Utility-scale photovoltaic solar farms have been in operation around the world for more than two decades. Investment demand has helped drive down component costs, and solar farm generating capacities have quickly scaled up. Today, solar is one of the primary sources of renewable energy, and investment in new plants is likely to grow as the energy transition accelerates.
The primary risk considerations for investors and insurance markets include:
- Technology failures. The most common causes of losses include:
- Inadequate design or quality control in component manufacturing
- Aging installations and infrastructure
- Inadequate maintenance programs
- Environmental damage
- Fires within componentry
- Theft and vandalism
- Extreme weather and environmental exposures. Solar farms have a large geographic footprint, and can be located in remote and weather-exposed areas. They can be damaged by windstorm, flood, lightning, earthquake, hail, snow, and wildfires. Insurers' risk modeling doesn't usually factor in storm variability or landscape characteristics, which can result in higher insurance costs.
- Contractor risks. Increasing demand for experienced contractors may lead to challenges in balancing project costs and the availability of labor. The claims history of chosen contractors can impact the insurability of a project, or even policy deductibles and premiums.
- Manufacturing and supply chain issues. To avoid construction delays, developers may choose to opt for inferior quality panels and technology, depending on product availability and price. Operators may face prolonged outages or reduced generation capacity while waiting for replacement parts.
- Evolving technology. Floating solar farms can overcome land-use issues, but may introduce other environmental concerns. This advancement may present new challenges for the durability of materials, effectiveness of cabling and mooring systems, and ingress of water. Cyber risks continue to present an emerging and serious threat to the sustained operation of solar plants.
