Operational Solar Farms

By Ronald J. Davis, P.E., Senior Electrical EngineerProNet Group, Inc. 

The renewable energy industry is rapidly evolving and as the costs to produce solar energy continue to decrease (currently down more than 80% since 2010), solar farms are becoming ever more popular. Commercial solar farm projects are typically constructed to sell energy to local power grids or for private use by large industries. It is important for insurance organizations who are considering underwriting operational solar farms to understand some of the most important aspects and risks involved. Unfortunately, the insurance history of solar farms is generally short compared to other types of assets. This article is intended to highlight four important topics to help potential insurers gain a better understanding of relevant aspects of solar farms as well as associated risks.

Location: As in real estate, location is essentially the most import aspect of a solar farm. As part of the initial selection process, it is vital to understand which locations have adequate sunshine and irradiance levels. In the U.S., the southwest region generally has the highest solar irradiance levels while the northeast has the lowest. Solar farms installed in higher irradiance areas will generally produce more energy, and thus, more revenue. Other important considerations include whether a given location is susceptible to flooding and the general conditions of the area soil, which affect the selection of mounting structures, piles, and foundations. Geotechnical and hydrology reports should have been obtained as part of the original vetting process for any location already selected. Also, proper mitigation measures should already be in place around an operational solar farm to address adverse conditions in less-than-ideal locations.   

Engineering/Design: It is important for solar farms to be designed in accordance with industry recognized codes and standards. For sites built in locations subject to significant annual rainfall, a well-designed site drainage system including gutters and/or ditches should be in place to divert excess water into appropriate areas. For locations prone to flooding, has some type of water barrier (dike, levee, berm, etc.) been installed? If the site was built in a relatively high seismic zone, were the site structures designed in accordance with corresponding seismic standards and requirements? Similarly, have these structures been designed to accommodate the maximum wind and existing soil conditions? Has erosion and settlement control been addressed in the site foundation designs? If the site has been built near a forest or area with tall obstructions, has a “buffer zone” been put in place around the farm to minimize the effects of shading? Have fire detection and suppression systems been installed around for higher-risk assets such as switchgear, transformers, or battery systems? These are among the most important considerations as part of assessing the overall design of a solar farm.

Manufacturers/Suppliers: Selection of dependable, quality-oriented, and reliable manufacturers/suppliers is of utmost importance to ensure that the solar farm will last throughout its intended design lifetime. Have the major components, including panels, inverters, switchgear, and transformers, been selected from well-known, prominent manufacturers. There are two types of warranties for solar panels. Workmanship warranties for reputable panels typically last for 10 – 15 years and, for premium panels, can last as long as 25 years. Power performance warranties for all types of panels typically last for 25 years and guarantee output to at least 80% of the initially rated value throughout the warranty period. Inverters and transformers manufactured by top vendors can be expected to have initial warranty periods of at least 2 – 5 years. In the case of inverters, extended warranties can also be purchased, potentially as long as the design lifetime of the solar farm. Other components such as trackers and mounting systems need to have been manufactured of sufficient quality to withstand extreme weather conditions including high winds, storms, and freezing temperatures. Manufacturers/suppliers should also be evaluated in terms of whether they’ll be around for the foreseeable future for technical support and supply of spare parts. 

Site Security/Environment: Some combination of site security features around the solar farm including perimeter fencing, exterior lighting, CCTV system, guard house, and warning/hazard signs is generally considered necessary to reduce the risk of theft, vandalism, or other unauthorized entry. Panels and inverters are expensive and very transportable, leading to significant risk of theft if not addressed. For existing solar farms, has there been a history of such incidents? Is the site being monitored on a 24-hour basis? Is site access restricted to authorized personnel? Who lives in surrounding areas and what are their impressions of the solar farm? Are they satisfied with the nearby proximity of the solar farm and generally support its operation? How about equipment noise levels and corresponding requirements of local ordinances? Is there any pending litigation against the solar farm initiated by outside parties? Any of these circumstances could adversely impact continued operation of the solar farm and should be carefully researched as part of any insurance related due diligence exercise.

If you would like more information about this article, please contact Ronald J. Davis with Pronet Group, Inc. at 281-496-2865.

This is a publication of Southern Loss Association, Inc., P.O. Box 421564, Atlanta, GA 30342. The articles published on this website are in a general format and are not intended to be legal advice applicable to any specific circumstances. Legal opinions may vary when based on subtle factual differences. All rights reserved.