Module Warranty Insurance Key to Solar Market’s Growth: Mercom Webinar
Stakeholders want greater clarity about insurance
March 2, 2023
Warranty of solar modules is a crucial part of any solar installation, as modules account for nearly 40% of project cost. Warranty covers both the product and its performance. While warranty is a business enabler, it is yet to grain traction in the industry, experts at a webinar hosted by Mercom India said.
The webinar was titled ‘Solar PV Performance Warranty: Building Market Confidence.’
The panelists were Burzin Umrigar, SVP-Head Construction Insurance & Renewable Energy, Howden India; Punit Mehta, Director at Pixon Green Energy; Sudhanshu Kamboj, VP-Project Development at Radiance Renewables; and Vineet Mittal, Director, and Co-founder at Navitas Solar.
Priya Sanjay, Managing Director, Mercom India, moderated the session.
Growing Demand for Solar Module Warranty Insurance
Solar module warranty insurance as a business enabler has come to the fore in the last four- five years.
On the growing significance of module warranty insurance, Burzin Umrigar said, “The insurance is for both buyers and sellers. The insurance is for faulty manufacturing, material defects, material aging, and insolvency of manufacturers. Currently, there are few players in the market, but it is bound to grow.”
He said if the manufacturer goes insolvent, the insurance policy is transferred to a registered buyer, ensuring that his warranty claims remain covered.
“Most companies provide insurance for 25-30 years. We require insurance policy longevity in terms of business focus. We take utmost care in the manufacturing process, and the insurance policy is to address particular contingencies that crop up from time to time,” Punit Mehta of Pixon Green Energy said.
The market has matured over a period of time, and manufacturers are now offering warranties for 25 years.
According to Sudhanshu Kamboj, “There is a need for climate change insurance which is not in vogue right now but will come into the picture with global warming taking center stage. It will certainly gain traction in the coming years. The insurance business is at a nascent stage, and the premiums are too high.”
The surge in demand for solar module warranty insurance is expected to boost the market’s growth in the coming period.
“Even projects with lower capacities should get the benefits of insurance. It gives the buyers additional coverage and a layer of security. There is a lot of flexibility in buying insurance products, and this makes it easier for us to export the products. Now the U.S. clients are planning to buy from Indian manufacturers as an alternative to China. Having insurance in place makes it easier for us to sell,” Vineet Mittal of Navitas Solar said.
Turnover Requirement a Challenge
Many believe the insurance products are not customized for Indian manufacturers. The minimum turnover requirement of availing the claim is also a significant hurdle.
“The developers want insurance for a range of capacities, and they feel that the capacity cap for availing the insurance is a challenge. Also, we have stringent insurance eligibility criteria in place. However, manufacturers are able to provide the documentation needed for the insurance, which makes it easier for developers,” Umrigar said.
He added that there is definitely a need for a risk advisor who can decode the nuances of insurance for customers.
“Product warranties contribute to the growth of sales, and it is imperative that all the assets should be insured. Insurance cover has become very important as a part of our business, and manufacturers are comfortable with the fact that any hurdle that comes in the way can be dealt with,” added Mehta.
He said Pixon Green Energy has been in the export business for quite some time. “For exports, insurance is essential since clients demand insurance coverage for deals to go through.”
Stakeholders feel the need for customization for each client. Customers are ready to pay the cost, but the product should be good.
“Getting insurance claims reimbursed is a big challenge for any manufacturer. It is a big impediment to facilitating the growth of insurance products in the country. There should be greater clarity regarding the details of the overall process, and also, there is an utmost need to keep the insurance process simple,” said Mittal.
Solar PV Warranty Insurance from a Developer’s Perspective
Solar developers invest significant capital into projects, and therefore solar PV warranty insurance becomes critical.
“We get lending from Indian banks, which take into account the Tier-I manufacturers, and the lending process becomes easier. The lenders are happy with the product and performance warranties, and it is only a matter of time before climate change insurance also becomes popular. On behalf of other developers, I might say there are challenges for domestic manufacturers, and the banks see domestic manufacturers with a critical eye,” opined Kamboj.
Many developers do their own third-party inspections before opting for any insurance products.
You can watch the webinar here.