Energy storage is key to achieving a sustainable energy transition and REIB offers a good insurance solution for it

Energy battery storage system insurance

Central Eastern Europe is moving towards sustainable development and stronger energy security. The importance of the renewable energy sector is growing fast. The region has achieved breakthroughs in green energy supply over the past year with unprecedented growth in installed capacity.

Investing in energy storage solutions is a logical next step. Various energy storage technologies improve grid stability, facilitate the integration of renewable sources and optimize energy management. They also give solar power producers more financial flexibility. They can take advantage of the price difference per MWh during the day and increase their profit.

Energy storage protection

Battery owners face another challenge. They must ensure good protection for both: the installed solar power plants and the energy storage. Standard covered risks such as fire and natural perils, short circuit, overvoltage, flood and earthquake are insufficient to guarantee full protection. That’s why the insurers have to find a new insurance solution that will take into account the specifics of the insurance object. The insurance market in Bulgaria, however, is not ready to meet the demand and is not sufficiently familiar with the insurance of energy storage.

As an insurance broker, it is important for us to find a solution to provide comprehensive insurance coverage for our clients. Since 2018, we have been partnering with the pioneers in this field in Germany. For six years, one of the largest storage owners in the country has been our client. We gained experience in the international market and we’ve been working with industry leaders. Based on this, we developed a product specialized for Central and Eastern Europe.

We offer a full range of coverage including feasibility studies and the phases of development, construction and operation. Some specific risks include:

  • Loss of income (instead of profit) the difference in this case is significant, because in the same event, the client will receive a bigger compensation. 
  • Extended Loss of Revenue Indemnity Period  – up to 18 months.
  • Cover even if the PV plant is not officially grid connected.

The effect on funding

Securing financing for solar projects is a major challenge for investors. Banking institutions require large deductibles and higher down payment from the investor.

The solution is to provide the bank with a guarantee that they can trust. This requires the involvement of an “A” credit rated insurer to guarantee the production of the solar project. And we have the solution!

The “Reduced Yield” coverage is an insurance product that is a “win-win” for both parties – the Investor (borrower) and the Financial Institution (lender). It wraps all the project’s warranties into one coverage. The coverage has a pre-agreed €/kWh rate which provides security for long-term investment. We will compensate for reduced energy production if the expected electricity output from solar power plants falls by more than 10%.

Some reasons for paying compensation are low solar radiation and equipment issues, extreme weather and inaccurate seasonality.

The main advantages of this product are:

  • Reduced risk for banks, as a result of which they would offer lower interest rates when financing a solar project.
  • A guarantee for the trader that if the producer does not supply them with the requested amount of electricity, there will be someone to cover the eventual claim of the end customer.
  • Assurance for the investor that he will receive at least 90% of the estimated performance of his project.

“Reduced Yield” is a cover that guarantees the production of electricity. It’s essential for the whole chain – from the financing institution to the designer of the solar park to the electricity trader and the investor.

If you want to know more about insurance options for energy storage, contact us for a personal consultation!