Kathryn Meng Elmes
Technology-Enabled Expansion: Energetic Insurance Now Serving Energy Efficiency, Utility-Scale Solar
Distributed energy resources (DERs) have the power to fuel the world. 20% of U.S. electricity generation now comes from renewable sources, including 3% from solar. The progress is undeniable, but the untapped potential is even greater.
Despite significant declines in solar costs, financial hurdles inhibit large swaths of the market from installing and procuring renewable energy.
Our core focus at Energetic Insurance is to unlock DER financing for those market segments. We do this by quantifying risk and uncovering promising projects via rigorous software-enabled underwriting.
We started in commercial solar, often referred to as commercial and industrial (C&I) behind the meter (BTM). C&I is a large, existing market with a major financing process paint point – counterparty credit measurement.
Other solar sectors, such as utility-scale and residential, have existing dominant frameworks for measuring counterparty credit. C&I projects rely on ratings agencies or shadow rating methodologies which do not extend to most of the market. This is true not only in solar, but across the DER landscape, in the US, and around the world. The opportunity could not be bigger.
We’re allowing a broader segment of the world to access DERs via comprehensive underwriting.
Our underwriting thesis goes far beyond traditional credit analysis. We don’t just underwrite an offtaker, we underwrite an asset value. We underwrite a commodity. We underwrite potential savings. We underwrite environmental assets.
Historically, the DER assets we’ve underwritten have been solar panels, but the underwriting engine we’ve built is capable of much, much more.
We’ve developed features and functionality within our modeling and software solutions that position us to underwrite counterparty credit in multi-asset microgrids, in energy efficiency projects, and at significantly larger scales.
We’ve gone beyond what traditional credit underwriting is built for. Our methodology, data analytics, and actuarial models have been built with the complexities and nuances of energy systems in mind. We ask questions that traditional credit underwriters often don’t – to what extent can a DER asset have value without being removed?
In close collaboration with our reinsurance partners, we have demonstrated the extensibility of our modeling and software across numerous different structures and categories of energy project finance. This includes alternative contract structures because the risk is not just in the offtaker or the asset, but also in the underlying insured agreement and legal framework.
Our technology-enabled underwriting approach allows us to assess and support a range of projects types, including but not limited to:
Various verticals: schools, warehouses, retail, low-income housing, entertainment, hotels
Contract structures: partnership flip, sale-leaseback
Operating portfolio refinancings as well as new construction
Individual projects, tranched portfolios, and warehouse structures
Even this is not enough.
There is a much larger world out there, and we're excited to show the versatility and extensibility of our modeling and software platforms.
We harness flexible cloud architecture that allows for rapid customization and deployment of new models, while maintaining remote, secure and auditable access by our underwriting team.
We prioritized flexibility as we developed our modeling approach, ensuring it could handle more than just solar. This led us to take a modular approach which allows us to assign each project one or more contracts with one or more offtakers, serving multiple revenue markets. Our technology is flexible by design, allowing us to meet the market where it is, rather than force projects into cookie cutter templates.
Today we are working on a portfolio of projects that include onsite, community solar, and residential subscribers, all under one policy.
In electricity markets, much of the market today relies on single line time series projections. In our Monte-Carlo Markov-Chain models (MCMC) we utilize in-house statistical distributions to represent the inherent uncertainty over the long duration of our policy period (out to 10 years).
In our underwriting, these distributions allow us to rapidly evaluate risks across multiple markets and provide indicative risk pricing with 24-48 hours. This is essential for the developers and banks we work with who are often deciding how to approach a customer proposal or financing negotiation.
This year we are excited to expand and apply our models to new areas:
Energy Efficiency: This vast category includes lighting, HVAC, controls, insulation & air sealing, and more
Utility-Scale Solar: Including virtual PPAs and large-scale offsite contracts
International Geographies: We have tested our modeling approach in new territories, beginning with European markets
Beyond extending the applicability of our models to these new areas, we have massively accelerated the speed with which our underwriting users can access and analyze results. Thanks to new data pipelines and increased sophistication of our internal analytics framework for analyzing electricity markets, we have achieved a 70% reduction in time required to expand into a new electricity market.
We are excited to see the growing impact our policies can have as we broaden the reach of our modeling.
Where would you like us to go next? Let us know in the comments below!