Page 345 - Sustainable On-Site CHP Systems Design, Construction, and Operations

318 Op erations

with CHP plant customers. Another area of potential confusion involves loss of capacity
payments caused by a failure during a power purchaser availability test. When the sub-
ject policy contains a daily deductible for business interruption, a CHP plant owner-
operator claim may be denied because the CHP plant had not yet met the specified
waiting period. Accordingly, it is important that the CHP plant risk manager and insurers
risk advisor/broker have access to those negotiating the power purchase contracts and
have an opportunity to discuss the terms of a pending power purchase agreement so that
the various loss scenarios be “gamed out” to verify that everyone understands the vari-
ous triggers, clauses, and incentives contained in the contract. With that knowledge, your
broker can offer suggestions on the best way to structure a program that provides the
most efficient insurance coverage at reasonable cost.
Financing contracts and power purchase agreements typically span a number of
years. Even though the above-mentioned markets have been long-term players, will-
ingness to provide particular coverages, grant certain deductibles, or provide specified
limits has changed over the years. Therefore, if a contract contains very explicit insur-
ance requirements with respect to specific coverages, limits, or retentions, it is quite
possible that over the course of the contract one will face a market cycle that blocks the
availability of the required coverages.
As an additional complication, the financial strength of an insurer is a concern to
everyone. Often lenders will require that a facility purchase insurance from only “A”
rated companies. While this is an admirable goal, it may not be realistic, given the long
term of the contract.
Attempt to secure as flexible insurance terms as possible. However, this does not
mean ignore insurance until the last moment. Consider adding a provision such as “as
available on reasonable terms and conditions” to allow you to adjust to market cycles.
Some insurers are willing to consider multiple year programs. These can be beneficial
as long as the cancellation clauses are understood on both sides.

Let People Know the Great Results of CHP
Finally, let people know the great results of having a sustainable on-site CHP system. Let
people know that on-site CHP is a time-tested, proven technology that offers many impor-
tant benefits to building and facility owners and operators, to local and regional utility
systems, to a country’s economic competitiveness and security, and to human society as
a whole. Let people know that sustainable on-site CHP’s important benefits include
• Lowered overall facility energy costs
• Increased total system efficiency
• Improved overall facility reliability
• Reduced electric demand on constrained utility grid and fully loaded generation
equipment
• Reduced source energy use (i.e., total fuel consumption)
• Reduced total CO emissions, which have been linked to global warming
2
• Ability to use biofuels, which are sustainable and essentially carbon neutral