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The firm doing this research also sell insurance that covers solar panel under performance. So while there might be truth in what they are saying, just keep in

The firm doing this research also sell insurance that covers solar panel under performance. So while there might be truth in what they are saying, just keep in mind there is conflict of interest here.

tantalor 5y ago
How is it a conflict of interest? Their business is to price their rates correctly, so they need to measure the actual failure characteristics. Pricing insurance is a balancing act. If you overestimate then your rates will not be competitive. If you underestimate then you pay out more in claims then you collect in premiums.
- calvano915 5y ago
  This information may encourage more purchases of their insurance product. It's a conflict that is worth stating when considering the information they're providing.
- ZeroGravitas 5y ago
  Do insurance companies advertise? If they do, then spreading viral stories about the need for their kind of insurance is probably a valid strategy too.
- webmobdev 5y ago
  How is it a conflict of interest? They could be exaggerating their findings - fear and anxiety are excellent motivators used by advertisers since the dawn of capitalism.
- Frost1x 5y ago
  The conflict of interest is that they have financial incentives for you to believe failure rates are worse than they are. Insurance may need accurate assessments for a sustainable business model, but their business model also relies on people assessing risk as higher than their assessment or at least that an accurate risk assessment + overhead fees to assess it is less than my own. As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' As an insurance company, I want people the opposite, that reality of risk lies lower than what you think it is, so I can make money. I want a bunch of worried low risk people to pay overhead and marginal fees so my margins are frothier.
  - gotoeleven 5y ago
    Since they're an insurance company, doing this kind of assessment is their core business.. they have every incentive to not over or under estimate it. So you're positing that they have some real numbers on failure rates that they keep secret and some exaggerated numbers they tout publicly? That would require dishonesty at a level that would ruin the company if it was found out, so it seems unlikely they would risk it.
    - Leherenn 5y ago
      The funny thing with insurance is that if they ever become too good at estimating risks, they will destroy themselves. You don't need insurance if you can perfectly predict the future. Though I don't think we particularly close to this point, so I doubt they care too much.
      - quickthrowman 5y ago
        It does seem clairvoyance would negate the need for insurance, but that prompts another question: why do you think a clairvoyant person or machine is possible in any way? Also, if an insurance company had perfect knowledge of future claims by being clairvoyant, they could charge a suitable risk premium to write policies where they wouldn’t lose any money, since they would also know how many policies they would be writing.
  - setr 5y ago
    > As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' I don’t think that’s entirely right — the main value add of insurance is to the rare, mind numbingly expensive events — ER visits, crashing into a RR, house burning down, etc. You’re paying to minimize tail risk, including risk you couldn’t possibly self-insure against in reasonable time (my payments to insurance is not going to reach the value of my home — the bet is whether my home will ever burn down). Regardless, it’s still a conflict of interest in this case
    - 5y ago
- jnmandal 5y ago
  I'm going to assume you are asking in good faith. From wikipedia: "A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another" In this specific case where the firm is publishing research they have funded, there are essentially two interests or activities at play: A. research to determine the extent of solar panel installation performance or lack thereof B. selling financial products based on performance Since interest B would be negatively impacted by a certain outcome from interest A (a finding that solar installation performance is optimal, in this case), that implies the firm's performance of activity A may have been affected in order to reduce negative impact to the firm overall. We see this a lot in industry-funded research. Its not unusual. For example, recently a lot of airlines have funded studies about Covid19 spread in airplane cabins. To be published in a reputable journal, researchers are compelled to declare these interests in the cover page of their papers. Also, a good journalist will state this somewhere in their piece (normally at the top or the bottom, conventionally in italics). To your point about competition and rates, that is really not any part of conventions on declaring interest conflicts in academic research but I'll entertain an argument about it here because I don't think the market forces are as strong as you imply. The idea that a product will be priced perfectly simply does not apply in a niche market such as this. When you are selling a niche product, the market will not be deep enough to force firms into the behaviour you are describing. This already applies to things as widely held as flood insurance where the market is so shallow, that the federal government has to intervene to make it viable. Solar PV Installation performance insurance (not to mention options) is extremely niche.
  - tantalor 5y ago
    Great points, thank you for going into detail. I think "conflict of interest" is frequently misused. I was taught it describes situations where one's professional/ethical/legal obligations are opposed, such as an attorney representing competing clients, or a board member approving a contract with a company he is an investor in. I realize this is a semantic point. In this case, I don't think kWh Analytics has any professional obligation to a standard of science or journalism, so there's no conflict.
JohnJamesRambo 5y ago
Not only that, but they offer the Solar Revenue Put. https://www.kwhanalytics.com/solarrevenueput https://www.kwhanalytics.com/solarrevenueput It’s frustrating to see nonsense like this associated with seemingly every industry.
- mardifoufs 5y ago
  Why is it non sense? Hedging is essential for managing risk and if you can't do that you will end up with less money being invested in solar. There's a reason why this "nonsense" is widespread across (usually capital intensive, commodity producing) industries, and it's usually not because of speculation.
boringg 5y ago
Definitely a conflict of interest. That said I think all the solar sales organizations/financial models I have seen have been bullish on the performance of solar assets and then refer to the warranties as a backup. If you are financing a project and the degradation occurs faster but not at a rate of which it gets swapped out on warranty - you want something to cover that financial difference. Also swapping out the asset has costs that aren't covered - so it isn't as simple as it would seem. It's the same as all insurance products - might need it, might not. At least in this case they put forward some real statistical data. And their comment that residential performs worse than commercial completely resonates given the LOE difference.
- ethbr0 5y ago
  Out of curiosity, how the heck are they modeling these for insurance rate purposes? Considering we're at the beginning of mass deployment.
  - boringg 5y ago
    They have large tranches of data from large funds that have deployed. While we are at the beginning of mass deployment - theres been a considerable amount of deployment to date that you can model against if you have access to data and then constantly update your priors as you get more information.
    - ethbr0 5y ago
      Presumably premiums are adjustable on a yearly (or relatively short-term) basis too, which would bound the risk of incorrectness.
millerm 5y ago
I agree that such reports are suspect and one should be absolutely skeptical of such things. I'm not saying this report is incorrect, but we need independent studies to support or refute such claims. Until then, I take it as a "That's interesting, I wonder if it's accurate". There is a definite conflict of interest here. I am fairly certain you would never see a report published by kWh Analytic stating the opposite if it were found to be true. I'd like to read the report, but I'm not registering for it. It's obviously a marketing tool for sales, not a peer-reviewed study.
geoduck14 5y ago
Sure there is a conflict of interest, but there is also inherent expertise. Insurance companies are well suited to study this EXACT thing and to come to a very correct answer. Also, if there were an independent expert who arrived at this same conslclusion, wouldn't you expect him/her to monetize their knowledge?
- sidlls 5y ago
  Insurance companies are well suited to exaggerate risks and mislead by statistics. And they are very good at it.
  - Pet_Ant 5y ago
    I think you are conflating two things. Insurance companies want to know as precisely as possible to determine their liability. It is the essence of their job. Now, what they communicate to customers is another thing. I bet they know very well what they are getting into... but I agree they aren't likely to be transparent with you about it.
  - jjk166 5y ago
    If one insurance company tries to profit off exaggerated risk, a competing insurance company can offer the same protection at a lower premium and steal their customers. You don't make it in the insurance business by making short term decisions that hurt you in the long run.
    - vlovich123 5y ago
      That presumes someone takes time to evaluate the claim. Unless you have data already available that the counterfactual is true, it’ll take a while before a competitor appears to test out your claim and existing incumbents might just take your word for it. Additionally, the success of the competitor to eat your padded profits is not controlled solely by the truth.
      - j_wtf_all_taken 5y ago
darksaints 5y ago
Normally when companies fund research, there is a slight conflict of interest because they want the public to buy their products and positive research can nudge them in that direction. And that research can be suspicious, and sometimes inflated, but generally the conclusions are directionally correct. And for that reason, I may scrutinize, but do not immediately discard the findings of soy industry funded research on the health benefits of soy, etc. All that gets thrown out the window when an insurance company funds research. Because insurance companies don't profit from consumers being informed...they profit from information asymmetry. Deliberate exaggeration of risks is pure profit for them.
- michaelt 5y ago
  > when companies fund research [...] generally the conclusions are directionally correct. I'm not sure I understand why that should be the case? After all, plenty of research gets handed over to the company that paid for it, who get to decide whether to release it publicly it or not - so negative reports never see the light of day.
  - darksaints 5y ago
    Indirectly, that's exactly the reason why. * If the research points in the opposite direction of the desires of the research funders it will likely get squashed. Researchers aren't typically keen on putting their name on publications that are pointing to the opposite direction of the truth. * If the research points in the same direction as the desires of research funders, it gets published. It may be exaggerated, but research that has the correct direction but exaggerated scale isn't quite the black and white ethical dilemma that the former scenario is. So asbestos companies might publish research saying that the risk of cancer is low, but they won't publish research that says that it is an excellent antioxidant. This same observation also extends to insurance companies, but with insurance companies, the conflict of interest isn't the direction of research, it is the magnitude of the exaggeration. Because the gap between real risk and the fake published risk is their entire profit margin.
nickysielicki 5y ago
Who else would you expect to employ actuaries with a specialty in solar power?
hedora 5y ago
They say people were estimating 0.5% loss of capacity per year. If so, after 40 years, the panels would be running at 80% capacity, which is still well above the point where you may as well replace it, unless new panel efficiency improves a lot. I’ve never seen anyone claim a solar panel would last 40 years. Something is fishy.
- rsj_hn 5y ago
  I think what is fishy is the assumption that the 0.5% loss rate per year for new units would not change over time as the units got older. Hazard rates for products are not constant like that -- there is a period when the failure rate increases rapidly after the design life of the unit.
- r00fus 5y ago
  Exactly. Typically the usage cycle is 20 or 25 years. This puts the entire study in a poor light.
- kragen 5y ago
  Most solar panels from 40 years ago did in fact last 40 years, though some fraction have broken or clouded. Moreover, the rate of degradation slows substantially after about 20 years. NREL has published extensive studies on this. But manufacturers do not guarantee this (because nobody gets power plants financed with a 40-year term), and whether today's solar panels make it to 40 years is anybody's guess. It's common for manufacturers' ratings to be conservative, but that may have changed as they battle every last percentage point of avoidable costs.

tantalor 5y ago

How is it a conflict of interest? Their business is to price their rates correctly, so they need to measure the actual failure characteristics. Pricing insurance is a balancing act. If you overestimate then your rates will not be competitive. If you underestimate then you pay out more in claims then you collect in premiums.

calvano915 5y ago
This information may encourage more purchases of their insurance product. It's a conflict that is worth stating when considering the information they're providing.
ZeroGravitas 5y ago
Do insurance companies advertise? If they do, then spreading viral stories about the need for their kind of insurance is probably a valid strategy too.
webmobdev 5y ago
How is it a conflict of interest? They could be exaggerating their findings - fear and anxiety are excellent motivators used by advertisers since the dawn of capitalism.
Frost1x 5y ago
The conflict of interest is that they have financial incentives for you to believe failure rates are worse than they are. Insurance may need accurate assessments for a sustainable business model, but their business model also relies on people assessing risk as higher than their assessment or at least that an accurate risk assessment + overhead fees to assess it is less than my own. As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' As an insurance company, I want people the opposite, that reality of risk lies lower than what you think it is, so I can make money. I want a bunch of worried low risk people to pay overhead and marginal fees so my margins are frothier.
- gotoeleven 5y ago
  Since they're an insurance company, doing this kind of assessment is their core business.. they have every incentive to not over or under estimate it. So you're positing that they have some real numbers on failure rates that they keep secret and some exaggerated numbers they tout publicly? That would require dishonesty at a level that would ruin the company if it was found out, so it seems unlikely they would risk it.
  - Leherenn 5y ago
    The funny thing with insurance is that if they ever become too good at estimating risks, they will destroy themselves. You don't need insurance if you can perfectly predict the future. Though I don't think we particularly close to this point, so I doubt they care too much.
    - quickthrowman 5y ago
      It does seem clairvoyance would negate the need for insurance, but that prompts another question: why do you think a clairvoyant person or machine is possible in any way? Also, if an insurance company had perfect knowledge of future claims by being clairvoyant, they could charge a suitable risk premium to write policies where they wouldn’t lose any money, since they would also know how many policies they would be writing.
- setr 5y ago
  > As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' I don’t think that’s entirely right — the main value add of insurance is to the rare, mind numbingly expensive events — ER visits, crashing into a RR, house burning down, etc. You’re paying to minimize tail risk, including risk you couldn’t possibly self-insure against in reasonable time (my payments to insurance is not going to reach the value of my home — the bet is whether my home will ever burn down). Regardless, it’s still a conflict of interest in this case
  - 5y ago
jnmandal 5y ago
I'm going to assume you are asking in good faith. From wikipedia: "A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another" In this specific case where the firm is publishing research they have funded, there are essentially two interests or activities at play: A. research to determine the extent of solar panel installation performance or lack thereof B. selling financial products based on performance Since interest B would be negatively impacted by a certain outcome from interest A (a finding that solar installation performance is optimal, in this case), that implies the firm's performance of activity A may have been affected in order to reduce negative impact to the firm overall. We see this a lot in industry-funded research. Its not unusual. For example, recently a lot of airlines have funded studies about Covid19 spread in airplane cabins. To be published in a reputable journal, researchers are compelled to declare these interests in the cover page of their papers. Also, a good journalist will state this somewhere in their piece (normally at the top or the bottom, conventionally in italics). To your point about competition and rates, that is really not any part of conventions on declaring interest conflicts in academic research but I'll entertain an argument about it here because I don't think the market forces are as strong as you imply. The idea that a product will be priced perfectly simply does not apply in a niche market such as this. When you are selling a niche product, the market will not be deep enough to force firms into the behaviour you are describing. This already applies to things as widely held as flood insurance where the market is so shallow, that the federal government has to intervene to make it viable. Solar PV Installation performance insurance (not to mention options) is extremely niche.
- tantalor 5y ago
  Great points, thank you for going into detail. I think "conflict of interest" is frequently misused. I was taught it describes situations where one's professional/ethical/legal obligations are opposed, such as an attorney representing competing clients, or a board member approving a contract with a company he is an investor in. I realize this is a semantic point. In this case, I don't think kWh Analytics has any professional obligation to a standard of science or journalism, so there's no conflict.

JohnJamesRambo 5y ago

Not only that, but they offer the Solar Revenue Put. https://www.kwhanalytics.com/solarrevenueput https://www.kwhanalytics.com/solarrevenueput It’s frustrating to see nonsense like this associated with seemingly every industry.

mardifoufs 5y ago
Why is it non sense? Hedging is essential for managing risk and if you can't do that you will end up with less money being invested in solar. There's a reason why this "nonsense" is widespread across (usually capital intensive, commodity producing) industries, and it's usually not because of speculation.

boringg 5y ago

Definitely a conflict of interest. That said I think all the solar sales organizations/financial models I have seen have been bullish on the performance of solar assets and then refer to the warranties as a backup. If you are financing a project and the degradation occurs faster but not at a rate of which it gets swapped out on warranty - you want something to cover that financial difference. Also swapping out the asset has costs that aren't covered - so it isn't as simple as it would seem. It's the same as all insurance products - might need it, might not. At least in this case they put forward some real statistical data. And their comment that residential performs worse than commercial completely resonates given the LOE difference.

ethbr0 5y ago
Out of curiosity, how the heck are they modeling these for insurance rate purposes? Considering we're at the beginning of mass deployment.
- boringg 5y ago
  They have large tranches of data from large funds that have deployed. While we are at the beginning of mass deployment - theres been a considerable amount of deployment to date that you can model against if you have access to data and then constantly update your priors as you get more information.
  - ethbr0 5y ago
    Presumably premiums are adjustable on a yearly (or relatively short-term) basis too, which would bound the risk of incorrectness.

millerm 5y ago

I agree that such reports are suspect and one should be absolutely skeptical of such things. I'm not saying this report is incorrect, but we need independent studies to support or refute such claims. Until then, I take it as a "That's interesting, I wonder if it's accurate". There is a definite conflict of interest here. I am fairly certain you would never see a report published by kWh Analytic stating the opposite if it were found to be true. I'd like to read the report, but I'm not registering for it. It's obviously a marketing tool for sales, not a peer-reviewed study.

geoduck14 5y ago

Sure there is a conflict of interest, but there is also inherent expertise. Insurance companies are well suited to study this EXACT thing and to come to a very correct answer. Also, if there were an independent expert who arrived at this same conslclusion, wouldn't you expect him/her to monetize their knowledge?

sidlls 5y ago
Insurance companies are well suited to exaggerate risks and mislead by statistics. And they are very good at it.
- Pet_Ant 5y ago
  I think you are conflating two things. Insurance companies want to know as precisely as possible to determine their liability. It is the essence of their job. Now, what they communicate to customers is another thing. I bet they know very well what they are getting into... but I agree they aren't likely to be transparent with you about it.
- jjk166 5y ago
  If one insurance company tries to profit off exaggerated risk, a competing insurance company can offer the same protection at a lower premium and steal their customers. You don't make it in the insurance business by making short term decisions that hurt you in the long run.
  - vlovich123 5y ago
    That presumes someone takes time to evaluate the claim. Unless you have data already available that the counterfactual is true, it’ll take a while before a competitor appears to test out your claim and existing incumbents might just take your word for it. Additionally, the success of the competitor to eat your padded profits is not controlled solely by the truth.
    - j_wtf_all_taken 5y ago

darksaints 5y ago

Normally when companies fund research, there is a slight conflict of interest because they want the public to buy their products and positive research can nudge them in that direction. And that research can be suspicious, and sometimes inflated, but generally the conclusions are directionally correct. And for that reason, I may scrutinize, but do not immediately discard the findings of soy industry funded research on the health benefits of soy, etc. All that gets thrown out the window when an insurance company funds research. Because insurance companies don't profit from consumers being informed...they profit from information asymmetry. Deliberate exaggeration of risks is pure profit for them.

michaelt 5y ago
> when companies fund research [...] generally the conclusions are directionally correct. I'm not sure I understand why that should be the case? After all, plenty of research gets handed over to the company that paid for it, who get to decide whether to release it publicly it or not - so negative reports never see the light of day.
- darksaints 5y ago
  Indirectly, that's exactly the reason why. * If the research points in the opposite direction of the desires of the research funders it will likely get squashed. Researchers aren't typically keen on putting their name on publications that are pointing to the opposite direction of the truth. * If the research points in the same direction as the desires of research funders, it gets published. It may be exaggerated, but research that has the correct direction but exaggerated scale isn't quite the black and white ethical dilemma that the former scenario is. So asbestos companies might publish research saying that the risk of cancer is low, but they won't publish research that says that it is an excellent antioxidant. This same observation also extends to insurance companies, but with insurance companies, the conflict of interest isn't the direction of research, it is the magnitude of the exaggeration. Because the gap between real risk and the fake published risk is their entire profit margin.

nickysielicki 5y ago

Who else would you expect to employ actuaries with a specialty in solar power?

hedora 5y ago

They say people were estimating 0.5% loss of capacity per year. If so, after 40 years, the panels would be running at 80% capacity, which is still well above the point where you may as well replace it, unless new panel efficiency improves a lot. I’ve never seen anyone claim a solar panel would last 40 years. Something is fishy.

rsj_hn 5y ago
I think what is fishy is the assumption that the 0.5% loss rate per year for new units would not change over time as the units got older. Hazard rates for products are not constant like that -- there is a period when the failure rate increases rapidly after the design life of the unit.
r00fus 5y ago
Exactly. Typically the usage cycle is 20 or 25 years. This puts the entire study in a poor light.
kragen 5y ago
Most solar panels from 40 years ago did in fact last 40 years, though some fraction have broken or clouded. Moreover, the rate of degradation slows substantially after about 20 years. NREL has published extensive studies on this. But manufacturers do not guarantee this (because nobody gets power plants financed with a 40-year term), and whether today's solar panels make it to 40 years is anybody's guess. It's common for manufacturers' ratings to be conservative, but that may have changed as they battle every last percentage point of avoidable costs.