What is 'bankability' in the solar project and financing world?
I've heard folks say it means you have to have shipped at least ten megawatts of solar panels. Others have described it as having had solar panels in the field for at least five years. Michael Kanellos tried his hand at defining the manufactured word:
"In a nutshell, banks typically will only provide loans to utility-scale solar projects if the projects will be built with solar panels from a limited number of suppliers, i.e. SunPower (SPWRA), First Solar (FSLR), Sharp (SHCAY.PK), etc. China's Suntech Power Holdings (STP) is part of the bankability club, but most new entrants, and many Chinese suppliers, are often not considered bankable."
"Essentially, the bankability factor has restricted the field of available producers to a much smaller pool; those firms that are not considered bankable are effectively shut out of the market. Indeed, this is exactly why the current market is considered to be undersupplied...there is no shortage of module capacity, but rather of bankable module capacity," adding, "Bankability is the missing piece of the puzzle, and combined with Germany's ability to absorb high-cost modules, it is what has thus far insulated established, high-cost manufacturers from the twin effects of oversupply and commoditization."
This fuzzy term is also what keeps new entrants from winning business and new technologies from being deployed. If you're a new player in solar with a limited production history and perhaps a new technology -- you're going to come up against the term bankability. How do you overcome this chicken-and-egg problem?
SolFocus might have figured it out: get an insurance company to provide a warranty for panel performance.
Munich Re introduced the first insurance solution to provide a performance warranty for solar panels in the United States through a new plan that covers concentrator photovoltaic (CPV) systems manufactured by SolFocus. Munich Re, SolFocus and broker Woodruff-Sawyer & Co. collaborated on this first coverage of its kind for CPV technology systems.
Munich Re has devised a number of coverages that reduce the risks in renewable energy for investors and thus make such investments possible.
“The performance and reliability of SolFocus CPV has advanced to such a high level that a renowned insurer like Munich Re has offered an insurance policy,” said Mark Crowley, CEO of SolFocus. “The ability to provide such an insurance policy is critical for companies such as ours in providing confidence and trust to the marketplace.”
SolFocus provides all of its customers globally with a warranty for its CPV systems of 25 years for power performance. If any product fails to meet the specifics of this warranty, then the Munich Re policy kicks in.
Prior to the agreement being signed, Munich Re conducted an in-depth review of the SolFocus development and manufacturing processes. Munich Re already makes its performance-warranty insurance available to several other manufacturers of photovoltaic cells based on other technologies, but this is the first CPV offering.
The innovative insurance solution is an important milestone for the financing of photovoltaic projects, offering producers additional financial protection. Manufacturers of modules can take the long-term, technical-guarantee risk off their balance sheet, thus easing the financial burden and giving customers greater security.
This serves to make CPV panels more bankable -- whatever that means.