From Sunup to Sundown: A Guide to Solar Farm Insurance

You don’t know how it started, but you knew this was always possible. Noxious smoke billows into the air, along with the smell of burnt silicon. A fire broke out in the heart of your solar farm and has spread to the lithium-ion batteries. You later learn that an electrical fault ignited a blaze that devoured everything in its path, fueled by the very materials meant to harness the sun’s power. It took the local firefighters an agonizingly long time to arrive and then wind their way through the hundreds of acres of costly equipment to get to the fire. By the time they’re finally in place, the damage is catastrophic. Thankfully, no one was hurt. Your thoughts turn to your employees, investors, and clients… As you watch the charred remains of what was once a state-of-the-art installation, you can’t help but think of the hailstorm that shattered your West Texas farm just last year. Baseball-sized hailstones had turned your panels into a graveyard of shattered glass and lost potential. Each disaster is a stark reminder of the unpredictable wrath nature could unleash on your quest for renewable energy.

The growth of commercial solar farms showcases the overlap of ingenuity and environmental stewardship. Investment in renewable technology is crucial to minimizing carbon footprints, but it comes with challenges, especially in obtaining sufficient insurance coverage. The following article is a thorough (but not comprehensive) discussion of considerations, nuances, and risk-mitigation tactics when insuring solar farms.

Unique Elements of Insuring Solar Farms 

Utility-scale solar facilities are centralized installations designed to generate electricity from solar energy, often defined as generating more than 4 MWAC (4 Megawatts Alternating Current). Building a utility solar facility involves substantial investment and large tracts of land. An oversimplified rule of thumb is that about 5 acres and $1,000,000 of investment are needed per 1MW of power generated. Therefore, a 100MW solar facility typically requires about $100,000,000 and approximately 500 acres of land. These figures underline the massive scale, substantial financial stakes involved, and the need for tailored insurance solutions to safeguard these assets.

Securing sufficient insurance for solar power generation is more complex than traditional commercial ventures. Developers frequently need help obtaining enough coverage to satisfy project financiers, a hurdle that can stall or even halt project development. Additionally, many insurance brokers are unfamiliar with this relatively new class of risk, leaving gaps in coverage that can be costly to the insured. 

Property Damage Coverage: A severe hailstorm in 2019 caused extensive damage to a solar farm in West Texas. The hailstones, some as large as baseballs, shattered the solar panels, leading to a significant loss of power generation capacity. The damage was so severe that the farm had to be shut down temporarily for repairs.

Given the significant capital investment required in solar farms, comprehensive property damage coverage is crucial. This coverage must safeguard against damage from natural disasters, a primary concern due to the exposure of solar panels and related equipment to the elements. However, property coverage needs to do more than replace broken panels. Removing damaged solar panels requires skilled electrical workers and specialty equipment that comes at a premium cost. The weight of panels and distance to specialized disposal or recycling facilities lead to increased transport costs. As a result, the disposal of damaged panels can cost just as much as the purchase and installation of replacement panels. Debris removal is a component of property coverage that is usually not an anticipated concern and is often sub-limited in a standard property policy, meaning there may be a big gap in coverage afforded vs. coverage needed. 

The physical location of a solar farm plays a significant role in determining its insurance needs. For instance, farms in flood-prone areas require careful placement of essential components like transformers and inverters to mitigate potential water damage. Additionally, areas prone to wind and hail necessitate robust coverage options to address these prevalent risks. Insurers must evaluate each site's specific geographic and climatic challenges to tailor appropriate coverage.

Fire: A foundational concern for any property insurance policy is to protect the owner in the event of a fire. Solar farms are no different. As a utility, they’re susceptible to fire damage due to the high-voltage wires and batteries being exposed to the elements. A study conducted by the European testing company TÜV Rheinlan found that about half of the fire/heat damage in photovoltaic (PV) systems was due to the PV system itself. In other words, about half of the potential fire and damage experienced by solar farms are caused by mechanical malfunction of the utility. Additionally, a study by the BRE National Solar Centre found that fires caused by the PV are likely to be ‘serious fires’ that were difficult to extinguish and spread beyond their point of origin.¹

Micro-Cracking Endorsement: A notable risk specific to solar panels is micro-cracking. These tiny fractures (typically caused by hail) can significantly degrade the efficiency of solar panels over time. Despite its impact, insurance coverage for micro-cracking is rare and difficult to obtain. Solar farm operators should understand the exclusions in their policies that limit coverage for micro-cracking and take proactive, protective measures to minimize damage.

Premises and Wildfire Liability: Solar facility owners face several liability risks. They may be held responsible for any injuries occurring on their premises, whether the individuals involved were authorized to be there or not. This includes curious individuals, like onlookers or teenagers, who might trespass to explore new technology.

Additionally, solar facilities are often situated in rural, dry areas, making them susceptible to wildfires. Owners and contractors can be held liable for any damages caused by a wildfire that originates at their facility. Small-town fire departments may lack the resources to quickly control such fires, increasing the potential for significant damage. For example, in 2024, a wildfire in west Texas killed two people and thousands of cattle. The fire was traced back to a utility contractor's equipment, leading to a lawsuit that named the electrical company, contractor, and property owner as defendants. ²

Security and Theft Prevention: Due to their remote locations and high-value equipment, solar farms are particularly vulnerable to theft and vandalism, making them an "attractive nuisance." To mitigate these risks, security measures such as fencing and surveillance systems need to be in place. A proactive approach to risk management through security protocols can significantly enhance safety and show insurers a commitment to minimizing risks, potentially resulting in more favorable policy terms.

Operational Considerations: A solar farm's operational model, whether managed by employees or third-party service providers, can influence various aspects of insurance coverage, from worker's compensation to operational liability. Policies must be crafted with a clear understanding of the farm's operational structure to ensure all potential liabilities are adequately covered.

Maintenance and Cleaning: Regularly cleaning solar panels is vital to their efficiency and profitability. One study found that power generation from a panel degraded by as much as 50% when it wasn’t clean for six months. However, cleaning panels presents its own set of challenges​. ³

• Water: Using water to clean solar panels aligns with the environmentally friendly nature of solar farms. However, this method requires a significant amount of water, which must be filtered to prevent residue buildup. This process is costly, and if there is a large temperature difference between the water and the panels, it can lead to cracking.
• Solvents: Chemical solvents can be used to clean solar panels, but this approach raises environmental liability concerns due to the potential runoff of harmful chemicals into the surrounding ecosystem.
• Manual Labor: Cleaning hundreds of solar panels by hand is labor-intensive and introduces several risks. Brushes can scratch the panels, workers are exposed to the danger of electric shock, and the remote locations of many solar farms often lack immediate access to emergency services. Additionally, workers must contend with the elements, which can further complicate the cleaning process.

Technological Advancements: Solar technology is continually advancing, resulting in more efficient energy production. However, this progress introduces two key considerations for solar farm operators:

1. Risk of Advanced Equipment: Are you prepared to manage the risks associated with newer, thinner solar panels that might be more susceptible to breaking?
2. Insurance Coverage: Do you understand the type of equipment your insurance covers in the event of a loss, or could you be left with outdated equipment in the event of a claim?

Risk Mitigating Techniques

Risk management is a two-way street. Insurance carriers offer to indemnify insureds against losses while insureds try to prevent losses when possible. Developers and operators should work together with their insurance carriers to adopt comprehensive risk mitigation strategies, ensuring their investments are safeguarded and insurance costs are kept under control.

Fire Risk Reduction

• Regular Inspections: Conduct regular, independent third-party inspections to identify and rectify potential fire hazards. This proactive approach ensures that any faults in the PV system or other components are detected early, preventing potential fire outbreaks.
• Safety Components: Incorporate additional safety components, such as fire suppression systems and quality assurance measures, to mitigate fire risks. These systems can quickly extinguish fires, minimizing damage and operational disruption.
• Prompt Replacement: Ensure defective or aging components are promptly replaced to prevent malfunctions that could lead to fires. Timely maintenance and upgrades are crucial for maintaining the safety and efficiency of the solar farm.

Weather-Related Risk Management

• Advanced Stowing Systems: Utilize automatic stowing systems to position panels away from direct hail impacts, reducing damage from severe weather. These systems can detect approaching storms and adjust the angle of the panels to minimize exposure to hail and wind.⁴
• Robust Design Standards: Implement design standards that withstand high wind speeds and other weather-related challenges. This includes using reinforced materials and structures that can endure extreme weather conditions.
• Innovative Technologies: Leverage technologies such as robotic cleaners and dry-cleaning methods to maintain panel efficiency in harsh environments. These technologies reduce the need for manual labor and minimize the risks associated with traditional cleaning methods.

Comprehensive Security Measures

• Fencing and Surveillance: Install robust fencing and surveillance systems to deter theft and vandalism. High-quality security systems can monitor the site 24/7, providing real-time alerts and preventing unauthorized access.
• Proactive Security Protocols: Develop and implement proactive security protocols to demonstrate a commitment to risk management, potentially lowering insurance premiums. This includes regular security audits and employee training on security best practices.

Environmental and Equipment Risk Management

• Environmental Liability Coverage: Ensure that environmental liability insurance is in place to cover potential damages caused by cleaning agents, construction, and operational activities. This coverage helps manage risks related to environmental impact and regulatory compliance.
• Equipment Maintenance: Regularly maintain and upgrade equipment to prevent breakdowns and ensure operational continuity. This includes scheduling routine maintenance checks and promptly addressing any malfunctions or wear and tear.

Adapting to Technological Advancements

• Stay Informed: Stay informed about the latest advancements in solar technology and ensure that insurance policies are updated accordingly. This proactive approach ensures that the solar farm is covered for the newest and most efficient equipment.
• Upgrade and Replace: Plan for regular upgrades and replacements of equipment to maintain efficiency and coverage. Ensure that the insurance policy allows for the replacement of damaged components with the latest technology.

Insurance is a driver of modern human achievement and technological advancement. It allows people to take risks on investments and businesses that could benefit society. Solar farms are one of the best examples of this power on display today. By taking proactive measures and working with a knowledgeable advisor, solar farm operators and developers can navigate the complex risk landscape and ensure their investments are protected from sunup to sundown.

If you’d like to discuss insurance options for your utility or solar farm, reach out to info@swinglecollins.com.