Tuesday, September 13, 2016

The impact of extreme weather conditions on the global solar PV industry has contributed to an 87% increase in the average severity of claims over the past five years

The severity of claims lodged by the PV industry has risen sharply, says GCube


By Christopher Hopson in London

Tuesday, September 13 2016

Updated: Tuesday, September 13 2016

The impact of extreme weather conditions on the global solar PV industry has contributed to an 87% increase in the average severity of claims over the past five years, renewables underwriter GCube revealed.

Its Cell, Interrupted study finds that weather-related losses are one of the most common causes of solar PV claims worldwide, accounting for just under half of all PV claims in North America, and over a quarter in the rest of the world.

GCube says the solar PV industry will need to invest time and resources in order to increase its tolerance to risk, particularly for losses resulting from extreme weather, which can include tornadoes, floods, windstorm and hail damage.

Additional factors to this risk increase include electrical failure, lightning strikes and the theft of components including copper wire. The latter is a particular concern for operators in Southern Europe, and theft-related claims account for over a quarter of the total outside of North America.

While the study says an increase in the total number and cost of claims is to be expected as the PV market expands, this overall increase in severity highlights a growing need for knowledge sharing and collaboration among project owners, developers and risk, insurance and claims managers.

Cell, Interrupted – produced exclusively for the firm’s international community of insured clients and supporting brokers – identifies the challenges faced by solar PV developers and owners around the world, the causes and cost of solar PV claims, and discusses how they can best be mitigated.

Annual growth in the solar market consistently exceeds 25%, with falling technology costs, and sufficient scale and innovation driving development in new markets, says GCube.

However, if the industry is to continue to develop at this rate – particularly in an age of declining subsidies – it will need to more adequately prepare for sudden and unforeseen risks, particularly as the market increasingly moves into areas prone to natural catastrophe and extreme weather conditions.

The study warns that a failure to do so will be to the detriment of investors and project stakeholders.

Jatin Sharma, head of business development at GCube and author of the report, says that despite its relative infancy, the solar PV industry has already gained a number of scars.

“It has faced bankruptcy and consolidation. Its investors have been left in the wake of regulatory uncertainty, including concerns that industrial policy will undermine a cost competitive, but ‘foreign’ supply chain.

“And climate change, its once greatest ally, has demonstrated how vulnerable utility-scale and residential solar PV are to the increasing frequency and severity of natural perils such as floods, windstorms and tornadoes.”

Sharma says an industry preoccupied with growth, cost reduction and innovation will struggle to brace itself for the continuing turmoil.

“Until there is greater awareness among the investment community that risk and asset managers need more resources to adequately prepare for the sudden and unforeseen, the industry will continue to be caught off guard.

“As we’ve recently seen with Californian wildfires, extreme weather-related conditions and their aftermath can pose a very real threat to solar energy assets and surrounding infrastructure, operating in increasingly testing environments worldwide.”

In summary Cell, Interrupted, which draws on a blend of GCube’s proprietary claims data, technical expertise and publicly available market information, says the solar industry will continue to exceed analysts growth expectations as it proliferates.

“Falling costs, sufficient scale and innovation in energy storage should result in further penetration in established markets while overcoming investment barriers and weak grid issues in new markets.

“But if the industry is to adapt and develop to reduced margins in a zero subsidy environment, it will need to invest time and resources to increase its tolerance to risk, notably adapting and responding to electrical malfunction and natural peril losses,” the study concludes.

The study also contains input and contributions from DNV GL, Lightsource, OST Energy, Quintas Energy, RES Group, Dulas and Renewable Energy Loss Adjusters.