Project Title: Expanding the C&I Solar Market to Small and Medium Businesses through Financial Risk Mitigation
Funding Opportunity: Technology to Market 3
Solar Subprogram: Technology to Market
Location: Boston, MA
Amount Awarded: $800,000
Awardee Cost Share: $265,992

The commercial and industrial (C&I) solar market is constrained by the lack of bankable public credit ratings for offtakers, also known as solar power purchasers, which is a common requirement for long-term, third-party project finance. Energetic Insurance is developing a new data-driven underwriting platform to create a novel insurance product that mitigates offtaker credit risk.

This project seeks to create a scalable insurance product that can affordably transfer the risk of C&I offtaker payment default from lenders and tax equity providers to a large insurance carrier and remove the requirement of an offtaker’s public credit rating. Funding will be used to develop advanced actuarial and underwriting models and enable collaboration with lenders, project developers, and insurance companies.

Photovoltaic projects are funded through well-established financing mechanisms that require a measure of offtaker repayment default risk. For residential and utility scale projects, credit ratings are commonly accepted and those markets have enjoyed exponential growth. For commercial and industrial (C&I) projects, lenders and tax equity providers usually require the offtaker be publicly rated with agencies such as Moody’s or S&P. Most companies in the U.S. don’t have such a rating and thus the pace of C&I installations has slowed. In order to grow the C&I market, Energetic Insurance will create a product to transfer the risk of default to an insurance company through a credit enhancement mechanism that will supply an insurer’s public credit rating to the lender in exchange for a policy premium paid out of purchase price allocation revenue. By integrating a variety of alternative data sets, the project will show that the underlying risks of purchase price allocation payment default are less than what is perceived by the market. This allows for the appropriate pricing of the risk of default, resulting in an affordable risk transfer mechanism that will enable more widespread C&I solar.