Risk Management & Insurance Considerations for Solar Projects
Solar Project Life Cycle Get it, Fund it, Build it, Run it
Get it
Fund it
Fund it
It is expected that there will be a lot of consolidation. Therefore, you might be acquiring projects that already have certain IX (Interconnection) agreements or PPA (Power Purchase Agreement) attached. These insurance provisions might have been written some time ago when the property markets were in a vastly different state than they are today, and than where we are likely headed.
Should you purchase projects without thoroughly reviewing the insurance provisions?
Fund it
Fund it
Fund it
The volume and speed are crucial in any deal. This means you want a methodology that is repeatable, scalable, and appropriate. It's widely perceived that sorting out insurance provisions can be time-consuming. However, it doesn't have to be that way. Establish a framework. Determine what is agreeable, what makes sense, and what is appropriate. Granted, every project involves different counterparties and unique risks, but for the most part, insurance provisions, in principle and structure, are largely the same. Additionally, the amount of paperwork and the version controls of a single piece of contract can be overwhelming.
Have you created a system that help everyone stay organized?
Build it
Build it
Build it
Milestones matter. Therefore, establish a strong and solid relationship with the EPC (Engineering Procurement Construction) firm you choose. The construction business is complex, with many moving parts. Appreciate that complexity.
Would you want a skilled mechanic who can support you?
Run it
Build it
Build it
Everyone chases financial return. The question then is: over what timeframe?
Is it for 1 year, 5 years, 10 years, or 20 years? The longer the time horizon, the more important it becomes to focus on the resilience of the asset. Resilience begins with the location. Other factors that also influence resilience include engineering, equipment selection, quality control, and ongoing monitoring.
All of the bad news is resolvable
Jeffrey Strassner
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