Now There’s Insurance Against Cloudy Days

When Georgetown Mews, a 930-unit Queens co-op, got ready to flip the switch on the largest residential solar energy project in New York State, the board wanted to make sure its $3.5 million investment paid off. So they turned to a little known backup, something known as “solar shortfall” insurance.

Developed and underwritten by Hartford Steam Boiler (HSB), a subsidiary of Munich Re, these policies were launched in the United States in 2015, with a focus on states where there are significant incentives for renewables, such as California, North Carolina, and Arizona, says John Stokes, the vice president of HSB’s energy practice. “Anyone who’s investing in these types of products would like to have some reasonable assurance that the debt service can be repaid even if the products don’t perform,” he says. 

Georgetown Mews was the first customer of its kind for HSB, in that its solar operation was of a smaller scale than typical clients and involved 32 separate rooftop systems that had to be aggregated into one policy, says Marshall Haimson, the president of E-Capital Development/E-Capital Insurance Service, and the broker who handled the Georgetown Mews policy. 

Georgetown Mews’ project manager, Steve Owen, founder and president of the consulting firm Sol Alliance, was aware that the co-op wanted to minimize the risk on its investment. So he put the co-op board’s attorney, James Samson of Samson, Fink & Dubow, in touch with the insurance broker. Haimson works with a number of energy-savings insurance carriers, but he says HSB is “leading the way” in the solar shortfall niche, partly because of the 150-year-old company’s grounding in engineering and technical expertise. 

HSB’s engineers went through the Georgetown Mews project’s technical documents, establishing to their satisfaction that the system was designed and engineered properly, essentially “bulletproofing” the project’s internal economics, Haimson says. 

The company also established a value for the electricity the project would generate. In other words, it established a rate that represented the value that would be lost if the system failed to perform as expected. With input from Samson and Owen, the company settled on a value of 22-31 cents per kilowatt hour (depending on Con Ed’s rates) – the rate at which Georgetown Mews will be reimbursed for any production shortfall. 

The co-op board was about to step into the best of all possible worlds: a renewable source of energy that’s projected to shave $425,000 off the annual electric bill, and an insurance policy that will cover the co-op if the rooftop solar panels fail to live up to their advance billing. It’s a working definition of fail-safe.