PHOTOVOLTAIC INSTALLATIONS Equipment Overview / Property Insurance Exposures and Underwriting Considerations

November 8, 2011 Presenters Equipment Overview / Property Insurance Exposures and Underwriting Considerations

Robert Beck Rick Pizzella Senior Vice President, Engineering Principal Engineer Corporate Insurance Partners Emerging Technologies Munich Reinsurance America, Inc. The Hartford Steam Boiler Inspection & Insurance Company

2 Agenda

Introduction

Photovoltaic Equipment Overview

Property Exposures

Questions and Answers

3 PHOTOVOLTAIC EQUIPMENT OVERVIEW What are ?

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

Thin Film . Crystalline silicon . Thin film Multicrystalline . Multi-junction . CIGS

Single Crystalline

Photos Courtesy of DOE/NREL 6 Crystalline Silicon

. Cells built on a silicon- wafer substrates ‒ Generally ~350 microns thick . Proven technology . More efficient than thin film ‒ Commercially used cells ‒ 13 - 19% efficient BP Solar’s Product Line of Crystalline Silicon Modules for Residential and . More expensive than thin Commercial Buildings 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 Thin Film Solar Cell – CIGS . Commercially used thin-film cells are 7–14% efficient

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

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

9 PV System Configurations

Stand-Alone PV System

Grid-Connected PV System

Source: http://www1.eere.energy.gov 10 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

Microinverter >>

. Used to convert DC to AC . 10 year life expectancy . Should be at least 90% efficient . Microinverter alternative

Photos Courtesy of DOE/NREL 12 Mounting Systems Fixed

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

Fixed Position Flat Panel Ballasted Array

Photo Courtesy of DOE/NREL 13 Mounting Systems Tracking

Single Axis Solar Tracker Dual-Axis Solar Tracker

Single Axis Multi Axis . East to West . 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

<< Awning

Windows >>

<< Shingles

Photos Courtesy of DOE/NREL 15 Energy Storage

Battery banks

Mainly used in stand-alone systems

Additional hardware required

Charge controller

Battery Bank Installations

Photo Courtesy of DOE/NREL 16 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

Non-Residential (Commercial)

Utility Type

19 Residential Installations

Single-family residential homes Multi-family residences

Photos Courtesy of DOE/NREL 20 Non-Residential Installations Hyatt Regency – New Brunswick, NJ

Rooftop PV Solar

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

21 Non-Residential Installations Munich Re – Princeton, NJ

Photo Courtesy of Munich RE

Solar Parking Canopy 2.5 MWp

Photo: Artist rendering of a SunPower Corp. canopy similar to the one planned for Munich Reinsurance America, Inc.’s Princeton area headquarters. 22

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

Waldpolenz Solar Park, Germany

Peak Capacity: 40 MWp Peak Capacity: 10 MWp Area: 495 acres Area: 62 acres Panels: 550,000 - (72W) Panels: 57,600- Sharp (200W) Type: Thin Film CdTe Type: Crystalline Silicon Inverters: Siemens 24 FIRST PARTY PROPERTY EXPOSURES Solar Projects – Underwriting Considerations

Design Standards & Manufacturing

Insurance Coverage

Risk Management

Hazards and Insured Perils

Contractual Issues

26 Design Standards and Manufacturing

27 Design Standards and Manufacturing

Solyndra Files for Bankruptcy

28 http://www.solyndra.com/2011/09/solyndra-suspends-operations-to-evaluate-reorganization-options/ Design Standards and Manufacturing Considerations

. 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?

29 Bottom Right: Integrated Circuitry & Power Connectors Design Standards and Manufacturing Considerations

. Electrical standards (current?) Single Axis . Suitable designs for Solar Tracker emerging and rapid technology change . Properly designed for climate (temperature, Dual-Axis lightning, wind, snow & ice) Solar Tracker . Structural standards - static and dynamic loads . Site layout construction/ repair issues Photovoltaic . Age (old vs. new Concentrator equipment and parts)

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

. Renewable Portfolio Standards (RPS) . Renewable Energy Certificates (RECs) . Feed-in-Tariff

State . Net Metering . State and/or Utility Loan Programs . http://www.dsireusa.org

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

31 Insurance Coverage Considerations

Existing Solar Installation

Retrofit Into Existing Property

New Construction Physical Damage, Delay in Startup, Testing

Special Covers

Photo Courtesy of DOE/NREL 32 Insurance Coverage Considerations

First Party Coverage Consideration

. Property . Equipment breakdown . Natural catastrophe ‒ Flood ‒ Earthquake . Time element

Not all policies cover all these risks.

33 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

34 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.

36 Insurance Coverage Retrofit Into Existing Property

What if a is added to an existing property?

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?

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

37 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 Insurance Coverage Special Covers

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

40 Insurance Coverage Special Covers

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

210 Wp 200 Wp Annual degradation 0.2% 90% Claim Expected case Warranty claim: 80% Claim 1.1%

2011 2021 2036

Excessive annual degradation will may result in warranty claims.

41 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

42 Hazards and Insured Perils

. Fire, arcing, over current . Vandalism & theft . Earth movement . Frame or roof collapse . Terrorism . Weather ‒ Wind ‒ Flood ‒ Icing/Hail

Know your risks as you consider solar installations.

43 Hazards and Insured Perils

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

44 Contractual Issues

. Time element exposures . Contingent exposures . Power company contracts . Service & maintenance agreement . Monitoring agreement . Jurisdictional incentive contracts

Knowing your contractual exposures helps ensure knowing your risk.

45 More Information

Robert Beck Rick Pizzella [email protected] [email protected] (609) 275-2172 (860) 722-5452

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

46 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.