“Shortfall Insurance” Protects Solar Investments

As it was putting the finishing touches on a massive array of rooftop solar panels – the largest residential solar installation in New York State – the co-op board at 930-unit Georgetown Mews in Queens wanted some peace of mind. So they bought a “solar shortfall” insurance policy from Hartford Steam Boiler (HSB), which guarantees an annual payback even if the $3.5 million system fails to perform as promised. 

Real-time metering will enable HSB to monitor the project’s performance. HSB requires Georgetown Mews to share the data at least quarterly so it can send someone out if the system is under-performing. At the end of each coverage year, if it is determined there is a shortfall, HSB will cover it, minus a deductible, which is 10 percent of the insured amount. The policy lasts for five years and is renewable; the premium for that entire period is $58,000. “That premium indicates they don’t think they’re taking much risk,” says the co-op’s attorney, James Samson, a partner at Samson, Fink & Dubow. 

Indeed, significant under-performance on properly designed and installed systems is “really rare,” says Noah Ginsburg of Here Comes Solar, part of a nonprofit green energy education center in New York City. When it does occur, he explains, the most common reason is failure of the inverter, which converts the solar panel output into a current that can be fed into the electric grid. But inverters are usually covered under the standard manufacturer warranty and are easily replaced within a week or two, he says.

Kevin Kaminski, the senior vice president of the alternative energy solutions group for Energi Insurance Services, says his company writes policies to cover solar shortfalls caused by improper system design or installation. The policies are often taken out by the contractors themselves rather than the project owners. “There’s not a lot of demand out there, to be perfectly honest,” Kaminski says. “People are getting more comfortable with solar, and the performance calculations are fairly straightforward.” 

Ginsburg, whose organization provides free technical assistance to New York City co-ops interested in solar, cautions that such insurance coverage could be overkill for projects that aren’t as large as the one at Georgetown Mews. One thing boards can do to ease their minds as to a potential project’s production reliability, he advises, is to double-check the numbers put forward by solar contractors using the calculator at PVWatts, a free online tool provided by the National Renewable Energy Laboratory.

Nevertheless, insurance broker Marshall Haimson and Steve Owen, the project manager on the Georgetown Mews job, foresee rising demand as solar takes off in the New York City area, with a boost from falling costs and healthy tax credits and other incentives. They’re talking with HSB about how to replicate the Georgetown Mews policy for future co-op and condo projects. “We might have more of a cookie-cutter approach, without having to go through a full technical review for each project,” says John Stokes, an HSB vice president. “We could turn it around more quickly.”