Hail insurance is about risk management for PV developers

From pv magazine USA

The destructive potential of hail on solar arrays has only been fully realized in the last two years. In this series, pv magazine talks with experts in storm modeling, risk insurance, and damage mitigation to learn how solar arrays can survive nature’s wrath. Read Part 1 here.

The generally accepted consensus around hail damage mitigation for solar projects is that it’s a recently developed area of focus. Only recently have projects come on-line in hail-prone areas, so when disaster struck at Midway, the industry and adjacent risk management industries were entirely caught off guard.

But after talking to Michael Kolodner, U.S. power and renewables industry practice leader for insurance broker Marsh, that consensus doesn’t tell the full story. To understand what has happened to the solar insurance market since Midway, you have to understand insurance’s role in risk management.

Midway, of course, refers to the 178 MW Midway Solar Project that sprawls across 1,500 acres near Midland, Texas. In May 2019, a monster hailstorm ripped through, damaging or destroying more than 400,000 of the plant’s 685,000 Hanwha Q cell modules. The insurance losses totaled $70 million.

Kolodner said that in Texas and the plains states, big hail events are neither unforeseen nor unexpected. Yet, as new and surprising as Midway was to many in the solar industry, it was equally surprising to many on the underwriting side. This is partially due to underwriting being such a highly specialized and segmented part of the solar sector.

However, for all of the parties that were caught off guard by that May storm, Kolodner also said that there were plenty in the risk and insurance spaces who were well aware of hail’s hazardous nature when it comes to solar. The issue ultimately came down to the maturity of renewable developers when it comes to risk management.

“Insurance often serves as the language for risk management,” said Kolodner, adding that the full spectrum of risk management is much broader.

And then it did come down on Midway.

Two years after the storm, the market has hardened and insuring projects against hail damage has become more expensive but also less of a catch-all solution. In turn, the risk management aspect of project development has been forced to rapidly mature.

Developers looking to build projects in potential problem areas now include risk assessment as part of their pre-construction process. They also are using hardware and engineering techniques that allow them to better mitigate the potential effects of a catastrophic event. One example is trackers that have a safe-stow function to protect panels in the event of hail.

Kolodner said this sort of diligence has paved the way for a healthier and more diverse insurance market, one that is itself more mature and resilient than a few years ago when insurance was seen as a cover-all solution.

“If you’re taking a more mature approach and the market is not naive or underpricing the risk, now you have a broader spectrum of supply that’s available,” said Kolodner.

Underwriters now offer a more diverse  supply of products to support solar energy projects because price points have been adjusted and developers are more sensitive to the risk.

“They’re managing it better and they present a more attractive risk profile” to an insurer, Kolodner said.

The goal, he added, is not to insure as much as possible. Rather, the objective is to assess and mitigate risk enough to allow insurance to cover the perils that will always be present. That means that developers working in hail-prone regions can take a number of steps to decrease how much damage hail can inflict on their project, but they can’t eliminate the risk entirely. And it’s just that enduring sliver of risk where insurance fits in.