Q&A: Does your solar business have the insurance coverage it needs?

solar contractor insurance

With insurance (or the destruction of it) in the news so much lately, we figured we’d reach out to Christy Howley, solar program manager at ProSight Specialty Insurance, for some solar installation insurance advice. Recently, ProSight aligned with the North American Board of Certified Energy Practitioners (NABCEP) and became the group’s preferred insurance provider. As a result, companies with NABCEP certification or certified employees may be eligible for preferred rating.

Here’s how you can avoid being left high and dry by your solar business insurance.

Solar Builder: What is typically lacking in more general insurance programs that solar contractors get lumped into?

Christy Howley: Some policies may lack proper errors and omissions (E&O) coverage. This goes beyond general liability and can help protect against subjective claims like negligence, fair dealing and inaccurate advice.

Another coverage that solar contractors should look for is employment practices liability insurance (EPLI). This will help protect a business from claims that include: wrongful termination, discrimination, sexual harassment and retaliation.

At ProSight, we are tapped into the solar industry and that allows us to create specific coverages designed to solve business obstacles that are unique to the solar industry. Examples are operational systems coverage and obstruction of premise supplemental (OOPS) coverage. The former provides liability coverage for operational solar systems. The latter, OOPS coverage, helps protect businesses from paying out of pocket to compensate clients when an installation accident leaves living quarters uninhabitable. Both coverages can provide a contractor with peace of mind while working on projects.

SB: What coverages in particular should solar contractors be seeking out? And what scenarios are covered by these programs?

Howley: What’s lacking in a policy differs in every situation. Insurance policies are not one-size-fits-all, so business owners should make sure they are very explicit with the capabilities and direction of a company. This will allow the agent to find a policy that best fits the company’s needs.

In the solar and energy efficiency field, there are so many different business models that you will rarely find two companies that are doing the exact same thing. So, where a certain coverage might be important to a business that procures and sells solar systems, that same coverage might not be necessary for a company that solely installs.

Contractors should also evaluate their policy for any problematic exclusions in their policies that may be critical to their business model. If they are not careful, they could undertake a job that is not covered by their insurance. If an incident were to occur, the company would be liable for the damages.

SB: Is there anything you see as over-coverage that should be avoided to save costs?

Howley: Insurance is peace of mind. If specific coverages give a solar practitioner the comfort to do business, it’s well worth the price of the premium. And, it’s not only the individual company that benefits. The entire solar industry benefits when businesses are properly insured and conducting installations safely. When an insurance carrier has to pay a large loss, it impacts the policies and premiums that are subsequently written. So, if each solar provider gets properly covered and goes the extra mile to install properly and keep their employees safe, it will help maintain cost stability across the industry.

SB: Are those coverages available across the country or just in certain solar-heavy regions?

Howley: ProSight has the ability to provide our exclusive coverages nationwide. Whether your company operates in a solar-heavy region like New York City or you are one of the first solar businesses in your area, we can give you access to Operational System coverage, OOPS coverage and much more.

SB: Does size and scope of a business matter? Like, what if someone wants to get into solar + storage, or maybe start doing small commercial instead of just residential?

Howley: The size and scope matters most when the business moves into arenas that the current insurance policy excludes or doesn’t currently contemplate. If a company does commercial but wants to get into residential, even if it’s only a small percentage of the business, it is crucial to be sure there isn’t a residential exclusion on the policy.
The same goes for solar + storage; if a policy is set up for coverage on installations and the business wants to start providing storage options to their customers, be sure to re-examine the insurance policy before taking the steps into expansion. If a customer files a claim against the company for something that isn’t covered under the current policy, the business and the owner could be on the hook for all the damages.

SB: What’s an example of how a specific coverage saved a customer?

Howley: One of our insureds utilized our worker’s compensation coverage for an unfortunate incident that happened during an installation. In a total fluke situation, a plank gave out while a worker was walking on it. The worker fell about 30 ft and was severely injured. With ProSight’s WC, the worker’s injuries and lost time at work were covered for as long as the injury lasted. We want our insureds and their employees to go home safely each night, but if an accident happens, our policy covers medical expenses and time missed from work.

SB: Is there anything a solar contractor can do personally or in their business to further lower costs on premiums?

Howley: The main thing solar contractors can do is treat their people well. Make sure they get proper training, allow them to attend industry conferences, get them the most updated equipment and do whatever it takes to prepare employees to be the best at their jobs.

Industry certifications can also help offset long-term costs as well. The education received while undergoing and maintaining the certifications from NABCEP can signal to insurers and customers alike that your business is compliant with the highest level of certification and scrutiny.

— Solar Builder magazine

Why sale leasebacks? How this PPA solution gets commercial solar projects financed

solar panels and money

An increasing number of solar developers are realizing they can use sale-leaseback financing to take advantage of tax incentives for solar installations, and in turn, reduce costs, conserve cash, increase profitability and enhance their brands.

Reducing energy costs is a major consideration for many businesses and government entities because they know that lower energy costs translate into improved profitability and cash flow, and investments in sustainability can add significant value to assets.

Developers such as Community Energy and Monolith Solar are using sale leasebacks to finance projects that include a power purchase agreement (PPA), allowing monetization of the tax benefits, inclusive of the investment tax credit and depreciation. In this structure, solar developers own and operate the system and sell the power to a third party.

The features of a smart sale-leaseback project include:

  • Strong credit all around (developers, PPA offtakers, installers)
  • Positive project cash flow
  • Experienced engineering, procurement and construction management teams
  • Tier 1 components
  • Strong site control
  • Solid PPA
  • Strong incentives
  • Quality operations and management plan/partner

Smart sale-leaseback programs allow developers to finance distributed solar projects that otherwise may not be financeable, as this financing structure scales down nicely, following industry trends of lower costs per watt.

Conserve cash, gain flexibility

Solar developers benefit from financing solar equipment acquisitions by preserving cash and credit lines for other uses. Here are some of the other benefits of financing solar capital expenditures:

  • Potential tax benefits. Equipment financing may provide tax advantages by monetizing the Investment Tax Credit, utilizing Modified Accelerated Cost Recovery System (MACRS) and bonus depreciation benefits.
  • Stimulus benefits. Additional savings opportunities may be available through solar renewable energy credits and grants.
  • Flexibility. Whether it’s a tax or non-tax lease, payments can be structured to match budget requirements, with terms aligned with the solar equipment’s useful life.
  • Reduced capital outlay. By bundling solar equipment with other costs, including design, engineering, development and installation, businesses can acquire what they need with no money down and one fixed monthly payment. In most cases, 100 percent financing can be provided.
  • Be known as a green leader. A solar system is not only a wise financial investment but also supports environmental values. Financing allows organizations to demonstrate commitments to promoting clean energy and reducing their carbon footprint.

10 questions to ask

In the acquisition of solar equipment, it’s important to weigh all available options. Here are 10 questions to consider:

Before
1. Do I need construction financing?
2. Does the installer have the experience, financial strength, qualified staff and bonding capacity to complete a successful project?
3. Does the project use Tier 1 components?
4. Is the PPA financeable?
5. Does the energy offtaker meet a finance company’s credit requirements, i.e. investment grade credit rating?
6. Do I have good site control?

During
7. What are the lease terms, including tenor, monthly lease payment and end-of-term options?
8. What are my other financial obligations for the equipment (such as insurance, taxes and maintenance) during the financing period?
9. Can I purchase the system during the lease term?

After
10. Can I return the equipment or renew the lease?

With answers to these questions, solar developers can effectively utilize solar equipment financing to conserve cash and build their balance sheets by leveraging PPA revenues and retaining the entire revenue stream, as opposed to selling off the PPA.

Choosing a Finance Partner

Seek out a financing partner who can accommodate businesses with customized payments to match budgetary requirements. Make sure the financing company has solar lease financing experience, understands solar project needs, takes the time to ask questions and listens to your responses.

Above all, look for a financing company with a track record in renewable energy and a willingness to customize leasing solutions to help solar developers finance their projects.

Doug Beebe and Luis Gutierrez are VPs of energy finance for the eastern and western United States, respectively, for Key Equipment Finance.

— Solar Builder magazine

Pared-down MLPE: How Empower Micro Systems does residential solar with two SKUs

empower-genesys-8k-powerbridge-1In its early days, the U.S. residential solar market was dominated by high-volume buyers like Sunrun, Solar City and Vivint, which means they bought most of the equipment, with the remaining market being served through distribution channels. But big-time growth going forward in the residential solar segment will be driven by the local installer, and the growth of that local installer market will come through greater simplicity, in both process and systems. That’s how we see it at least, and that’s the thesis driving a new PV electronics platform from Empower Micro Systems, a technology company that is currently licensing its new patented solar platform to larger established brands.

“With more financing options available, there is just not a huge advantage in being larger,” says Mika Nuotio, CEO of Empower Micro Systems. “The system is collapsing. Hyper regionalized deployment is coming. The vast majority is from installers, sold through distribution.”

So, if smaller companies gravitating toward simple solutions is the operating assumption, Nuotio says SKU consolidation is one of the most important goals to shoot for — reducing inventory costs and inventory turns makes an installer’s job easier and more profitable.

“In particular in solar, if you sit on inventory for a month or two, you are eroding your profit margin and reselling that equipment. Fast inventory turns make things much easier,” Nuotio says. “Installers are in the service business. They need transactional efficiency. When we designed our technology, we looked at the whole value chain from manufacturers through distributors to homeowners. What’s the technology that streamlines everything?”

SKU consolidation

Installers like stocking products in a van or keeping confined stock at a distributor. Select the wrong size or put the wrong one in the van and another trip is needed.

Simplicity is far from a new concept, as pretty much all manufacturers are trying to simplify their products and an installer’s workflow, but Empower’s Genesys 8K modular technology platform is maybe the simplest out there, cutting the SKU count to two: just a PowerBridge and a PoweHub. With those two, Nuotio says you can build any system from 2.4 to 11.4 kW, which could cover about 99 percent of U.S. residential installs. Comparable module-level power electronic solutions will likely have eight to 15 different SKUs.

Introducing ‘fractal inversion’

Empower Genesys So, how is Empower able to say “just buy two components and then that’s it?” Nuotio explains it is part technology and part design. The Empower technology uses a combination of microinverters and DC optimizers, an architecture that Nuotio is calling fractal inversion.

Here’s how it was described to us: The PowerBridge is a microinverter, one installed per module; the input is DC, and the output is low voltage AC (operating between 0 and 40 volts). Multiple units are then connected in series to create an AC string and aggregated together to hit grid voltage.

The PoweHub is the smart energy combiner. It combines multiple output circuits into one circuit that goes into the service panel and can support up to three strings. Each string is 16 amps, and the aggregate output max is 48 amps. The power rating of the system scales with the number of PowerBridges.

“Because we are connecting the PowerBridges serially in the string, we have an all AC system that doesn’t need a proprietary trunk cable,” Nuotio says. “Installers we talk to say they don’t like trunk cables; they are complicated to deal with, you need three different versions in stock, slicing connectors, sealing caps. That whole thing goes away.”

Overall, the system concept reminds us of Enphase, except for the commitment to pared down SKUs and the move away from trunk cables. It is similar to SolarEdge in that the DC to AC ratios aren’t rigid, which is a trend you can expect to continue in residential solutions. It differs from SolarEdge by being all AC voltage, which means less thermal stretch compared to an oversized DC string.

“Thermal stretch on an individual PowerBridge actually goes down when you oversize in our system,” Nuotio says. “Each PowerBridge is operating at a lower power output, and the string current is limited to a max level of 16 amps. If you keep loading more and more DC power, the total power is max 3.8-kW AC, so each unit actually processes less power and therefore puts less thermal stretch on the electronics.”

Lastly, as solar + storage systems start to take off, Nuotio says the PowerBridge simply couples to a lithium ion battery pack in the way it would a PV module, to help keep those SKU counts low and install solar today but be ready with the infrastructure for storage down the road.

Limitations?

The rigid modularity of the system might not work for every single home on the market because a single string of at least 8 PV modules is needed to make the system and economics payoff. But that is a fairly small volume of projects.

“If you look at the cost of customer acquisition, permitting, installation and truck rolls to do anything, an eight-module system is just not economical. It is washed out by soft costs, so we don’t see that as a major limitation from an overall market perspective.”


Tigo with Amazon AlexaTigo Skill connects a PV system to Amazon’s Alexa

Tigo is now offering its customers the benefits of Amazon Alexa technology via the new Tigo Skill, available on Alexa-enabled products. Using the Tigo Skill, residential and commercial customers with monitored PV systems can request tailored information from Alexa, the cloud-based voice service by Amazon. For example, simply saying “Alexa, ask Tigo how much power my PV system generated today,” will report a day’s worth of power without the need to log in to Tigo’s SMART website.

“Within seconds, you can know how well your PV system is producing — without logging on to a computer or climbing on the roof,” says Maxym Makhota, Tigo’s VP of Software Development. “Tigo Skill is the first to bridge the gap between solar, artificial intelligence and the Smart Home mentality in which information is always available.”

— Solar Builder magazine

PV Pointer: Minimize truck rolls by using smart software

APsystems-YC500i-EnergyMax

We’ve all heard the expression “work smarter, not harder,” but you would be surprised how often solar installers get in a truck and roll out to a jobsite to adjust or repair something that probably could have been fixed remotely back at HQ. Many software-savvy solar installers are boning up on best practices to better utilize the systems and information already available to them — most of it right at their fingertips — to save both time and money.

For solar arrays, the most critical software typically lies within the power conversion devices, gateways and interconnected online monitoring platform provided by the inverter manufacturer. The online platform not only monitors the performance of the system, but also tracks a profusion of data points simultaneously and stores that information in the cloud. By checking certain performance specs, settings, activity and historical data, installers can quickly troubleshoot and fix common hitches or, at worst, narrow down the problem.

Every inverter monitoring interface is a little different, but much of the information and tools available are typically the same. With an MLPE system like microinverters, you’re able to drill down to the PV panel level to see what each module is producing at any given time. When troubleshooting a system issue, or when you see a panel reporting low or zero watts, first try rebooting the system remotely if your monitoring platform offers that capability. With some systems, a reboot may help the interface identify the issue, or it might reset the array to its default parameters in case an unusual grid event threw a monkey wrench at it. It could also spur the system to begin downloading recent updates that may have stalled when the system encountered the issue. You may even consider rebooting more than once.

If you’re still troubleshooting the issue, check the DC side of the system. For a microinverter system, be sure each inverter is reporting at its minimal operating range (such as 16 V) incoming from the panel. Next, check your AC output. If your system shows it registering zero or 120 V, the inverter may not be sensing the grid or enough volts from the grid to register as a 240 V grid connection. Without an identified grid connection, the inverter will not convert energy, so if you see this as an issue with multiple sequential inverters, it could be a cable or connector problem. If it applies to the entire string or array, the problem could be a loose wire in the junction box or a tripped breaker.

2017 Solar Inverter Buyer’s Guide

With a low wattage problem, you can drill down to the panel level online and check the voltage. If it’s registering under its minimal operating range, it’s likely a panel problem and not the inverter. You may still have to visit the site, but at least you know what you’re replacing and exactly where it is on the array. At the site, unplug the suspect panel from the inverter and take a live load DC voltage and current reading. If your panel is reading below its minimum startup voltage and 0 current, then the panel is the culprit and needs replacing.

Don’t underestimate the value of historical data. Looking back over a system’s history — especially that of a single panel — may help identify recurring issues affecting that particular panel. Perhaps a chimney shadow hits the panel at the same time each day. You can look back through the production history to see if it occurs often, or if you have multiple installations in a particular area, you can check each of those to see how unusual grid activity may be affecting your other sites.

Understanding what the site metrics are telling you will give you better insight into what’s happening at a jobsite. Learning what you can do to troubleshoot an issue online can not only save you a truck roll but also significantly reduce your time identifying the problem if you do have to drive to the site.

Larry Busby is a technical services manager at APsystems.

— Solar Builder magazine

Solving C&I Solar: How boutique financing is growing this underserved solar segment

C&I Solar

Boutique financiers armed with massive databases and complex algorithms are changing the way that small commercial and industrial (C&I) solar projects get financed. Typically targeting projects under 250 kW, these financiers have automated and accelerated as much of the underwriting chore as possible. The result is that old back-office costs largely have disappeared, making a small C&I loan possible, and even lucrative for certain classes of investors.

“For C&I net metering deals, there likely will be a $5 billion to $6 billion market this year. If there is an avoided cost of power that is more than 10 cents/kWh, there is likely to be a workable deal. Our installers say C&I is where they see all the growth,” says Dustin Keele, founder of SolRates, based in Silicon Valley. His company finances in all 50 states.

This market is also huge in terms of number buildings. “About 90 percent of all U.S. commercial buildings have square footage below 25,000 sq ft. Using 10 watts per sq ft for a density average, you can install a 250-kW system on these buildings,” says San Francisco-based Braggawatt founder Trey Ramsey. “When you focus on systems bigger than 250 kW, then you will find a higher concentration of blue chip companies, which have plenty of borrowing options.”

“We calculate that the medium U.S. business needs a $175,000 system,” says Bryan Birsic, the CEO of Boulder, Colo.-based Wunder Capital.

All of these boutique financiers say they want to see businesses save at least 10 percent off their utility bill. In states like New Jersey, however, with strong SREC markets, the savings can go up to as much as 50 percent.

Crushing the Underwriting Barrier

Most banks are not interested in considering a solar C&I deal for less than $5 million, these financiers say, since the labor cost of their staff of underwriters makes anything under that size unprofitable. But using a series of information tools, including business financials, tax documents and credit rating agency records, these financiers can generate a yes or no response in very little time, eliminating 90 percent of the time and effort that a team of staff underwriters might expend to reach a decision.

“We have hundreds of data fields automated,” Birsic says. “No one can compete with us in this space unless they have a high-technology platform.”

These small lenders also have adopted standardized and proprietary contracts to eliminate lawyer review and cost. The industry is likely to move toward a single C&I contract format in a few years’ time.

“One thing that’s nice about 250-kW-and-under systems is that they are not much more technically complex than a residential system, yet they can be many times larger,” Ramsey notes. His finance platform version 2.0 was recently released with some 600 installers and other players in its database. “It’s one of the final frontiers for solar,” he says.

Operating Leases Popular

If a business is not able to use the ITC benefit, or is willing to forego it, the project becomes that much easier to place. An operating lease, in which the lessee does not own the system until all payments are made and a buyout is paid, is one popular mechanism.

“Operating leases assign the tax credits and depreciation benefits to the bank, so effective interest rates can be negative,” Keele says. “For instance a $500,000 system might have $425,000 in lease payments including the system buyout payment at the end of seven years.”

The SolRates system (free for installers to use) simplifies these equations.

“Once the data is loaded, SolRates provides instant online financing options, where our algorithm finds the optimal lender and financing structure for the deal,” he says. Some of these financiers make their money by originating the leases or loans for an institution that will hold it and use the associated ITC benefit. Others work the margins the good old way.

Broadening Investor Base

Apart from small banks and credit unions, small C&I loans are frequently funded by private equity, be the investor an individual, a family office, a financial adviser or a foundation.

“Business owners going solar with our financing can and frequently do achieve ROIs of greater than 10x on their out of pocket capital,” Keele says.

Wunder Capital packages its own term investment products from the various loans it closes. The company’s Term Fund pays 8.5 percent for the seven-year instrument; the minimum investment is as little as $1,000. In its end-June mid-year review, Wunder reported funding 53 projects this year to date, with the majority involving Term Fund investors.

One risk mitigating factor in private equity investing is the higher quality of warranties, Birsic says. Some lesser known manufacturers have secured these via third parties specialized in the product. While Tier 1 manufacturers tend to service the warranties from their balance sheet, the practice of re-insuring warranty risk has accelerated. Not every solar manufacturer open for business today can safely be assumed to be in business in seven years.

Seven-Year Loan Demand to Grow

Loans for purchased C&I systems are rapidly emerging as the popular financing tool for the segment. Even with seven-year terms, the buyers can save money along the way.

“The loan rates that customers pay can vary depending on their credit: If it’s good, high 5 percent or low 6 percent is typical. If it’s less good, then mid-7 percent,” Keele says.

The complexity of the loan tends to go up with value. “Our focus is toward the lower end, so for a 100-kW deal, it may only be worth $200,000. But for a 1-MW deal, worth $2 million, it may be a very different set of conditions,” Ramsey says.

The financiers agree that as the ITC dwindles away, there will be more loans to the small C&I segment than operating leases.


SPI debut: The Braggawatt Energy platform

Efficiently financing small- and medium-sized businesses is the solar industry’s white whale. At SPI, Braggawatt Energy is officially launching its new platform, specifically built to address these needs. How? What they are calling a partner-driven model designed for simple navigation, creation of financing proposals and automation of credit reviews and financing contracts to implement reliable onsite energy solutions that uniquely address the needs of SME customers.

“Unlike disjointed software platforms or standalone financing providers, Braggawatt’s platform streamlines the origination, development and financing of distributed energy solutions for SMEs,” said Trey Ramsey, co-founder and CEO of Braggawatt.

“We connect the dots between local installers, solar-ready businesses and the financing necessary to make it all happen,” Oleg Popovsky, Braggawatt’s co-founder and CCO, added.

Charles W. Thurston is a freelance writer who covers solar energy from Northern California.

— Solar Builder magazine