New Kind of Insurance Protects Your Solar Investment

What if someone offered you a policy that guaranteed you thousands of dollars if your solar project didn’t come through for you as promised? Such a policy now exists – it’s called “solar shortfall” insurance. Developed and underwritten by Hartford Steam Boiler (HSB), it falls under the broader umbrella of what is known as “energy-savings insurance,” which is designed to give property owners, financiers, and investors confidence that major expenditures on energy-efficient technology will live up to expectations. Such policies are common for large-scale projects, but far less so in the residential end of the market.

“This kind of policy is most typical for very large installations, where a 3-to-5 percent deviation in performance over the course of a year is financially meaningful,” says Noah Ginsburg, the director of Here Comes Solar, a program of Solar One, a non-profit green-energy education center in New York City. “That doesn’t make such a big difference for smaller residential systems.”

Even so, insurance broker Michael Spain, president of the Spain Agency, has high praise for solar shortfall insurance. “The concept is brilliant,” Spain says. “Hartford is on the cutting edge of insurance policies, and I take my hat off to them.”

The co-op board at 930-unit Georgetown Mews, in Kew Gardens Hills, Queens, decided to take advantage of this new breed of insurance policy. The co-op will soon flip the switch on one of the state’s biggest residential solar projects ever. The $3.5 million job will provide enough electricity to cover demand for roughly half the 38-building complex, and shave a projected $425,000 off the co-op’s annual electric bill.

But the co-op’s expenditure on the project – somewhere between $500,000 and $1.15 million, depending on the final tally of tax credits and incentives – is so sizable that board members wanted some assurance that the investment would pay off, says the co-op’s lawyer, James Samson, a partner at Samson, Fink & Dubow. How could they be certain the project would reliably deliver the projected level of savings year after year?

The answer was solar shortfall insurance. But in this case, it was tailored specifically for Georgetown Mews, offering broad protections for the project’s 32 separate solar-panel systems installed on 32 roofs. Coverage includes equipment damage caused by everything from terrorism to hurricanes. Most importantly, the coverage ensures that the co-op will realize no less than $380,000 in electricity savings every year. That should help the Georgetown Mews board – and shareholders – sleep easy at night.