However, with increased claims and risks, price rises and lower availability of cover is impacting the sector. Duncan Gordon, head of Renewable Energy at specialist energy insurance brokerage and risk management firm Gallagher, provides an overview of how solar power project owners can navigate a challenging insurance market.
Inaccurate estimates significantly increase the risk of default on solar loans as an asset class, meaning the project has insufficient operating cash flow to meet its debt service obligations.
For much of the world where large utility-scale solar project development activities are now taking place, climate risks are intensifying. Catastrophic weather events are especially costly, as a small number of incidents account for a majority of the monetary loss represented in solar insurance claims.
Credit: Nextracker Prior to 2019, there was an ample number of insurers willing to provide renewable energy insurance, leading to plentiful, affordable cover being available for solar power project finance transactions. However, with increased claims and risks, price rises and lower availability of cover is impacting the sector.
Building on flood plains for example could mean that the solar farm is at risk of flooding or water damage. Building near archaeological sites also presents risks which would be reflected in higher insurance premiums. 5.
CANADIAN SOLAR Increasing insurance premiums and exposure and reduced capacity availability are causing significant challenges for solar asset managers. Given that the renewable energy market is expected to rapidly expand through 2050, the industry needs to remain cognizant of pitfalls and collaborate to solve these issues.