DOE/NREL 32

33 Insurance Coverage Considerations First Party Coverage Consideration Property Equipment breakdown Natural catastrophe Flood Earthquake Time element Not all policies cover all these risks. 33

34 Insurance Coverage Existing Solar - Property Most commercial property policies will cover existing solar installations, however; 1.Must be owned or responsible for insurance 2.Must include values (replacement or ACV) 3.May not cover all perils a. Equipment breakdown b. Flood c. Earthquake d. Time element 34

35 Insurance Coverage Equipment Breakdown Policies May Exclude Electrical Arcing Advanced Protection Technologies 35

36 Insurance Coverage Equipment Breakdown Policies May Exclude Mechanical Breakdown Damaged pinions caused in a storm, however pictures below show potentially exposed mechanicals. 36

37 Insurance Coverage Retrofit Into Existing Property What if a solar panel is added to an existing property? 1. Each policy is unique! 2. How will the policy respond? 3. There may be limitations/exclusions; a. Course of construction-coc b. Reporting c. Increase in hazard-risk change d. Testing e. Additional policies 4. Who is responsible for the insurance? a. Owner b. Contractor c. Utility d. Additional insured 5. What if existing property is damaged? A separate policy may be needed to protect interests of project and insured as existing Insurance may be inadequate. 37

38 Insurance Coverage New Construction-New Location Typically handled by a separate policy such as Erection All Risks-EAR Policy a.k.a. Builder s Risk Additional coverage options include: 1. Extension on an existing property policy a. Limits will apply 2. Endorsing to an existing property contract a. coverage may not be suitable for risk b. Adds additional exposure that may effect your permanent coverage Outdoor swimming pool stadium under construction Photo Courtesy of DOE/NREL 38

39 Insurance Coverage New Construction - New Location What is being covered? 1.Hard costs Solar panels and related physical costs Labor and materials 2.Soft costs Directly related to construction project, no physical existence Fees, permit costs, insurance premiums, taxes, debt service. 3. Time element considerations Delay in start up Advanced Loss of Profits (ALOP) Photo Courtesy of DOE/NREL 39

40 Insurance Coverage Special Covers 1. Lack of Sun coverage for investors to smooth results 2. Cover for availability and performance 3. Cover for carbon risks 4. Accumulation control wind, flood, EQ, and terrorism 40

41 Insurance Coverage Special Covers Solar Module Performance Warranty: 20 to 25 years 90% for years 1-10; 80% for years 11-20/ Wp 200 Wp Annual degradation 0.2% 90% Claim Warranty claim: 80% Claim Expected case 1.1% Excessive annual degradation will may result in warranty claims. 41

42 Risk Management Material handling &transit Emergency response Standard operating procedures (S.O.P.) for the Installer S.O.P. for the operators or building maintenance Experienced installers Knowledgeable/trained operators Errors & Omissions Contingency plans Maintenance and service agreements Inspection requirements 42

43 Hazards and Insured Perils Fire, arcing, over current Vandalism & theft Earth movement Frame or roof collapse Terrorism Weather Wind Flood Icing/Hail Know your risks as you consider solar installations. 43

44 Hazards and Insured Perils Examples of Wind, Cracking and Snow Exposures Source: Munich Re 44

45 Contractual Issues Time element exposures Contingent exposures Power company contracts Service & maintenance agreement Monitoring agreement Jurisdictional incentive contracts Knowing your contractual exposures helps ensure knowing your risk. 45

46 More Information Robert Beck (609) Rick Pizzella (860) Contact your company s Munich Re or HSB Client Manager for additional information. 46

47 THANK YOU FOR ATTENDING

48 Copyright 2011 Munich Reinsurance America, Inc. All rights reserved. "Munich Re" and the Munich Re logo are internationally protected registered trademarks. The Hartford Steam Boiler name is a mark owned by The Hartford Steam Boiler Inspection and Insurance Company. The material in this presentation is provided for your information only, and is not permitted to be further distributed without the express written permission of Munich Reinsurance America, Inc., Munich Re or Hartford Steam Boiler. This material is not intended to be legal, underwriting, financial, or any other type of professional advice. Examples given are for illustrative purposes only. Each reader should consult an attorney and other appropriate advisors to determine the applicability of any particular contract language to the reader's specific circumstances.