Green energy investment boosted by insurance industry options
Solar, wind, geothermal and biomass energy systems are the most popular forms of alternative energy in use today. Over the past twenty years these energy systems have helped the US move further away from non-renewable or non-sustainable power sources and have helped keep carbon emissions and greenhouse gases in check. One of the drawbacks to any of these alternative energy sources, though, is the cost associated with building out, retrofitting, or modifying the existing energy source. Installing solar panels costs money – materials, labor costs, permit fees, and peripheral expenses can make the project quite expensive. This cost must be factored into the amount of savings the alternative energy source will provide, which then generates the payback period. Projects with a short payback period are more likely to be considered by a builder, as the financial savings will be seen more quickly.
How does an insurance company help the green energy sector?
When individuals or companies decide to upgrade or modify their existing energy system, the timeframe in which the initial investment will be recouped must be established. For some, a promise of reduced energy costs on a continual basis is enough to prompt the start of a green energy project. Others need to know the exact timeframe in which the initial investment will be repaid. This timeframe is a variable that has many individuals and organizations holding off on green energy investment. This is the unknown factor – more specifically, the unknown reduction in recurring energy costs is the unknown piece.
Insurance companies these days have begun to offer policies for energy retrofit and green energy installations that help cover any potential shortfalls in forecasted energy savings. Let’s say that a building owner decides to install a green energy system in place of an older, antiquated unit. Several insurance companies on the market today will provide a level of “gap” coverage that will ensure the building owner receives enough of an energy cost savings to make the project worthwhile.
This helps to provide a level of comfort to those who are risk-averse and ordinarily wouldn’t invest in a project with an unknown outcome. While modern energy companies do a pretty good job at forecasting the actual savings of a green energy installation or retrofit, the actual numbers won’t shake out until the job is complete.
With our national economy in a slow recovery mode, and energy prices holding relatively low, the investment in sustainable or green energy will certainly benefit form this influx of security. Insurance companies who offer this level of coverage will no doubt be an integral part of our nation’s continued leadership in future sustainable energy projects.