Planning for Brightfield Risks from Project Conception to Construction Completion
Manage the risk in your brightfield development from pre-construction to operation to insure the sun steadily shines on your investment.
Brightfield development is creating value and providing tangible rewards for stakeholders—many of which have been deadlocked in limbo with little potential for productive use on their property. Closed landfills present perfect sites for solar developments, particularly those which are generally compacted and provide level, scalable land. Insurance is a significant component in any brightfield development, but the structure of insurance depends upon the type of transaction notably a leasehold, or a land purchase.
For leasehold transactions, Brightfield Risks can be categorized into three buckets:
Site access is critical to assess the inherent risks associated with the site, and almost always a critical path item during the course of due diligence. Access agreements provide contractual approvals for third parties to access the site on behalf of the lessee and other interested parties. Best practices provide that all vendors maintain compulsory insurance coverages, such as workers compensation and general liability coverage, because the lessee is exposed to contingent liability arising out of the actions of its agents or contractors. Furthermore, the lessee may be contractually obligated to assume the tort liability of others, for example, in a legal defense arising out of a bodily injury or property damage claims.
Landfills can present attractive nuisances and as such, could be trespassed upon. And while the purpose of insurance is not to reward those intent on breaking the law, pre-construction insurance protects the insurable interests of those trespassed upon.
Lastly, general liability coverage for vacant land is materially different from general liability needed for development. This policy is no longer viable when deployment and construction starts and must be transitioned to a project liability policy.
Approvals have been granted, site plans have been accepted, bank financing is closed and construction is ready to begin. Project liability (general liability) insurance runs concurrently with construction until the requisite statute of repose, which varies by state. The statute of repose is also known as statute of limitations and provides completed operations coverage for claims presented after construction which result from a construction related event. Coverage can be structured to protect the interests of: 1) lessee, 2) lessee plus general contractor or 3) lessee plus general contractor plus all subsidiaries. In addition to general liability coverage, developers should be cognizant of the potential risk of loss arising from: 1) Contractors Pollution Liability – responds to environmental claims which result from exacerbation of known pollution conditions or newly created pollution conditions, 2) Builders Risk - loss or damage to machinery and equipment, 3)Professional Liability - design errors which encumber the output of the solar array and protects against unexpected costs to correct design errors and 4)Surety Bonds arising from Performance (failure to perform as intended) or Payment Issues (failure to pay).
When the project is completed and CO has been granted, a new solar farm begins to churn out throughput and the insurance risks transition from construction to operational. Specifically:
1) Property Insurance which insures the machinery and equipment on a replacement cost basis and also includes loss of business income and extra expenses incurred after a covered loss ensues. Business Interruption is typically limited to a 12 month period of indemnity. While business income coverage is generally standard in property insurance policies, business interruption losses are often difficult to prove and insureds are best served by engaging forensic accountants;
2) Premises liability coverage for bodily injury and property damages resulting from the operations of the brightfield, which include damages to invited and uninvited guests;
3) Power Purchase Agreements, and related forms of contracts pertaining to sale and/or trading of electricity, in the USA can be insured against non-payment and the costs incurred in respect to canceling (or, remarketing) an electricity supply contract (mark to market) when that supply is no longer required for a particular customer(s) since that customer(s) has been shut-off due to non-payment. Non-payment cover can be extended to cover defaults in payments resulting from bankruptcy.
Planning through the lifecycle of your brightfield development will insure your renewable goals are met and you’re harvesting the sky on your schedule.
Contact Chris Alviggi, ARM and the renewable development team at Alliant to discuss a brighter solar future for your property, whatever the risk.
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According to the U.S. Department of Energy (DOE), a Brightfield is an abandoned or contaminated property that is redeveloped through the incorporation of solar energy, which can be many different types of solar applications including photovoltaic arrays. Brightfield development leads to economic development, environmental cleanup and improved air quality by bringing pollution free solar energy and high tech manufacturing jobs to brownfield sites. A Brightfield's current or desired use is for solar energy production, or it has been professionally designated as suitable for use as a productive solar site; typically verified by one or more third-party reports. Ready Brightfields have some, if not all, utility infrastructure already in place or may simply be near utility lines amenable to solar power distribution. Use the Brightfield tag on BL as one of the many tags in our handy Taxonomy to post any kind of property, project, RFP, RFQ or RFI or planning effort where the solar is relevant