Page 20 - Insurance Times June 2019

may happen due to various reasons such as lack of Sabotage, Terrorism & Theft Risk
resources, equipment damages, or component damages.
It is also a major risk as all parts of the solar parks are
subject to sabotage, terrorism or theft and thus can produce
Unscheduled closure of plant can really hamper the
less electricity as expected. Theft, especially, is a major
progress of the project leading solar companies in big
cause of concern among all mentioned here, as in remote
trouble.
locations if the plants are established then there are big
security concerns.
Performance Risk
There is also a risk of performance i.e., generating lesser The immediate impact of the presence of any of these risk
electricity than expected because of some technical fault. factors is uncertainty around the revenue and profitability
Suppose after taking all the technical calculations in place projections for the project and thus the financial viability
and even after getting adequate amount of sunlight. of the project.
Sometimes the performance of the panel can degrade,
which can really cost the performance of the project. Many of the risks mentioned above can be managed
through financial instruments and insurance products. For
Climate & Weather Risk example, weather risks can be mitigated through weather
futures and technology risks can be offset through
There is a lot of risks related to not producing of desired
warranties. However, for a relatively young industry such as
electricity due to lack of sunshine or snow covering the
solar, a lack of engineering studies for actuarial purposes
panel for longer period of time.
often means that financial risk management products are
badly re-purposed from other fields and prohibitively
If the lack of sunshine remains for a prolonged period due
priced.
to any of the climate and weather conditions such as snow
fall, windy weather, then it can lead to a reduction of
electricity production. Insurance Options for Solar Energy
industry in India
Variability in revenue due to variability in output, sometimes
Solar panel systems, whether they are roof or ground-
incurring additional balancing charges. Solar projects
mounted, are prone to risk of failure due to various reasons
depend on favourable weather conditions for their power
and business organization can get full coverage of the
outputs and therefore their revenues.
plant / system that will include risk factors including various
manufacturing defects, external events like natural disasters
The variability of the weather means that the volume of
etc.
power is subject to variation over short and long timescales.
The effect for long term viability means that revenue of
It is true that most solar products have warranties
projects can vary year to year by around 5% in case of solar
associated with it. But in a highly unpredictable industry
energy, depending on the region.
which has seen many component manufacturers/suppliers
going out of the market. Having a proper insurance package
significantly offsets the financial risks.

Adding insurance to the solar system can save thousands
in repair or replacement costs in case of the misfortune of
being damaged or stolen.

It is hereby important to note that there are only two solar
specific policies available currently in Indian insurance
market by HDFC Ergo and ICICI Lombard which are solar
energy shortfall policy and Solar panel warranty insurance
policy respectively.

Apart from these two none of the policies are solar specific

20 The Insurance Times, June 2019