The Impact of Surety Bonds on the Cleantech Economy
March 4, 2024
It’s no secret that large-scale projects, especially those in renewable power, entail risks, particularly due to the incorporation of newer technologies. This is where surety bonds come into play, an area of expertise for Rosenberg & Parker.
What is Surety?
So, what exactly is a surety bond? I set out to find the answer so you don’t have to! I had the opportunity to speak with Jack Rosenberg and James DiSciullo, each specializing in their unique niche within the surety industry. Similar to the idea behind a loan, a surety bond mitigates risk. The primary distinction between the two lies in the fact that a surety bond is an unfunded guarantee of performance. The surety company acts as a third party, assuring the obligee that the service or project will be completed. Essentially, it is a promise; a surety bond adds a layer of security and trust to various types of agreements and contracts. If one party fails to fulfill their end of the deal, the surety company steps in, taking responsibility and providing compensation.
Now what does this mean in the context of clean energy?
As discussed, numerous renewable energy projects incorporate newer technologies, making them inherently riskier. A party involved in such projects may require a surety bond to integrate renewable power generation assets into the grid and meet sustainability goals. In contrast to fossil fuel power plants, where ongoing fuel costs are a factor, most of the cost in renewable energy is paid upfront, introducing new types of risks. In summary, the utilization of surety bonds has become increasingly crucial, serving as a catalyst for innovation within the relatively new market of renewables. This is a topic that will be discussed at the 10th annual UNC Cleantech Summit.
Surety is Personal – Turtle Bonds
Jack and James reflected on a project in which Rosenberg & Parker participated, jokingly referred to as ‘Turtle Bonds.’ Essentially, it was a solar field project that involved the purchase and clearing of land, leading to an extensive mitigation process. Scientists were brought in to conduct walk-throughs, searching for tortoises identified as ‘endangered’ on the land. Rosenberg & Parker ensured that the client had a surety bond, guaranteeing the legal procurement of the land and the relocation of the endangered tortoises to a new home. The solar company then purchased and protected this new habitat, necessitating a guarantee that the developer would take proper steps to save the tortoises and the posting of a surety bond to the California Department of Wildlife.
Large-scale projects, especially those in renewable energy with newer technologies, inherently involve risks. Within the expertise of Jack Rosenberg and James DiSciullo, surety bonds play a crucial role in mitigating these risks. Essentially, a surety bond is an unfunded guarantee of performance, acting as a promise and adding a layer of security to contracts. In the context of clean energy, where projects often involve innovative yet risky technologies, surety bonds become important to ensure completion and meet sustainability goals.
The involvement of Rosenberg & Parker in the solar field project, humorously dubbed ‘Turtle Bonds,’ exemplifies the practical application of surety bonds. The project, requiring a land purchase, triggered a mitigation process due to the discovery of endangered tortoises. The surety bond ensured that proper steps were taken to procure the land, relocate the tortoises, and protect their new habitat. This illustrates how surety bonds can address unique challenges in renewable energy projects, providing a guarantee of responsible and lawful project execution.
This article was written by MacKenzie Swartz, an IE Cleantech Corner Initiative intern.