Surety Bonds: What Solar Contractors Need to Know

Due to the complexity and ever-changing legislation in the solar industry, it can be challenging for solar contractors to know what types of surety bonds are required before starting on a new project. Solar bonding adds additional layers of complexity due to the nature of the work being done and the contracts and bond forms are usually not common forms.

This is why it’s vital for contractors to establish a close relationship with a surety bond producer knowledgeable in all the intricacies of solar bonding to prevent delays and avoid unnecessary costs. Rose & Kiernan, Inc. has surety expertise across a variety of specialty industries including solar and renewable energy. As such, we decided to put together a guide for solar contractors on what you need to know about surety bonds:

• Types of bonds for utility-scale solar bonding
• Choosing the right surety bond underwriter and producer

Types of bonds

Like many other construction jobs that involve building something, there are multiple licenses, permits and bonds needed. However, with solar construction projects, the difference is in the bonds themselves. A recent article in Surety Bond Quarterly, a publication from the National Association of Surety Bond Producers (NASBP), listed the most common types of bonds written for utility-scale solar bonding. They are:

• Engineering, procurement and construction (EPC) contracts. (supply & install)
• Decommissioning agreements  (guarantee, may be long term)
• Power purchase agreements (PPAs)
• Interconnection agreements

Choosing the right surety bond producer

What should you do if you get a bonding requirement request? The NASBP says that a knowledgeable surety bond producer can do a lot of the “heavy lifting” during the bonding process.

It’s very important as a solar company to work directly with a surety bond producer who has specific knowledge of the solar industry so as not to delay the construction project or hinder it from beginning at all. Some surety companies are weary of the solar industry and sometimes hesitate to commit to writing a surety bond for a solar project mainly due to lack of experience. The good news is, there are several surety companies that specialize in solar bonding and are eager to lend a hand. They also have the knowledge and expertise to ensure that it is done correctly.

Of course, if you have more questions or would like more information on surety bonds in the solar industry, please reach out to our surety team at Rose & Kiernan, Inc., by contacting us here or by calling us at (800) 242-4433. You can also check out the Surety section of our website.