Insurance modelling and analytics provider Sciemus has launched a unique insurance policy to protect solar farms from lack of sunlight, which reduces the energy output and revenues of the farm.
The policy will pay out if the sunlight levels fall below a certain agreed amount. It is available as a hedging instrument for solar farm operators for up to ten years. Other insurance policies for lack of sunlight are available, but these are bundled with property damage schemes. The policy from Sciemus is available as a stand-alone product, making it more affordable for smaller solar farm owners.
“The problem many solar farms face is that they secure debt financing at the P95 level, leaving a 5% chance that the Annual Energy Production will not be achieved,” explained James Ingham, head of renewables at London-based Sciemus. “We know the weather can be variable, and if sunshine levels are less than expected then the output of the farm diminishes, yet the farm operators are still obliged to pay back their bank debt.
“Our product is a very useful hedge against volatility in the weather and it provides solar farm operators with ease of mind, knowing that regardless of the weather, their cash flow is secured and they will be able to fulfil their debt obligations. And because it is a stand-alone product unconnected to property damage insurance, it is particularly attractive to smaller solar farm operators or those new to the market.”
The insurance scheme is index-linked and will pay out a fixed price per unit lost of sunlight at the end of each one-year period. The amount of sunlight is calculated either at the solar farm or at the nearest weather station. The policy is now available in Europe and North America, and is planned to launch in the Middle East and North America (MENA) region later this year.
