risk analysis for insurance of pv manufacturers and pv … · risk analysis for insurance of pv...

Risk Analysis for Insurance

of PV Manufacturers and PV ParksSolar Bankability Workshop Cologne 2016

Cologne, May 10, 2016, Dr. Ulrich Bohnert, Risk AnalystGreen Tech Solutions, Special Enterprise Risks

AGENDA

IntroRisk for PV Suppliers and PV ParksRisk for PV InsurersSummary

INTROMunich RE: Diversified structure – Diversified risk

3Munich Re - Green Tech Solutions

Munich Re (Group)*

Asset management

*This listing is incomplete and provides no precise indication of shareholdings.

Primary insuranceReinsurance Munich Health

Belgium

Corporate Insurance PartnerGreat Lakes Reinsurance (UK) PLCKA Köln.Assekuranz Agentur GmbHMSF Pritchard Syndicate 318Temple Insurance CompanyWatkins Syndicate

MunichRE Group1

http://198.65.252.133/default_main.asp

http://198.65.252.133/default_main.asp

INTROInsurance covers from “Green Tech Solutions”Solutions for special enterprise risks

Title of presentation and name of speaker 4

PV Industry

PV manufacturers

PV projects

Wind Industry

Serial loss

Offshore logistics

CSP projects

LED manufacturers

Biomass

Energy storage

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INTRO

Risk Definitions

Green Tech Solutions / Solar Warranty Insurance

ISO 31000 (2009) / ISO Guide 73:2002 :

Risk is the effect of uncertainty on objectives

Business Objective: A desired measurable quantity to be achieved within a time frame and with available resources

Sociological / Psychological:Risk is the mentally perceived representation of assumed possible dangers by individuals, groups or organizations and linked to emotions like fear

RISK ANALYSIS

From module technology to procurement

Reliable Technology

• Base Certificates• Extended Certificates• Allowed bills of materials

Reliable Product

• Datasheet / Nameplate• Used bills of materials• Production Quality• Warranty Terms

Reliable Supplier

• Purchase• Financial• Delivery• EPC handoverSubcontractors / Suppliers ?

Tolerances / Burden of Proof ?

Lifetime ?Loopholes ?

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7Green Tech Solutions / Solar Warranty Insurance

INTRO

Options for Risk ManagementCPN method developed in the project can support the decision

ISO 31000 (2009) / ISO Guide 73:2002 :

a) Avoid the risk (e.g. do not start business)

b) Increase the risk (e.g. if chances increase as well)

c) Remove the risk source (e.g. thorough testing, FMEA)

d) Change the likelihood (e.g. use good materials)

e) Change the consequences (e.g. give no warranties)

f) Share the risk with other parties (e.g. insurance)

g) Retain the risk by informed decision (e.g. for low CPN)

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INTRO

Risk Profiles for PV Park SPVsHow do the probability distributions for PV parks look like typically or individually ?


Fail Area Profit AreaLoss Area

Project Return positivenegative

RISK ANALYSIS

Certification Complexity / Product UncertaintiesRisk of undetected failure modes, loopholes and over-estimated lifetime prognosis

CertificateIEC-61215IEC-61730ID: PV123

V1 (initial)Product A, 200-240 WpProduct B, 270-330 WpProduct C, 260-300 Wp

Test report 1Tested Product A, 220 WpTested Product B, 300 Wp

Bill of MaterialVar1: Glass a, Cell b, EVA c, Backsheet d Var2: Glass e, Cell f, EVA g, Backsheet h

V2 (re-test)Product A, 200-240 WpProduct B, 270-340 WpProduct C, 230-270 Wp

Test report 2Tested Product B, 310 WpTested Product C, 250 Wp

Bill of MaterialVar3: Glass e, Cell i, EVA j, Backsheet hVar4: Glass e, Cell k, EVA l, Backsheet d

CertificateIEC-62804 (PID)ID: PV456

V1Product A, 200-240 Wp

Test report 3Tested Product A, 225 Wp

Bill of MaterialGlass a, Cell b, EVA c, Backsheet d

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9

AGENDA

IntroRisks for PV Suppliers and PV ParksRisks for PV InsurersSummary


RISKS FOR PV SUPPLIERS

Types of Supplier RisksMany contractual obligations with underlying technical uncertainties

Liabilities of component suppliers• Product Liability (Third Party, Safety)• Workmanship warranties• Performance warranties

Liabilities of Developer/EPC• Damages occurring during

construction• Liquidated damages (e.g. delay in

startup)• Workmanship warranties• Yield warranties

Liabilities of O&M provider• Liquidated damages related to

availability or yield (e.g. shadowing due to uncontrolled vegetation growth or soiling)

General Business Risks• Market change• Margin pressure• Political change• Growth financing• Debt overload


RISK FOR PV PARKS

Types of Property Risks (external impacts)Severity of damage is often related to installation quality

Lightning strokes• Lack or improper lightning protection

leading to destruction of components• Undetected malfunctions (bypass-

diodes)

Grid overvoltage• Lack or improper surge protection

leading to component failures

Wind loads• Mounting structures tear off• Module pull off or bending

Damage caused by snow loads• Module breakage• Frame deformation• Loss of roof cladding

Strong rain• Landslide• Stream channels

Fire• PV systems affected by building fire• PV systems causing fire

Theft or vandalism• Loss of infrastructure, e.g. modules, copper• Damaged fences

Animal impact• Glass breakage or contamination by birds• Rodent bites in cable insulation

Grounding and Mounting• Roof damage due to installation work• Overloading the roof structure• Water ingress beneath PV systems


RISK FOR PV PARKS

Reasons for Risks in PV ParksLack of widely accepted quality standards and long-term experience

Park design• Uncertain estimation of environmental

factors (e.g. climate, ammonia, salt, sand, dust)

• Weak supplier qualification• Weak components qualification• Stress - strength alignment (fit for

purpose)• Layout errors, e.g. cabling, grounding,

electrical dimensioning• Uncertainty in irradiance estimation• Using wrong assumptions for yield

prognosis• Using inappropriate tool for yield

prognosis (or wrong usage of proper tool)

• Weak O&M planning, e.g. maintenance intervals, spare part requirements

• Weak EPC qualification• Weak EPC requirement specification• Weak procurement contracts

Installation• Weak material inspection• Acceptance of improper deliveries• Undetected installation errors passing through

acceptance audit• Installation faults that cannot be corrected, get

insufficiently compensated, and leading to follow-up problems during the lifetime

• Missing or incorrect documentation• Time or cost over-run• Default of EPC company

Operations• Downtimes higher than expected• Irradiance lower than prognosis (design risk?)• Yield lower than prognosis (design risk?)• Inappropriate maintenance intervals• Spare part demand higher than planned• Default of warranty providers• High maintenance effort due to bad setup• Need for re-powering

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RISK FOR PV PARKS

Risks measures related to objectivesAre such goals clear, complete, measureable and achievable ?


PV Park Financial:Return on Invest 2014-2029 > 5% p.a.

(on average ?, tax ? …)

PV Park Operational:availability in 2015 > 98%

(monthly/yearly basis ?, scheduled maintenance ?, …)

PV Park Technical:all PV panels used in the park were manufactured according to a well-defined specification which was approved by the IEC-61215 certification procedures

(certificateproduct ?, certification chain ?, BoM combinations ?, …)

PV Panel Manufacturer:warranty claims in the years 2013-2023 < 0.5% p.a.

(per financial year ?, per production year ?, …)

AGENDA



RISKS FOR PV INSURERS

Underwriting risksSystematic or stochastic ? General uncertainty or missing information ?

• Wrong information basise.g. information asymmetry / alignment of interest

• Wrong estimation of probabilitiese.g. missing track records / unknown failure modes

• Wrong assumptionse.g. expectation that there are established industry standards which get followed thoroughly

• Anti-selection leads to weak risk balancing in the community of policy holders

• Price Pressuree.g. industry margins too low to afford full insurance cover

RISK ANALYSIS EXAMPLE 1: DEGRADATION

Power Distributions after AgeingRisk of change (are modern panels better or worse ?)

Source: Friesen (2012) PV Module Failure Modes Observed in Real Use and Long Term Exposure, PV-Module Reliability Lugano

Single Module Type (Arco)One Climate @Supsi (1982-2011)

• Asymmetric long tail over age• Multiplicative Degradation Argument• ca.15% of panels above 0.8%/yr

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Munich RE PV Insurance CoversRisk Assessment needed for manufacturer and for solar park

Park C

Park B

Solar Park A (SPV)

XYZ Solar Inc.(Manufacturer)

MR Project Cover:Solar Park’s module performance in case of manufacturer’s insolvency

MR Corporate Cover: Manufacturer’s performance warranty

Warranty Insurance

minimum volume 30 MW

Panel Insuranceminimum volume 15 MW

18

AGENDA


RESUMEE

Summary

PV technology (still) has uncertainties

Cost constraints limit risk removal for PV parks

Manufacturers and EPCs also carry liabilities

Debt and equity providers retain very different risk layers

Risk mgmt. highly related to information and knowledge

Transparency improves risk assignment / alignment

Cost based FMEA with CPNs supports risk decisions

Risk transfer solutions are evolving20

Thank you very much for your attentionSolar Bankability Workshop Cologne 2016Risk Analysis for Insurance of PV Manufacturers and PV Parks

Köln, May 10, 2016, Dr. Ulrich Bohnert, Risk AnalystGreen Tech Solutions, Special Enterprise Riskshttp://www.munichre.com/gts

http://www.munichre.com/gts

Disclaimer

© 2016 Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München("Munich Re"). All rights reserved.

The content of this presentation (including, without limitation, text, pictures, graphics, as well as the arrangement thereof) is protected under copyright law and other protective legislation. These materials or any portions thereof may be used solely for personal and non-commercial purposes. Any other use requires Munich Re’s prior written approval.

Munich Re has used its discretion, best judgement and every reasonable effort in compiling the information and components contained in this presentation. It may not be held liable, however, for the completeness, correctness, topicality and technical accuracy of any information contained herein. Munich Re assumes no liability with regard to updating the information or other content provided in this presentation or to adapting this to conform with future events or developments.

This presentation contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.

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Risk Solutions

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