Intelligent Energy

Insurance against sunsets: Munich Re steps in if your solar panel provider goes bust

Insurance against sunsets: Munich Re steps in if your solar panel provider goes bust

Posting in Energy

German insurer will protect solar farm operators against supplier bankruptcies. Crazy, or exemplary commitment to renewables? And why's an insurance company interested in global warming?

With solar panel manufacturers dropping like Arkansas blackbirds, Germany's Munich Re is coming to the rescue. It is now selling insurance that protects solar park operators in the event that their panel provider goes bankrupt.

In partnership with Deustsche Bank, Munich Re will indemnify the operator after the manufacturer tanks, should panels deteriorate below guaranteed performance. It will also "provide the financing to compensate for the reduced output," according to a press release announcing the product.

The insurance in effect picks up where the manufacturer's warranty leaves off after bankruptcy voids it. The optional coverage applies to utility scale solar projects, or anything over 20 megawatts. It is not available for the average home installation.

Without such insurance, banks may refuse to lend the capital necessary to build solar farms, Munich Re notes in the release. Solar panel output is key to investors calculating rates of return on large scale projects.

"Our aim in developing and marketing the optional coverage was to further facilitate solar park investment by assuming the risk of the module manufacturer's insolvency," says Munich Re board member Thomas Blunck. "Coverage of such risks makes it easier to calculate stable, secured cash flows for solar parks."

Munich Re has sold the optional coverage to a solar park in southern Italy, financed jointly by Deutsche Bank and Rabobank, according to the release which did not name the operator.

A raft of solar manufactures have filed for insolvency in recent months, victimized by among other factors pricing pressure applied in part by low cost Chinese suppliers. Solon, Solar Millennium, SpectraWatt, Evergreen, Solyndra and others have all gone under.

For insurance companies like Munich Re, there's an extra incentive to support renewables. Insurers face large pay outs after natural disasters like the floods and hurricanes that are on the increase amid global warming.

Munich Re believes that renewable energy like solar will cut CO2 emissions associated with fossil fuels and help mitigate man-made climate change. It has an active presence in renewables. For instance, it's a charter member of the Desertec Industrial Initiative, the group that aspires to furnish 15 percent of Europe's electricity by 2050 using solar power from northern Africa and the Middle East.

For solar to remain in flight as a large scale alternative to fossil fuels, more companies like Munich Re will have to take risks beyond the nest of their normal milieu.

Photo by MarkHalperJournalist

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Mark Halper

Contributing Editor

Mark Halper has written for TIME, Fortune, Financial Times, the UK's Independent on Sunday, Forbes, New York Times, Wired, Variety and The Guardian. He is based in Bristol, U.K. Follow him on Twitter. Disclosure