PHOTOVOLTAIC INSTALLATIONS Equipment Overview / Property Insurance Exposures and Underwriting Considerations

November 8, 2011

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Rick Pizzella Principal Engineer Emerging Technologies The Hartford Steam Boiler Inspection & Insurance Company

Robert Beck Senior Vice President, Engineering Corporate Insurance Partners Munich Reinsurance America, Inc.

Presenters Equipment Overview / Property Insurance Exposures and Underwriting Considerations

Agenda

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Introduction

Photovoltaic Equipment Overview

Property Exposures

Questions and Answers

PHOTOVOLTAIC EQUIPMENT OVERVIEW

What are Photovoltaics?

Photovoltaic (PV) cells (or solar cells as they are often called) are semiconductor devices that convert sunlight into direct current (DC) electricity.

1950s era PV cell laid over a modern crystalline silicon cell

Photo Courtesy of DOE/NREL 5

PV Cell Types

PV Cells – Old and New

Crystalline silicon Thin film Multi-junction CIGS

Single Crystalline

Multicrystalline

Thin Film

Photos Courtesy of DOE/NREL 6

Crystalline Silicon

BP Solar’s Product Line of Crystalline Silicon Modules for Residential and Commercial Buildings

Cells built on a silicon-wafer substrates ‒ Generally ~350 microns

thick

Proven technology

More efficient than thin film ‒ Commercially used cells ‒ 13 - 19% efficient

More expensive than thin film

Photo Courtesy of DOE/NREL 7

Thin Film

Inexpensive substrates used – e.g., stainless steel coil stock

A thin layer of PV material is then applied to this substrate – Generally ~3 microns thick

Example PV materials include – Amorphous Silicon (a-Si) – CdTe – CIGS

Commercially used thin-film cells are 7–14% efficient

Thin Film Solar Cell

Photo Courtesy of DOE/NREL 8

PV Configuration Definitions

PV Cells are configured into modules

Modules are configured into factory sealed units called panels

Panels are connected in series into strings

Strings are connected in parallel to form arrays

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A failed panel must be replaced with a panel having exact characteristics to avoid mismatch

PV System Configurations

Stand-Alone PV System

Source: http://www1.eere.energy.gov

Grid-Connected PV System

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Standard PV Hardware

Inverter (power conditioning unit) – Convert DC electricity to AC

Panel mount – keep the panel oriented towards the sun

Combiner boxes – consolidates strings

Storage – store extra energy (batteries)

Fuses, disconnects, and diodes

Photo Courtesy of DOE/NREL 11

PV Hardware Inverter (PCU)

<< Large Inverter

Used to convert DC to AC Should be at least 90% efficient

Microinverter >>

Photos Courtesy of DOE/NREL 12

10 year life expectancy Microinverter alternative

Mounting Systems Fixed

Fixed Position Flat Panel Ballasted Array

Fixed Position Cost effective but

inefficient

The racks & panels are set in one position (typically angled at 30o

facing southward)

Rack System

Ballasted Racks

Penetrating Racks

Photo Courtesy of DOE/NREL 13

Mounting Systems Tracking

Single Axis Solar Tracker Dual-Axis Solar Tracker

Single Axis East to West

Multi Axis East to West Horizon

Photos Courtesy of DOE/NREL 14

Building Integrated PV (BIPV)

PV systems are being integrated into building components and materials

PV integrated into building awnings, windows and rooftop shingles

<< Shingles

<< Awning

Windows >>

Photos Courtesy of DOE/NREL 15

Energy Storage

Battery Bank Installations

Photo Courtesy of DOE/NREL

Battery banks

Additional hardware required

Mainly used in stand-alone systems

Charge controller

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PV Cooling

Heat degrades PV performance

Panels are cooled using:

– Heat sinks

– Specially designed aerodynamics that promote cooling

– Hybrid panels with water jacket

Photo Courtesy of DOE/NREL 17

PHOTOVOLTAIC INSTALLATION EXAMPLES

PV Installation Types

Residential

Utility Type

Non-Residential (Commercial)

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Residential Installations

Single-family residential homes Multi-family residences

Photos Courtesy of DOE/NREL 20

Non-Residential Installations Hyatt Regency – New Brunswick, NJ

Fixed flush mounted panels Peak power – 421 kW Area – 32,000 sq. ft. Tracking – none

Rooftop PV Solar

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Non-Residential Installations Munich Re – Princeton, NJ

2.5 MWp Solar Parking Canopy

Photo Courtesy of Munich RE

Photo: Artist rendering of a SunPower Corp. solar power canopy similar to the one planned for Munich Reinsurance America, Inc.’s Princeton area headquarters.

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Non-Residential Installations Other Stand-Alone Installations

Portable trailer PV generator Farm water pump PV system

Photos Courtesy of DOE/NREL 23

Utility Type Installations

Peak Capacity: 40 MWp Area: 495 acres Panels: 550,000 - First Solar (72W) Type: Thin Film CdTe

Bavaria Solarpark

Peak Capacity: 10 MWp Area: 62 acres Panels: 57,600- Sharp (200W) Type: Crystalline Silicon Inverters: Siemens

Waldpolenz Solar Park, Germany

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FIRST PARTY PROPERTY EXPOSURES

Solar Projects – Underwriting Considerations

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Hazards and Insured Perils

Insurance Coverage

Design Standards & Manufacturing

Risk Management

Contractual Issues

Design Standards and Manufacturing

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Design Standards and Manufacturing

Solyndra Files for Bankruptcy

http://www.solyndra.com/2011/09/solyndra-suspends-operations-to-evaluate-reorganization-options/ 28

Use established manufacturers Avoid experimental, prototypical PV

Understand equipment and warranty ‒ Inherent defects ‒ Serial defects (loss history?) ‒ Material degradation ‒ Errors & Omissions

Turnover in manufacturers Ensure availability of spares or make

replacements contingencies if spare parts are no longer available?

Design Standards and Manufacturing Considerations

29 Bottom Right: Integrated Circuitry & Power Connectors

Electrical standards (current?)

Suitable designs for emerging and rapid technology change

Properly designed for climate (temperature, lightning, wind, snow & ice)

Structural standards - static and dynamic loads

Site layout construction/ repair issues

Age (old vs. new equipment and parts)

Single Axis Solar Tracker

Dual-Axis Solar Tracker

Photovoltaic Concentrator

Design Standards and Manufacturing Considerations

Photos Courtesy of DOE/NREL 30

Insurance Coverage

Production Tax Credit (PTC) renewed through 2012

Investment tax credits = 30% Modified Accelerated Cost Recovery

(Tax Deduction) 50% depreciation bonus (tax deduction) Federal grant programs Federal loan guarantees

Renewable Portfolio Standards (RPS) Renewable Energy Certificates (RECs) Feed-in-Tariff Net Metering State and/or Utility Loan Programs http://www.dsireusa.org

Fede

ral

Sta

te

The need for coverage is driven by the growth due to incentives. 31

Insurance Coverage Considerations

Photo Courtesy of DOE/NREL 32

Special Covers

New Construction Physical Damage, Delay in Startup, Testing

Retrofit Into Existing Property

Existing Solar Installation

Insurance Coverage Considerations

Property Equipment breakdown Natural catastrophe ‒ Flood ‒ Earthquake Time element

First Party Coverage Consideration

Not all policies cover all these risks.

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Insurance Coverage Existing Solar - Property

Most commercial property policies will cover existing solar installations, however; 1.Must be owned or responsible

for insurance 2.Must include values

(replacement or ACV) 3.May not cover all perils

a. Equipment breakdown b. Flood c. Earthquake d. Time element

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Insurance Coverage Equipment Breakdown

Policies May Exclude Electrical Arcing

Advanced Protection Technologies 35

Insurance Coverage Equipment Breakdown

Policies May Exclude Mechanical Breakdown

Damaged pinions caused in a storm, however pictures below show potentially exposed mechanicals.

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1. Each policy is unique! 2. How will the policy respond? 3. There may be limitations/exclusions;

a. Course of construction-COC b. Reporting c. Increase in hazard-risk change d. Testing e. Additional policies

4. Who is responsible for the insurance? a. Owner b. Contractor c. Utility d. Additional insured

5. What if existing property is damaged?

Insurance Coverage Retrofit Into Existing Property

What if a solar panel is added to an existing property?

A separate policy may be needed to protect interests of project and insured as existing Insurance may be inadequate.

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Insurance Coverage New Construction-New Location

Typically handled by a separate policy such as Erection All Risks-EAR Policy a.k.a. Builder’s Risk

Additional coverage options include: 1. Extension on an existing property

policy a. Limits will apply

2. Endorsing to an existing property contract a. coverage may not be suitable for

risk b. Adds additional exposure that

may effect your permanent coverage

Outdoor swimming pool stadium under construction Photo Courtesy of DOE/NREL 38

Insurance Coverage New Construction - New Location

What is being covered? 1.Hard costs Solar panels and related

physical costs Labor and materials

2.Soft costs Directly related to construction

project, no physical existence Fees, permit costs, insurance

premiums, taxes, debt service. 3. Time element considerations Delay in start up Advanced Loss of Profits (ALOP)

Photo Courtesy of DOE/NREL 39

1. “Lack of Sun” – coverage for investors to smooth results

2. Cover for availability and performance

3. Cover for carbon risks

4. Accumulation control – wind, flood, EQ, and terrorism

Insurance Coverage Special Covers

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Insurance Coverage Special Covers

Excessive annual degradation will may result in warranty claims.

Solar Module Performance Warranty: 20 to 25 years 90% for years 1-10; 80% for years 11-20/25

Annual degradation 0.2%

210 Wp 200 Wp

2021 2036 2011

80%

90%

Warranty claim: Expected case

Claim

Claim

1.1%

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Risk Management

Material handling &transit Emergency response – ‒ Standard operating procedures

(S.O.P.) for the Installer ‒ S.O.P. for the operators or

building maintenance Experienced installers Knowledgeable/trained operators Errors & Omissions Contingency plans Maintenance and service agreements Inspection requirements

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Hazards and Insured Perils

Fire, arcing, over current

Vandalism & theft

Earth movement

Frame or roof collapse

Terrorism

Weather ‒ Wind ‒ Flood ‒ Icing/Hail

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Know your risks as you consider solar installations.

Source: Munich Re Examples of Wind, Cracking and Snow Exposures

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Hazards and Insured Perils

Contractual Issues

Time element exposures

Contingent exposures

Power company contracts

Service & maintenance agreement

Monitoring agreement

Jurisdictional incentive contracts

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Knowing your contractual exposures helps ensure knowing your risk.

More Information

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Robert Beck rbeck@munichreamerica.com (609) 275-2172

Contact your company’s Munich Re or HSB Client Manager for additional information.

Rick Pizzella richard_pizzella@hsb.com (860) 722-5452

THANK YOU FOR ATTENDING

© Copyright 2011 Munich Reinsurance America, Inc. All rights reserved. "Munich Re" and the Munich Re logo are internationally protected registered trademarks. The Hartford Steam Boiler name is a mark owned by The Hartford Steam Boiler Inspection and Insurance Company. The material in this presentation is provided for your information only, and is not permitted to be further distributed without the express written permission of Munich Reinsurance America, Inc., Munich Re or Hartford Steam Boiler. This material is not intended to be legal, underwriting, financial, or any other type of professional advice. Examples given are for illustrative purposes only. Each reader should consult an attorney and other appropriate advisors to determine the applicability of any particular contract language to the reader's specific circumstances.