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By David Grant Head of Property Underwriting Migdal Insurance Company Migdal Insurance Company And And Assicurazioni Generali SpA Assicurazioni Generali SpA UK Branch UK Branch - - London London Tel Aviv – 12 November 2009

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By David Grant Head of Property Underwriting

Migdal Insurance CompanyMigdal Insurance Company

AndAnd

Assicurazioni Generali SpAAssicurazioni Generali SpA

UK Branch UK Branch -- LondonLondon

Tel Aviv – 12 November 2009

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Table of contentsTable of contents

Renewable Energies

1.1. IntroductionIntroduction

2.2. The workings of PhotovoltaicThe workings of Photovoltaic

3.3. Market Trends and Israel situationMarket Trends and Israel situation

4.4. Risks and Insurance IssuesRisks and Insurance Issues

5.5. Migdal Migdal –– Generali Global WordingGenerali Global Wording

6.6. Lack Of SunLack Of Sun

7.7. Questions?Questions?

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Renewable EnergiesRenewable Energies

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Renewable EnergiesRenewable Energies

Electrical Energy Electrical Energy –– a big problema big problem

Electrical energy cannot easily be stored in quantities large enElectrical energy cannot easily be stored in quantities large enough to meet ough to meet

national demands, it must be produced as it is requirednational demands, it must be produced as it is required

Introduction

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Renewable EnergiesRenewable Energies

Electrical Energy Electrical Energy –– a big problema big problemCould be possible to replace fossil fuels with renewable energieCould be possible to replace fossil fuels with renewable energies sources?s sources?

Introduction

A David versus Goliath issue?A David versus Goliath issue?

Source :Source :

International Energy AgencyInternational Energy Agency

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The workings of PhotovoltaicThe workings of Photovoltaic

Direct conversion from Solar Radiation to Electric EnergyDirect conversion from Solar Radiation to Electric Energy

Renewable EnergiesRenewable Energies The workings of Photovoltaic

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.kWh..kWh.

PV Panels

Inverter Meter

Converts Solar Radiation Converts Solar Radiation

into Electric Energyinto Electric Energy

DC AC

Records the Records the

amount of energy amount of energy

fed into the grid fed into the grid

Solar Solar

radiationradiation

Converts Converts

DirectDirect--Current Current

into into

AlternateAlternate--CurrentCurrent

Renewable Energies The workings of Photovoltaic

From Sun to ElectricityFrom Sun to Electricity

Solar Cells operate like Solar Cells operate like

batteries, with variable power batteries, with variable power

output , depending on solar output , depending on solar

radiation intensity radiation intensity

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Renewable Energies The workings of Photovoltaic

Panels Technology and Plant TypesPanels Technology and Plant Types

IntegratedIntegratedOn GroundOn Ground Semi IntegratedSemi Integrated

PolyPoly MonoMono AmorphousAmorphous

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PhotovoltaicPhotovoltaic

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Renewable Energies The workings of Photovoltaic

Plant size to meet a family needsPlant size to meet a family needs

Standard Family, living in a 3 bedroom house needs Standard Family, living in a 3 bedroom house needs 3000 kWh to 4000 kWh3000 kWh to 4000 kWh

of Electric Energy per yearof Electric Energy per year

According to Israel yearly Solar Radiation averages, circa 1600kAccording to Israel yearly Solar Radiation averages, circa 1600kWh/mWh/m22 the the

installed power could be installed power could be 3kW corresponding to circa 20 square meters.3kW corresponding to circa 20 square meters.

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Renewable Energies The workings of Photovoltaic

Performance EvaluationPerformance Evaluation

For performance estimation of a Photovoltaic Power Plant, the JRC web

application could be used as reference

1. Go to

http://re.jrc.ec.europa.eu/pvgis/

2. Select the location of the plant

3. Fulfill the module, with the

information requested

4. Execute the application to obtain:

1. Optimum Orientation

2. Yearly production

3. Productivity

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ConsiderationsConsiderations

1.1. High installation costsHigh installation costs

2.2. High investments neededHigh investments needed

3.3. Discontinuous ProductionDiscontinuous Production

4.4. High surfacesHigh surfaces

5.5. Lack of economical efficient storage Lack of economical efficient storage

system.system.

6.6. Efficiency degradation 1% per yearEfficiency degradation 1% per year

7.7. Need Feed in tariffsNeed Feed in tariffs

PhotovoltaicPhotovoltaic

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Renewable Energies

Solar resource are abundant and cannot be monopolized by one couSolar resource are abundant and cannot be monopolized by one countryntry

BenefitsBenefits

1.1. Free and unlimited Free and unlimited ““fuelfuel””

2.2. Ambient temperature operationAmbient temperature operation

3.3. High reliability in modules (> 20 years)High reliability in modules (> 20 years)

4.4. Can be integrated into existing Can be integrated into existing

buildingsbuildings

5.5. High public acceptanceHigh public acceptance

6.6. Low maintenance, low HR needsLow maintenance, low HR needs

7.7. Quick to InstallQuick to Install

The workings of Photovoltaic

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Renewable Energies

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Renewable Energies

Present Situation for Photovoltaic Present Situation for Photovoltaic –– Feed In TariffsFeed In Tariffs

Feed In TariffsFeed In Tariffs

LongLong--term, stable, feedterm, stable, feed--in tariffs have been proven the most efficient in tariffs have been proven the most efficient

instrument for sustainable market penetrationinstrument for sustainable market penetration

Italian ExampleItalian Example Plant type

Nominal Power in kW On Ground Semi Building Integrated Building Integrated

A) 1 ≤ P ≤ 3 €/kWh 0,392 €/kWh 0,431 €/kWh 0,480

B) 3 < P ≤ 20 €/kWh 0,372 €/kWh 0,412 €/kWh 0,451

C) P > 20 €/kWh 0,353 €/kWh 0,392 €/kWh 0,431

Feed-In Tariffs

Subsidy paid, for a defined time (15 to 20 years), for every kwhSubsidy paid, for a defined time (15 to 20 years), for every kwh

produced by the plant. produced by the plant.

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Renewable Energies

Good ExampleGood Example

ItalyItaly

Present Situation for Photovoltaic Present Situation for Photovoltaic –– Feed In TariffsFeed In Tariffs

Market Trends

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Present Situation for Photovoltaic MarketPresent Situation for Photovoltaic Market

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Renewable Energies

In just one year, utility-scale Photovoltaic

tripled to 3 GW.

Spain, added 2.6 GW

Germany added 1.5 GW

US added 340 MW

Italy 300 MW

South Korea 270 MW

Japan 240 MW

Europe in 2008 had a cumulative installed

capacity of 9.5 GW

Market Trends

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Present Situation for Photovoltaic MarketPresent Situation for Photovoltaic Market

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Renewable Energies

The world-wide installed capacity

reached 16.0 GW by 2008.

Market Trends

According to the electric energy needs for

a standard house the installed power is

capable to feed 5,300,000 houses

This represented 0.15% of global demand

at the time.

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Renewable Energies

•• The intendedThe intended feedfeed--in tariff is about 2.01 NIS per kWh produced by PV system. in tariff is about 2.01 NIS per kWh produced by PV system.

•• Limited to a total installation of 50MW during 7 years, whicheveLimited to a total installation of 50MW during 7 years, whichever comes first.r comes first.

•• FeedFeed--in tariff for 20 yearsin tariff for 20 years

•• A maximum of 15 kW for the domestic sector and a maximum of 50kWA maximum of 15 kW for the domestic sector and a maximum of 50kW for the for the

business sector.business sector.

•• Systems must be installed on aSystems must be installed on a built structure. built structure.

•• 20% of program must be from private individuals.20% of program must be from private individuals.

ISRAELISRAEL started in started in 20082008 with feedwith feed--in tariffsin tariffs

Israel Market

Present Situation for Photovoltaic Present Situation for Photovoltaic –– IsraelIsrael

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Renewable Energies Israel Market

Present Situation for Photovoltaic Present Situation for Photovoltaic –– IsraelIsrael

50 MW50 MW

1,000,000,000 NIS 1,000,000,000 NIS

10 MW 10 MW

200,000,000 NIS200,000,000 NIS

2000 plants2000 plants

15 kW15 kW

350,000 NIS350,000 NIS

30,000 NIS30,000 NIS

3 kW3 kW

75,000 NIS75,000 NIS

7,000 NIS7,000 NIS

Private Private InstallationsInstallations

Commercial Commercial InstallationsInstallations

Total ValueTotal Value

Max. InstallationMax. Installation

Plant ValuePlant Value

Year Production Year Production ValueValue

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Renewable Energies

The National Infrastructures Ministry is evaluating a feedThe National Infrastructures Ministry is evaluating a feed--in tariff scheme for in tariff scheme for

mediummedium--sized solarsized solar--power stations ranging from 50 kilowatts to 5 megawatts.power stations ranging from 50 kilowatts to 5 megawatts.

The proposedThe proposed feedfeed--in tariff is about 1.58 NIS per kWh producedin tariff is about 1.58 NIS per kWh produced

NEGEV DESERTNEGEV DESERT

Future for Photovoltaic in Israel ?Future for Photovoltaic in Israel ?

Israel Market

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Renewable Energies

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Construction Construction -- On GroundOn Ground

Renewable Energies Risks & Insurance Issues

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Construction Construction -- Building IntegratedBuilding Integrated

Renewable Energies Risks & Insurance Issues

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Construction Construction

Renewable Energies Risks & Insurance Issues

• Damage during construction

• Vandalism and theft due to incomplete protection systems

• Lightning

• Short circuit

• Bad Workmanship

• Electrical damages during testing

Ris

ks

Ris

ks Design ErrorsDesign Errors

Material, Fusion, Material, Fusion, Product DefectsProduct Defects

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Operational Risks Operational Risks

Renewable Energies Risks & Insurance Issues

• Vandalism and theft

• Lightening

• Short circuit

• Machinery Breakdown

• Inverter damages – High BI

• Earthquake damages

• Electrical damages during testing

• Fire within the building on which the PV is installed

Theft, inverter Theft, inverter breakdown, breakdown, structural structural damagesdamages

Ris

ks

Ris

ks NatCat, NatCat,

Vandalism,Vandalism,Machinery Machinery

Breackdown Breackdown

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Damages examplesDamages examples

Renewable Energies Risks & Insurance Issues

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Number of LossesNumber of Losses

2004/20072004/2007

Renewable Energies

snow

pressure

14%

overvoltage

26%

windstorm

9%theft

2%

hail

2%

malicious

damage

3%

fire

2%

other

causes

42%

Renewable Energies Munich ReRenewable Energies Munich ReGerman Insurance AssociationGerman Insurance AssociationBerlin 2008Berlin 2008

Risks & Insurance Issues

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Claims Expenditure Claims Expenditure

2004/20072004/2007

Renewable Energies

snow

pressure

12%

overvoltage

14%

windstorm

25%theft

8%

hail

3%

malicious

damage

1%

fire

26%

other

causes

11%

Renewable Energies Munich ReRenewable Energies Munich ReGerman Insurance AssociationGerman Insurance AssociationBerlin 2008Berlin 2008

Risks & Insurance Issues

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Renewable Energies

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Renewable Energies Policy Wording

PropertyProperty

All RisksAll Risks Property wording adapted to Photovoltaic Plants.Property wording adapted to Photovoltaic Plants.

The Insurer will indemnify The Insured for Damage to the InsuredThe Insurer will indemnify The Insured for Damage to the Insured Property if:Property if:

1.1. The Insured Property being, where appropriate:The Insured Property being, where appropriate:

1.1. securely fixed to an appropriate support, securely fixed to an appropriate support,

2.2. tested and connected to the National Grid or network,tested and connected to the National Grid or network,

3.3. situated in the Locations as stated in the Policy Schedule.situated in the Locations as stated in the Policy Schedule.

2.2. It is hereby Warranted that Insured holds a It is hereby Warranted that Insured holds a current certificate of suitability issued by current certificate of suitability issued by

the national or local authoritythe national or local authority stating that the installation meets with all the stating that the installation meets with all the

necessary legal requirements and the certificate is updated whennecessary legal requirements and the certificate is updated when required to required to

include any variants, upgrades and extensions. include any variants, upgrades and extensions.

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Renewable Energies Policy Wording

PropertyProperty

All RisksAll Risks Property wording adapted to Photovoltaic Plants.Property wording adapted to Photovoltaic Plants.

The Insured Property must be: The Insured Property must be:

Tested and connected to Tested and connected to

the National Grid or the National Grid or

networknetwork

Subsidized with FeedSubsidized with Feed--In In

Tariffs Tariffs Securely fixed to an Securely fixed to an

appropriate supportappropriate support

Certified by a national or Certified by a national or

local authority local authority

(e.g. PUA or IEC)(e.g. PUA or IEC)

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Renewable Energies Policy Wording

PropertyProperty

Particular conditionsParticular conditions

The Insurer will indemnify The Insured in respect of installations on roofs of buildings which are not Unoccupied.

All ground installations must be secured by:

1. All bolts and or screws must be welded to its support, etc etc.

2. A microchip must be inserted inside each panel and programmed only to ’recognize’ the inverter used with the plant;

3. Each panel must be fitted with an internal Anti-theft GPS tracking system.

4. CCTV for commercial and / or On Ground Plants

Unoccupied means: any part of an Insured Location which is not used or visited by

The Insured on a day to day or regular basis for the purpose of the Business.

TheftTheft

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Renewable Energies Policy Wording

Property and Machinery BreakdownProperty and Machinery Breakdown

Information the be provided by the InsuredInformation the be provided by the Insured

Questionnaire to be completed with, but not limited to:Questionnaire to be completed with, but not limited to:

1.1. Plant LocationPlant Location

•• Location and type of the BuildingLocation and type of the Building

•• Owner of the building, activity performed inside.Owner of the building, activity performed inside.

2.2. Plant Characteristics Plant Characteristics

•• Nominal total Power of the plant expressed in kW [PNominal total Power of the plant expressed in kW [PNN].].

•• Panel Technology, Tilt and Azimuth, With or without Tracking SysPanel Technology, Tilt and Azimuth, With or without Tracking System.tem.

•• Annual Expected Production expressed in kWh/year [PAnnual Expected Production expressed in kWh/year [PEXPEXP]]

3.3. Signed Contract with Israel Electric Corporation for Incentives Signed Contract with Israel Electric Corporation for Incentives and Feedand Feed--in tariffs in tariffs

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Renewable Energies

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Lack of SunLack of Sun

Renewable Energies Lack of Sun

The Insurer will indemnify The Insured in respect of a Loss resuThe Insurer will indemnify The Insured in respect of a Loss resulting from the lting from the

reduction in Gross Revenue caused by reduction in Gross Revenue caused by Lack of Solar Radiation or lightLack of Solar Radiation or light

The validity of the Guarantee is subject to:The validity of the Guarantee is subject to:

1.1. Complete coverage of the plant with Property and Machinery BreakComplete coverage of the plant with Property and Machinery Breakdown including down including

Business Interruption. Business Interruption.

2.2. Installation of a Installation of a Certified Photovoltaic Monitoring System (Black Box)Certified Photovoltaic Monitoring System (Black Box) which contains but which contains but

is not limited to:is not limited to:

a.a. Solar Irradiation sensorSolar Irradiation sensor and and temperature sensorstemperature sensors, ,

b.b. Inverter Monitoring SystemInverter Monitoring System,,

c.c. Power output measuring equipmentPower output measuring equipment, ,

d.d. Communications system, Ethernet or GSM / GPRS / UMTSCommunications system, Ethernet or GSM / GPRS / UMTS with web portal with web portal

showing all recorder data. showing all recorder data.

3.3. Signed Contract with Israel Electric CorporationSigned Contract with Israel Electric Corporation that certifies the plant admission to the that certifies the plant admission to the

FeedFeed--in tariff.in tariff.

Policy duration: 1 YearPolicy duration: 1 Year

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1.1. Plant CharacteristicsPlant Characteristics

�� Nominal total Power of the plant expressed in kW [PNominal total Power of the plant expressed in kW [PNN].].

�� Modules technology, and manufacturer.Modules technology, and manufacturer.

�� Annual performance losses of the Silicon. Annual performance losses of the Silicon.

�� Tilt and Azimuth Tilt and Azimuth

�� With or without Tracking System.With or without Tracking System.

�� Location, Lat & Long.Location, Lat & Long.

2.2. Annual average solar radiation expected (PVGIS) expressed in kWhAnnual average solar radiation expected (PVGIS) expressed in kWh/m/m2 2 [I[IAA]]

3.3. Plant Losses [Plant Losses [ηη]]

4.4. Annual Expected Production expressed in kWh/year [PAnnual Expected Production expressed in kWh/year [PEXPEXP]]

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Data to be provided by the InsuredData to be provided by the Insured

Lack of SunRenewable Energies

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.kWh..kWh.

PV Panels

Inverter Meter

Sensor

Converts Solar Radiation into Electric Converts Solar Radiation into Electric

Energy according the formula:Energy according the formula:

PPESTEST = P= PN N * I* IMM * * ηη

DC AC

Measures Measures

solar radiationsolar radiation

IIMM

Records the Records the

amount of energy amount of energy

fed into the gridfed into the grid

PPEFFEFF

Solar Solar

radiationradiation

IIMM

Nominal Nominal

PowerPower

PPN N

LossesLosses

ηη

Renewable Energies Lack of Sun

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Lack of SunLack of Sun

Renewable Energies Lack of Sun

At the end of each year, the insurer will send to the Insurance At the end of each year, the insurer will send to the Insurance Company the Company the

production value (Actual Production production value (Actual Production PPEFFEFF) and the data extracted from the Sensor ) and the data extracted from the Sensor

(Estimated Production (Estimated Production PPESTEST))

PVGISPVGIS InsurerInsurer

Threshold Production PThreshold Production PTHTHExpected Production PExpected Production PEXPEXP

Actual Production Actual Production PPEFFEFF

MeterMeter

Estimated Production PEstimated Production PESTEST

SensorSensor

The Insurer will set the Threshold Production The Insurer will set the Threshold Production PPTH TH as a percentage of the Expected as a percentage of the Expected

Production Production PPEXPEXP evaluated by the plant designer according to PVGIS websiteevaluated by the plant designer according to PVGIS website

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Renewable Energies Lack of Sun

Actual Actual

Production Production

PPEFFEFF

Estimated Estimated

Production Production

PPESTEST

Threshold Threshold

Production Production

PPTHTH

Lack of Sun Lack of Sun -- ExampleExample

Expected Expected

Production Production

PPEXPEXP

TimeTime

[Years][Years]

Power Power

Production Production

[kWh/year][kWh/year]

YY11 YY33YY22 YY......

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Misunderstandings Misunderstandings -- Lack of SunLack of Sun

Renewable Energies Lack of Sun

Lack of productionLack of production Lack of PerformancesLack of Performances

OverestimationOverestimation

of of

ProductionProductionWrong orientationWrong orientation

Designer and Designer and

Engineering Engineering

liability liability

Installer and Installer and

Engineering Engineering

liability liability

Photovoltaic Photovoltaic

Panels, and Panels, and

electronics electronics

ProductProduct

GuaranteeGuarantee

Cabling and Cabling and

Voltage Voltage

mismatchingmismatching

Installer liabilityInstaller liability

We donWe don’’t covert cover……

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Renewable EnergiesRenewable Energies