Large solar farm risks and solutions

In recent years, electricity generation through large scale solar farms has enjoyed significant growth and taken an increased share of the UK’s energy generation overall.

For instance, in 2019, solar generation reached a record 12.9TWh¹ before again setting new records in May 2020, when it accounted for 34% of all energy supplied to the National Grid.² That growth in generation has been driven by a huge increase in solar capacity – in 2019 solar had the second highest shared of total capacity at 28% of renewable electricity generating capacity.¹

Solar farms: the state of the market

In fact, during September 2020 alone, over 1GW of new large solar sites were added to the UK’s solar capacity, while a further 4GW of new sites were scoped or put into planning between April and September 2020 – taking the cumulative pipeline of solar farms in the UK to 11.6GW across 469 sites.³

However, despite that huge investment, there are some clouds on the horizon for solar farm owners, funders, developers and operators. In particular, a number of emerging and growing risks to solar farms have created a challenging market for solar farm insurance.

Those risks include:

Solar farm theft risks:

Solar farms are often located in remote areas where response times following activation of CCTV can be in excess of an hour. Combined with the relatively high value of cabling and PV modules, this makes them a tempting target for thieves.⁴ For instance, in 2019 thieves stole 168 solar panels from sites in Wales – which could amount to a loss in materials alone of over £900,000.⁵

Solar farm breakdown risks:

As solar farms age following several years of operation, key components like transformers and inverters commonly suffer more frequent mechanical or electrical breakdown and require repair or replacement. This can lead to business interruption claims with sites unable to operate as normal during repairs.

Solar farm extreme weather risks:

While solar farms can play a crucial role in helping to address climate change, they are also at heightened risk from climate change-driven extreme weather events like severe storms and localised tornados. For instance, in November 2018 1,100 PV modules were severely damaged during a localised storm at a solar farm in Tewkesbury, Gloucestershire, which led to an insurance pay-out in the region of £500,000.⁶

As a result of these risks, and the insurance losses that can follow when something goes wrong, insurance premiums for large scale solar plants rose by, on average, 20-30% in the 12 months to December 2020.⁷

Solar farms and insurance

The effect of these risks on the insurance market for solar projects means it is more important than ever for solar farm funders, developers, owners, and operators to work with specialists to secure efficient, tailored cover.

For instance it is possible to secure solar project insurance that covers the construction and installation phase as well as operational risks – including:

• Construction phase: Contractors all risks, advanced loss of profit, terrorism, and public liability.
• Operational phase: Operational all risks including loss of revenue, terrorism, and public liability.

Clearly, detailed renewable energy project risk management – to identify and minimise construction and operational risks – is crucial too. In fact, as well as helping to protect project viability by minimising disruption and delay during planning and construction, effective risk management can also play an important role helping projects to minimise the impact of rising insurance costs in the sector.

For more information, you can read more about renewable energy project risks management here, explore the insurance solutions and support available from Marsh Commercial here, or get in touch to talk to a solar farm insurance expert.