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CASE STUDY - Renewable Energy Insurance Broker (REIB)

CASE STUDY - Renewable Energy Insurance Broker (REIB) Photo: Pixabay

The solar industry has experienced a rapid expansion over the last few years. However, such trends often lead to too high optimism and disrupted long-term stability. Findings from a recent study show that in 2020 most of the photovoltaic installations underperformed their forecasted P50 models by more than 6%, while 25% of the plants missed their prognosticated energy return by over 10%. At the same time, many solar companies, mainly developers, resort to seeking long-term equity for their projects from a variety of sources, ranging from public markets to private equity funds. This means that the solar industry is facing increasing demand in meeting investing expectations and realising returns.

Against this backdrop, Bulgaria-based Renewable Energy Insurance Broker (REIB) has recently partnered exclusively with Colonnade, an “A”-rated insurance company, to offer a solution that hedges against reduced yields. The solution takes into account several factors that may lead to underperformance:

 • reduced global solar radiation in comparison with expectations from our profit survey

 • reduced performance of the facility’s components in comparison with the minimum performance of the manufacturer 

• interruptions in the power grid

• above-average or excessive wear 

The insurance sum is calculated based on the energy return forecasted by software model reports (e.g. PVSyst or PVGIS). At the end of the insurance period, this projection is compared with the real energy return. In the event of the actual performance being less than 90% of the projected output, the investor is entitled to compensations. The actual amount to be paid is calculated based on the following formula: the gap between the real and 90% of forecast yield is multiplied by the electricity price according to the respective power purchase agreement (PPA) (€/kWh). 

 

Here’s a practical example: 

 

SAMPLE INSURED:                  XXXX Solar Farm

Solar Yield Projection:    1,800,000 kWh for 1 year Degradation Factor:     0.5% of initial projection per year Average Electric Rate:    € 0.08 per kWh

Annual Limit:                € 43,200 (year 1)

 

Applicable projections (in kWh):

 

 

100%

90% (Insured Level)

Actual Yield

Loss Amount

Year 1

1,800,000

1,620,000

1,750,000

€ 0

Year 2

1,791,000

1,611,900

1,500,000

111,900 x € 0.08 = € 8,952

Year 3

1,782,045

1,603,841

900,000

703,841 x € 0.08 = € 56,307

(€ 42,769 Annual Limit applies)

 

If you are interested in learning more about this solution, visit www.reib-us.com or call +359 899 96 9647

This case study was first published in The Renewable Energy Sector in Bulgaria report published by SeeNews and Gugushev & Partners Law Office. You can download the report here.

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