Climate Change Is Tightening Insurance Markets. That’s No Good for the Solar Industry

(From greentechmedia.com | By EMMA FOEHRINGER MERCHANT | MARCH 02, 2021)

Insurers now see renewables projects as more vulnerable to natural disasters.

In the spring of 2019, the sky in parts of West Texas opened up, in some areas dropping hailstones as big as baseballs, according to the National Weather Service. Beyond cracking car windows and damaging rooftops, the hailstorm struck a 180-megawatt solar project developed by 174 Power Global, causing an estimated $70 million to $80 million in damages as ice smashed the project’s panels, made by Hanwha Q Cells.

The event got the insurance market’s attention.

“That’s really when the market changed overnight,” said Sara Kane, a senior vice president overseeing energy risk management at insurance broker Beecher Carlson.

Solar came up at a time when insurance was relatively affordable and easy to procure. Insurance was never an insignificant cost for developers, according to a 2010 report from the National Renewable Energy Laboratory (NREL). But it’s gotten significantly more expensive in recent years as natural disasters exacerbated by climate change have proliferated. Hurricanes have soaked the South and wildfires have destroyed property in the West, compelling insurers to reckon with what experts say are years' worth of underpricing the risk of damages.

From the end of 2019 to the first part of 2020, property insurance premiums rose between 10 percent and 60 percent, according to the Insurance Information Institute. The change has been particularly acute for solar. Premiums have increased by as much as 400 percent in the last two years, according to a recent analysis by two companies that specialize in analyzing solar risk, kWh Analytics and Stance Renewable Risk Partners.

How insurance will function in a climate-change-impacted future is an open question that policymakers across the United States are now mulling. But there's a distinct paradox in the threat of rising insurance costs hampering solar growth.

“It would be ironic if one of the possible fixes for climate change can’t move forward just because it can’t get insurance,” said Keith Martin, a transactional lawyer at law firm Norton Rose Fulbright.