Many parties take on some measures of risk in the investment and commitment of funds to PV projects. Project risk, resource risk, technology risk, policy risk, performance risk, and market risk are just some of factors that are considered. Insurance is a form of risk mitigation that may be used to hedge against loss risks. The fact that insurers take on risk reduces the risks to project financiers, developers, and operators—but at a cost. Reduced risks for insurers may lead to improved finance costs to the borrower and hence lower project costs, greater financial confidence and ultimately more RE project installations. Understanding and characterizing risks can lead to cost reductions where overly conservative and expensive contingency budgets have been used. With better information these costs can be reduced as increased confidence is gained through performance.
Targeted consequential risk reduction via innovative insurance solutions allows project developers access to lower cost and more abundant capital for solar project finance. In order for insurance companies to enter this new market, they must have the tools and data necessary to quantify project risks, including probabilities of projects not performing to expectations.
This topic will be addressed in a white paper where Sandia will provide technical performance and reliability information, tools, QA processes, and data and/or analyses for enhanced understanding of the risks with RE projects, including
- performance models and methods applications;
- key performance indicators & metrics;
- reliability methods, failure data, analytical assessment, and reporting;
- plant condition states, availability, and capacity factors;
- descriptions of Sandia program efforts in these areas; and
- paths moving forward, such as industry best practices and the form of eventual standards.
This effort builds on previous R&D work and industry interactions on the bankability concept and connects the performance modeling and reliability work of the Program to Market Transformation.
Sandia contributed as a co-author to a report on these issues in a report entitled “Continuing Developments in PV Risk Management: Strategies, Solutions, and Implications“