The Ministry of New and Renewable Energy (MNRE) has issued a circular stating it has held talks with the Department of Financial Services, Ministry of Finance, and the Insurance Regulatory and Development Authority of India (IRDAI) regarding the availability of insurance products for domestic solar modules.
The insurance of solar products is a crucial component for developers in the solar ecosystem, and currently, there are not many players in this business.
Mercom highlighted this issue last year, stressing that lack of insurance is one of the main problems plaguing the Indian solar module industry. The Chinese government has made it a point to provide module insurance that makes it an attractive proposition for the module manufacturers.
A module manufacturer had told Mercom that “The insurance premium runs to crores. Manufacturers have to pay the insurance premium to these companies. Say it is a 1 MW project, and the total bill is ₹20 million (~$0.29 million), then the manufacturer has to pay a premium of 10% which is ₹2 million (~$0.029 million). This is an added cost for the manufacturers.”
In its latest circular, the MNRE has announced that it has held talks with the Department of Financial Services, Ministry of Finance, and the Insurance Regulatory and Development Authority of India (IRDAI) for the availability of insurance products regarding domestic modules.
Module insurance generally backs up the warranty that’s extended by the manufacturers to their clients. The warranties are typically a 10-year product warranty and 25-year performance warranty.
Currently, the insurance companies are covering liabilities of manufacturers arising out of performance and product warranty offered by the manufacturers to the buyers. Some of the products also cover the underperformance of solar modules on account of faulty manufacturing, material defects, and aging materials.
Project insurance in India currently covers shortfalls in power generation. Even though the cost of insurance can make modules a little bit more expensive, it will make purchasing modules from manufacturers that offer insurance less risky and more attractive for project developers.
HDFC Ergo General Insurance Company, a joint venture between HDFC Ltd. and ERGO International, an insurance entity of Munich Re Group, launched the first solar energy shortfall insurance policy in India that gives solar project developers the ability to insure specific causes of solar power generation loss.
Another aspect that would boost the spirits of the solar sector is the fact that most of the insurance companies are moving away from the coal sector and toward the renewable sector.
According to a report published by the Unfriend Coal campaign, a growing number of insurance companies are moving away from the coal sector because of the growing risk of unmanageable climate breakdown. Unfriend Coal is an international campaign calling on insurance companies to exit the coal sector and support the transition to a low-carbon economy.
Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU).