October 20, 2016

MANAGING RISK IN RENEWABLE ENERGY LIKE A MATURE ASSET CLASS

by Etienne Lecompte

ARTICLE AUTHOR: Jen Aitchison

As our industry is maturing into an asset class in its own right, there is a real opportunity to address business process and data management systems as tools to manage financial risks in renewable energy efficiently and effectively.

As an insurance professional I have seen a number of situations across the last 5 years where proper processes were often overlooked due to the sheer speed of transactions. As an industry, we have been running full steam ahead focusing on other issues that took precedent. Now may be a good time to stop, regroup and look at the processes and tools we use as an industry.

 

Taking real estate as an example, we see that they have invested time and money into systematic approaches and systems to allow them to transact on assets in full confidence of what they are buying. Can we say the same of solar plants?

 

Often enough, we are involved in transactions where we see erratic documentation management, poor maintenance records, few warranty records, scarce performance history, and never in a centralized or easily accessible location. We too often are left at the end of the process to validate exposure and risk only to be confronted with dropboxes full of documents that may or may not be relevant to the transaction at hand.

 

I believe that as an industry investing in systems that will provide proper transparency into underlying asset performance, assignment of warranties, leases and PPA’s as well as other reps and warranty related documentation will add significant financial value for all parties to a transaction. Consultants and stakeholders can decrease their risk exposure and come to a better understanding of what they are buying and even provide a seamless transaction process saving time and money for all parties when an entire asset lifecycle documentation file can be transferred with one simple step.

 

Proper information can also significantly reduce the risk of errors & omissions exposures for professionals and service providers in our industry, most notably asset managers. As professionals, we often rely on information provided by our clients and counter parties, with the expectation that the files are complete and all information is up to date and accurate. However, with assets changing hands consistently some of this documentation can be missed, providing exposure to financial loss and subsequent legal action and insurance claims.

 

I’m excited for the day when we have a standardized format for key project information, centralized tools where all parties can agree and aggregate information. By using proper tools organizations are effectively not only decreasing their own risk but also of all their counterparties and stakeholders.

 

It’s time for us to embrace technology to reduce risk and establish renewables as a consistent and respected asset class.

About Jen Aitchison:

Jen is a Partner with Jones Brown, leading the sustainable energy practice area since 2009. With over 14 years experience in the insurance industry, the last 7 focused on renewable and sustainable energy risks, she has had the opportunity to work on complex risks involving emerging technologies, and source creative risk management solutions such as performanc e warranties and energy savings guarantees. Recently her work won her the 2015 CANSIA presidents award for her work as PV Fire Safety Committee Chair; This responsibility saw the creation of the PV Fire Safety Manual and fully funded training across Ontario for firefighters, successfully lobbying the IESO to incorporate a process to notify all local firehalls of local PV installation and the use of standardized signage.

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