New Energy Risk (NER), a division of Paragon Insurance Group, has partnered with Ecostrat, a leading firm specializing in biomass supply chain optimization, to create a new insurance product called Feedstock Supply Insurance (FSI). The aim of this partnership is to address the risks associated with biomass feedstock supply chains, effectively stabilizing costs and securing long-term debt repayment for bioenergy projects, reported Bioenergy Insight.
The global bioeconomy, valued in the trillions, faces a major obstacle in its rapid growth due to the fragmented nature of biomass supply chains. These chains often rely on small and medium-sized suppliers, such as farmers, sawmills, forestry companies, and truckers. As a result, long-term, bankable supply contracts are rare, making it difficult for projects to secure the necessary financing. This has led to slow, complicated, and expensive bio-project financing, the media report further added.
FSI aims to transform these non-investment grade supply chains into bankable, investment-grade structures by transferring the risks from project developers and capital providers to A-rated insurance markets. This move will bolster the creditworthiness of biomass feedstock contracts and guarantee critical obligations, such as debt repayment.
The expected benefits of the FSI include reduced project debt costs, easier access to larger capital pools, and an accelerated scale-up of the global bioeconomy.
“As leaders in our respective industries, Ecostrat and NER are ideal partners for developing this innovative insurance product,” said Jordan Solomon, president and CEO of Ecostrat. “Ecostrat’s advanced predictive analytics will identify potential failure points in supply chains and assess their impact, while NER will provide underwriting capacity to support the feedstock insurance policies.”
Solomon added, “This collaboration will create a tool that will securitize biomass supply chains and open up much-needed capital for bio-manufacturing projects.”
George Schulz, managing director of NER, commented, “For over a decade, NER has been supporting the energy transition by improving the bankability of renewable technologies. Many of our clients in the bioeconomy also face the challenge of securing reliable feedstock supply. Ecostrat’s expertise in assessing these risks, combined with our ability to offer financial solutions, will help resolve this bottleneck and unlock the potential of biobased projects.”
Schulz continued, “By mitigating supply chain risks and enabling long-term financing, FSI will make biomass projects more viable and play a crucial role in helping countries achieve their renewable energy goals.”
Through this new partnership, Ecostrat and NER hope to drive innovation and investment in the bioeconomy, ultimately making biomass a more stable and scalable energy source.
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