Wind-solar hybrid projects are a practical solution to tackle the intermittency issues of standalone wind and solar energy sources and are poised to play a critical role as a generation source going forward.

When combined, the two renewable energy sources maximize electricity generation, strengthen grid reliability, and optimize land utilization.

According to Mercom India Research, India has an installed hybrid renewable energy capacity of 3.6 GW and a pipeline of about 31 GW, including battery storage projects.

On October 10, 2023, Mercom India hosted a webinar, “Risks and Solutions for Insuring Hybrid Renewable Energy Projects,” that focused on obstacles in providing insurance for these projects and effective risk mitigation approaches. You can watch the full webinar here.

The panelists were Vipul Shetty, Director of Energy Transition at Howden, Amit Sharma, Vice President – Business Development at CleanMax, and Sachin Mansuriya, Lead – Wind Solar Hybrid Projects at Fourth Partner Energy.

Priya Sanjay, Managing Director, Mercom India, moderated the session.

Project-Specific Risks

Insurance for wind-solar hybrid projects is to be tailored per the project’s characteristics, considering location, size, and the unique risks involved. This requires carefully assessing and managing these risks through appropriate insurance coverage so stakeholders can secure their investments and contribute to the growth of clean and sustainable energy production.

Speaking on the growing need for insurance products to meet the demands of wind-solar hybrid projects, Amit Sharma said, “In the last four to five years, the renewables sector has evolved, and the growth has been tremendous in the commercial and industrial (C&I) segment. With the growing demand for wind-solar hybrid projects, the need for insurance has increased. The risks include natural disasters, equipment failure, market fluctuations, and changing regulatory landscape. These factors have accentuated the need for insurance to make the projects economically viable for investors.”

Commenting on the risks involved in the smooth operation of wind-solar hybrid projects, Vipul Shetty said, “Defects come in many forms, and they need to be insured. Developers can have defective wind turbines and solar panels, thermal runaway, and wind turbine damage due to natural causes. These risks are also applicable to storage. Then, there are also regulatory hurdles that hinder the smooth operation of wind-solar hybrid projects. So, it’s a mix of everything.”

“When we combine wind and solar with battery energy storage systems, we are doubling the risk. When we involve more OEMs, checking the track record takes a long time and becomes a complex process. But from an overall perspective, there’s not much difference from standalone wind and solar projects,” Shetty added.

Impact on PPA Prices

Sharing his views on the impact of insurance on the power purchase agreement prices (PPA) prices, Sharma said that the impact is lower or similar to standalone wind or solar projects.

“It is a material impact and is in the range of 0.2-0.3%, which comes to ₹0.2 (~$0.002)/kWh to ₹0.3 (~$0.004)/kWh. It affects the PPA prices, but insurance is necessary,” Mansuriya said.

Insurance Criteria

Speaking about the criteria for providing insurance, Vipul Shetty said that the most important thing is the OEMs’ track record.

“The first thing we look into is the level of competency the OEMs have and the type of technology they are using. Also, we look into the scale of projects, which has increased considerably in the past few years. Another issue is the location of the projects to ascertain the likelihood of natural disasters, the frequency of which has increased in the recent past due to changing weather patterns,” he said.

Shetty dwelt on the issue of the constantly evolving technology landscape. “We have become more competent to deal with the changing technological landscape. We have renewable engineers to analyze the risk and give the green light to new technologies entering the renewable sector. It’s not much of a concern for us. It boils down to what level of infrastructure information is given to the insurers, and it is also important that correct information is provided to us.”

Expecting the insurance companies to keep pace with technological developments, Sharma said insurance companies need to keep pace with technological advancements in the hybrid segment.

“Climate change is a big issue now, and they should consider this while providing cover for hybrid projects. Also, virtual PPAs are likely to emerge in the near future, and the insurance companies should gear up with new insurance products to cater to this,” he said.

Tailored Solutions

Speaking about expectations from insurance providers, Sharma said there was a need for tailor-made solutions for various contingencies.

“The insurance providers should also consider supply-chain issues, which became prominent during the COVID-19 outbreak. Also, cyber-security is another area that they should look into. These are some of the areas where things can improve. Logistics is another area for which the insurance providers need to provide solutions,” Sharma said.

Bringing the insurer’s perspective to the table, Shetty said that the insurance companies are trying their best to provide warranties and new technology guarantees.

“We are also streamlining the whole process by providing guidelines to clients. The supply chain issue is definitely a concern for developers, but it isn’t easy to address it right now. It is a grey area. But on the brighter side, nearly 60-70% of renewable energy projects are now insured. More and more insurance companies are moving toward renewables as we move on the path of energy transition,” Shetty said.