Beyond the Spark: Insuring Battery Storage

Exploring Thermal Runaway, Risk Mitigation, and the Future of BESS Insurance

By: Adam Shinn, Data Science Manager, kWh Analytics; Michael Cosgrave, Principal, Renewable Guard; Ross Kiddie, Sr. BESS Risk Manager, Renewable Guard 

Originally Published on Energy Storage News

The energy landscape is undergoing a profound transformation, with Battery Energy Storage Systems (BESS) at the forefront of this change. The BESS market has experienced explosive growth in recent years, with global deployed capacity quadrupling from 12 GW in 2021 to over 48 GW in 2023. These sophisticated systems are revolutionizing how we generate, distribute, and consume electricity, offering unprecedented flexibility and efficiency to power grids worldwide.

The trajectory of BESS growth shows no signs of slowing. According to Lloyd's article in the 2024 Solar Risk Assessment, the industry is poised for a staggering 13-fold expansion, with an additional 181 GW either planned or under construction. This surge is driven by several key factors, capturing the attention of developers and investors alike. The intermittency of renewable energy sources like wind and solar power has created a pressing need for storage capabilities to balance irregular supply with demand. BESS offers crucial grid stabilization services and enables the delivery of more clean energy.

However, with these opportunities come significant challenges. The rapid growth of the BESS industry has outpaced the development of comprehensive safety standards and regulations. The technology itself, while advancing quickly, still faces issues related to energy density, cycle life, and overall performance. Perhaps most critically, BESS installations face a unique risk in the form of thermal runaway events, which can lead to fires and explosions if not properly managed.

Battery chemistry plays a crucial role in both the performance and risk profile of BESS. Lithium Iron Phosphate (LFP) has become the standard for commercial-scale energy storage due to its balance of cost, environmental impact, and safety characteristics. However, other chemistries like traditional lithium-ion, lead-acid, and flow batteries each offer different advantages and challenges depending on the specific application and use case.

Insuring BESS installations presents unique challenges due to the novelty of the technology and the potential for catastrophic events like thermal runaway. However, insurance is not just a cost of doing business—it's an enabling form of capital that's critical for the continued growth and adoption of BESS technology. Understanding how to protect these assets effectively is key to securing favorable insurance terms and, by extension, unlocking the financing necessary for new projects. Delving into the intricacies of BESS risks and mitigation strategies may help shed light on how asset owners, developers, and insurers can work together to foster a more resilient and insurable BESS industry, ultimately supporting the transition to a cleaner, more sustainable energy future.

Thermal Runaway: The Critical BESS Safety Challenge

The growth of global installed capacity of utility-scale BESS has naturally led to increased scrutiny of asset safety, particularly in light of high-profile fire incidents that have garnered significant media attention. However, it's important to note that despite these incidents, the overall rate of failures has decreased sharply. When failures do occur, they are often attributed to a phenomenon called thermal runaway.

Figure 1: Global Grid-Scale BESS Deployment and Failure Statistics

Thermal runaway occurs when a battery cell enters an uncontrollable, self-heating state. This process can rapidly escalate, potentially affecting neighboring cells and leading to a cascading failure across the entire system, often causing fire, explosion, and the release of toxic gases. It's crucial to understand that thermal runaway in lithium-ion batteries differs significantly from conventional fires. While conventional fires are sustained by fuel, heat, and oxygen[3], and can be extinguished by removing one of these elements, thermal runaway does not require oxygen. Instead, it is fueled by an internal chemical reaction that can continue without oxygen or visible flame.

Figure 2: The ‘traditional’ fire triangle and its relationship to Thermal Runaway

To fully grasp the complexity of thermal runaway, it's essential to understand its progression. The process typically unfolds in three distinct phases, each with its own characteristics and challenges:

1. Initial Instability: A voltage or temperature instability occurs, and the cell begins emitting gases.

2. Internal Short Circuit: The voltage drops to zero as internal cell materials fail, and the anode and cathode experience a direct internal short. The stored electrical energy in the battery flows through this short, causing temperatures to spike as high as 300-600°C. Importantly, visible flame may or may not occur at this stage.

3. Consumption of Cell Materials: As the internal materials of the cell are consumed, the thermal runaway event can transition to consuming the cell's encasing materials such as the electrolyte, polymers, and plastics surrounding the cell. The gaseous emissions at this stage are consistent with a plastic fire.

Understanding what triggers thermal runaway is equally important as recognizing its phases. Several factors can initiate this dangerous process:

1. Electrical Abuse: Overcharging or over-discharging batteries can lead to undesirable electrochemical reactions. When batteries are charged beyond their specified voltage range, it can result in electrolyte decomposition on the cathode surface, increasing battery temperature. Excessive lithium-ion migration during overcharging can destabilize the cathode, potentially initiating thermal runaway.

2. Mechanical Abuse: External damage to Li-ion batteries, such as impacts, indentations, or punctures, can compromise the integrity of the cell. If the casing is damaged, air can enter and react with the active components and electrolyte, generating heat. Severe internal damage can also lead to short circuits within the cell.

3. Internal Failures: Manufacturing defects or degradation over time can lead to internal short circuits, generating enough heat to initiate thermal runaway. These failures are particularly challenging, as they are hard to detect with external inspections.

Once thermal runaway begins in a single cell, it can quickly escalate into a cascading failure affecting neighboring cells and potentially the entire BESS installation. The heat generated by the failing cell can raise the temperature of adjacent cells, pushing them into thermal runaway as well. Additionally, failing cells can release flammable and toxic gases, further exacerbating the situation.

The consequences of a thermal runaway event in a large-scale BESS can be catastrophic. High-profile incidents have resulted in significant property damage, extended system downtime, and in some cases, injuries to first responders. These events not only pose immediate safety risks but also have broader implications for public perception and regulatory scrutiny of BESS technology.

Despite these challenges, it should be noted that the BESS industry has made significant strides in understanding and mitigating the risks associated with thermal runaway. As manufacturers, operators, and regulators gain more experience with large-scale BESS deployments, they have been able to identify common failure modes and develop more effective mitigation strategies.

Risk Mitigation Strategies and Best Practices

The BESS industry's approach to risk mitigation, particularly regarding fire protection and suppression, has undergone a significant evolution over the past eight years. This journey reflects the industry's growing understanding of the unique challenges posed by large-scale battery installations.

The landscape changed dramatically following a series of fires in Korea in 2017 and 2018. These incidents prompted a shift towards gaseous fire suppression systems in containerized units and dedicated BESS rooms. The theory was simple: remove oxygen from the environment to suppress fires effectively. However, the limitations of this approach became apparent with the APS Surprise, Arizona event in 2019, where quelled fires reignited upon the reintroduction of oxygen into the system.

In response to the Surprise, AZ incident, many fire departments and authorities began requiring water-based fire protection systems for BESS installations. Yet, several events since 2020 have revealed flaws in relying solely on water-based systems, particularly in remote locations where water availability can be limited.

Today, the industry has come full circle, returning to an approach that echoes the pre-2017 era but with pivotal enhancements, specifically the mandatory inclusion of Battery Management Systems (BMS). These systems are the nerve centers of modern BESS installations, playing a role in both performance optimization and safety management. BMS provides sensing and control of critical parameters, and importantly trigger protective or corrective actions if the system is operating out of the norm. These parameters include battery module over or under voltage, cell string over or under voltage, battery module temperature, temperature signal loss, and battery module current. In the event of any abnormal condition, the BMS will first raise an information warning and then trigger a corresponding corrective action should certain levels be reached.

While the Battery Mangement System is an essential component of BESS safety, a comprehensive approach to risk management includes several other best practices:

Spatial Separation and Explosion Relief: Effective explosion relief systems require design conformance to NFPA Standards and sufficient spatial separation between containers or structures to avoid collateral damage. The standard minimum distance for non-sprinklered LFP containers is 6 feet.

Multi-Layered Approach to Fire Protection: While the emphasis is on prevention, many installations still incorporate fire suppression systems as a last line of defense. This may include a combination of gaseous suppression, water-based protection, and emerging coolant-based systems.

Adherence to Evolving Standards: Compliance with applicable fire and building codes provides a basis for resilience. As these standards continue to evolve, BESS operators must stay informed and adapt their systems accordingly.

Conforming to these best practices is not just a matter of regulatory compliance; it's necessary for the long-term viability and growth of the BESS industry. As energy storage becomes increasingly central to our power infrastructure, the safety and reliability of these systems directly impact public trust, regulatory support, and investor confidence. BESS operators who prioritize these best practices not only mitigate their own risks but also contribute to the overall resilience and reputation of the industry. Moreover, as insurers and regulators scrutinize BESS installations more closely, those adhering to best practices are likely to find themselves in a more favorable position for insurance coverage and regulatory approval.

Beyond Compliance: Proving Resilience to Insurers

For battery storage asset owners, navigating the insurance landscape can be as complex as the technology itself. Insurers are looking beyond mere compliance; they seek evidence of a comprehensive, proactive approach to risk management. The following areas are critical for positioning BESS projects favorably in the eyes of underwriters:

Prove Preparedness

Insurers want evidence of active prevention rather than not just reaction to potential issues, but actively preventing them. This starts with your Battery Management System (BMS). Asset owners should be prepared to demonstrate how the BMS goes beyond basic monitoring, showing its capability to detect subtle anomalies that might precede a thermal runaway event and, crucially, how it autonomously implements corrective actions.

Remote monitoring is no longer a luxury—it's a necessity. Insurers are looking for systems that provide real-time, granular data on battery performance. The monitoring setup should allow for rapid intervention before small issues become major incidents.

Design for Safety

The physical layout of BESS installations significantly impacts risk assessment. Insurers are particularly interested in spatial separation between enclosures. While a minimum of 8 feet (already more conservative than NFPA code standards) is often cited as a benchmark, asset owners should be prepared to justify their chosen configuration based on specific risk assessments.

Fire suppression systems remain critical, but the approach must be tailored to the specific installation. Asset owners should be ready to explain the rationale behind their chosen system—whether gaseous, water-based, or an emerging technology—and how it's optimized for the specific setup and location.

Commitment to safety should extend beyond technology. Insurers look favorably on projects that engage experienced O&M providers familiar with regional specifics. Demonstrating coordination with local fire departments, including specialized training programs tailored to the BESS installation, is important.

Chemistry Considerations

Battery chemistry choice significantly impacts the risk profile. While Lithium Iron Phosphate (LFP) batteries are generally viewed favorably due to their stability, other chemistries may be beneficial depending on the use case.

Comprehensive Documentation

Thorough documentation is crucial. Insurers like to see:

• Detailed site plans

• Comprehensive BMS specifications

• Fire suppression system details

• Testing certifications

• Maintenance protocols

• Staff training programs

This information should be contextualized to demonstrate how each element contributes to the overall risk mitigation strategy.

The Path Forward

The BESS industry stands at the cusp of a transformative era, with rapid growth driven by technological advancements and the pressing need for sustainable energy solutions. As deployments scale up, emerging technologies like artificial intelligence and advanced data analytics are reshaping how we approach battery management and risk mitigation.

This technological revolution, however, must be balanced with a thorough understanding of the risks inherent to BESS. The industry's future hinges on our ability to build resilience into every aspect of BESS design, operation, and insurance. From innovative battery chemistries to sophisticated monitoring systems, each advancement plays a crucial role in enhancing safety and reliability.

As insurers and operators gain more experience and data, we’re seeing a shift towards more nuanced risk assessments and tailored insurance solutions. In this evolving landscape, brokers play a pivotal role. They should be proactively seeking detailed information and documentation from their clients and marketing these accounts across the insurance market. Not all insurers are equipped to make price adjustments based on resilience measures, making it crucial for brokers to work with those who have their arms around this risk class.

Looking ahead, there is reason for optimism for the battery energy storage. The industry has shown adaptability in the face of adversity, and the collaborative efforts between developers, brokers, and insurers are paving the way for safer projects. Carriers are only likely to become smarter and more comfortable with storage as the technology matures. By continuing to prioritize resilience, embracing innovative risk management strategies, and communicating with the insurance markets, we can ensure that BESS continues to play a vital role in our clean energy future, powering us toward a more sustainable and secure energy landscape.

[1] https://www.kwhanalytics.com/solar-risk-assessment

[2] https://www.epri.com/research/products/000000003002030360

[3] https://www.researchgate.net/profile/Edmund-Fordham/publication/359031670_Safety_of_Grid_Scale_Lithium-ion_Battery_Energy_Storage_Systems/links/62236da03c53d31ba4a9404b/Safety-of-Grid-Scale-Lithium-ion-Battery-Energy-Storage-Systems.pdf

Location, location, location: how catastrophic risks can shape renewable energy insurance premiums

Originally published on PV Tech
By Bobby McFadden, kWh Analytics, and Keaton Carlson, Renewable Guard

As a renewable energy managing general agent (MGA) and a broker, one of the most common questions we hear from solar and battery asset owners is: “Why do my insurance premiums keep rising, even though I haven’t had a claim?” It’s a frustrating and often confusing situation for many in the industry, but the answer lies in the changing landscape of natural catastrophe (nat cat) risks.

For certain carriers, when a significant loss is incurred, the pricing approach for comparable accounts in the book could be affected as well, adjusting insureds’ rates with no claim activity come renewal. Over the past few years, however, nat cat events have taken a major role in driving insurance premiums across carrier’s books. Nat cat risks are changing, and locations with historically temperate weather are experiencing extreme disasters.

As global temperatures rise, we are seeing more intense hurricanes, prolonged droughts and heavier rainfall events. These changes in weather patterns are altering the risk landscape for businesses, specifically impacting industries with exposed assets, such as renewable energy. Climate change is affecting the frequency and severity of natural catastrophes, making it more difficult for asset owners to secure affordable insurance coverage.

Take the example of an asset owner who had a solar site in Georgia. In 2023, the Federal Emergency Management Agency (FEMA) updated the local Flood Insurance Rate Map (FIRM), and the insured saw their flood premium dramatically spike by 300%, as the site was now located directly in a high hazard flood zone.

With major hurricanes and flood events, the topography under established sites changes, creating higher risks in some areas. Further, land development and paving over natural terrain increases water runoff.  This is not an isolated story; tornadoes are ripping through the Midwest, hailstones are increasing in size, and even New York is experiencing earthquakes.

These events can cause significant damage to solar panels, wind turbines, battery assets and other equipment, leading to costly repairs or replacements. As the frequency and severity of these events increase, insurers are adjusting their rates to account for the higher risk. As the risk landscape shifts, admitted carriers are facing capacity constraints in regions with high catastrophe exposure, such as coastal areas or flood zones, limiting the options available to asset owners.

Some catastrophe risks, such as earthquakes in California, have gotten so severe that some carriers have pulled their coverage for the state completely. Non-admitted carriers, however, can provide flexibility around regulated rates. The losses from catastrophe events ripple through insurers’ books, leading to rate increases even for asset owners who haven’t experienced losses directly.

It’s a vicious cycle. Renewable assets are a large part of the United Nations Climate Action Plan, and every industry stakeholder, including carriers, has a vested interest in ensuring these assets are built to last. So, renewable energy asset owner, here is what you can do to manage your risk profile:

• The cheapest time to implement resiliency is during the design phase of a project. Consult with your broker and carrier on location, equipment type and catastrophe protocols before assets go in the ground.

• Invest in high-quality equipment from reputable original equipment manufacturers (OEMs) and ensure that specifications are appropriate for the site’s specific catastrophe risks. For example, 3.2mm heat-tempered glass is becoming the best practice in hail-prone Texas.

• Implement robust risk management practices, such as stow programs for hail, wind, flood and snow, as well as hurricane preparedness plans and spare parts programs. Have a fire suppression system and thermal runaway management plan ready for your battery energy storage system (BESS) projects.

• Partner with experienced operations and management (O&M) providers that can offer precautionary services tailored to the site’s catastrophe exposures. Location matters; rats in Nebraska chewing wires pose a different risk than lizards slithering through transformer boxes in New Mexico. O&M providers have noted that vegetation mix heavy in seeds can attract more rodents to accumulate used underneath panels.

• Collaborate with brokers that specialise in renewable energy and can effectively communicate the nuances of catastrophe risk pricing to carriers. Not all carriers are made the same, and asset owners deserve an insurance price that is based on the true merits of their risk. By addressing climate risk with thoughtful equipment selection and strong risk management practices, asset owners can experience reduced insurance premiums and loss activity. When these factors are contemplated, sites can benefit from improved resiliency and reduced costs.

In the face of increasing natural catastrophe risks and rising insurance premiums, it has become abundantly clear that the renewable energy industry must adapt and evolve to ensure its long-term success. This is not to say that insurance is out of reach financially, but to explain that there are plenty of tools in the belt that can help owners reduce these costs.

Asset owners should take a proactive approach to risk management, not only to protect their investments, but also to contribute to the global fight against climate change. Insurance carriers and brokers can help by conducting their own research, collecting data and giving actionable feedback to the industry on designing, constructing and maintaining the best, most resilient renewable energy assets.

We cannot afford to let the vicious cycle of climate change and rising insurance costs hinder the deployment of renewable energy infrastructure. There’s an industry-wide incentive to share our knowledge and expertise, and to find innovative solutions that will allow us to build a more resilient and sustainable future.

Bobby McFadden is an underwriter at kWh Analytics, which manages a comprehensive database of renewable power assets in the US. Keaton Carlson is a risk manager at Renewable Guard, an insurance broker servicing the renewable power sector.

Big Interview: kWh Analytics’ Jason Kaminsky on managing risk amid extreme weather events

Full article available on PV Tech

Earlier this year, the Fighting Jays solar project in Texas was battered by “golf ball-sized” hail, an out-of-season weather event that cut into the project’s functionality, and drew attention to the risks associated with developing large-scale solar projects.

While weather damage itself is nothing new in the solar sector – the Fighting Jays incident rekindled questions about the risk of hail damage at solar projects – the widespread surprise at the extent and damage of the hailstorm suggests that this is a risk that has not been fully considered by the solar industry. As the Earth’s climate worsens, out-of-season weather events are more likely to take place, raising the prospect of a greater range of extreme weather incidents that will have to be considered by developers and financiers of solar projects.

Surveying the Risk Landscape of an Emerging Solar Sector

By: Bobby McFadden, kWh Analytics; Chris Bartle, Ciel & Terre; James Markos, Willis Towers Watson

Originally published by PV Tech Power

Solar power is expanding rapidly, accelerated by incentives like the U.S. Inflation Reduction Act. With land constraints near populated areas, clean energy growth is occurring in floating photovoltaics on bodies of water, also called FPV or floatovoltaics. This novel technology functions much the same way as traditional solar, but instead of installing racking in or on the ground, panels are set atop floating platforms, with tethers from the platform to the bottom and/or shoreline of lakes, reservoirs, or quarries.

Though, FPV today only make up around 2% of new global solar installations, the fleet is growing with projects coming online rapidly. While this emerging  technology presents exciting opportunities, it also brings new, previously unconsidered risks that insurers need to understand. 

Floatovoltaics could be an ingenious way to generate necessary clean energy while saving precious land space. Some advantages of FPV include:

• Makes Use of Unused Space: These projects are installed on non-recreational reservoirs, quarries, and ponds, utilizing areas that would otherwise be unused.

• Increased Solar Panel Efficiency: Positioning panels on water enables natural cooling that increases efficiency and output, especially during summer peak demand.

• Grid Connection Benefits: Co-locating projects with hydroelectric dams simplifies grid connections to export the solar power generated.

• Repurposing Contaminated Waters: Contaminated quarries and mining ponds can be repurposed for clean energy production.

• Water Conservation: Covering water surfaces with floatovoltaics reduces algae growth and evaporative water losses.

Image courtesy of Ciel & Terre International

However, floating solar has its challenges. The remote positioning of floating solar arrays in the middle of a water body can impact how a battery energy storage system might be utilized for additional revenue, depending on whether a DC or AC connection from the FPV is chosen. Current systems also do not employ trackers, whereby panels are tilted to the optimal production angle throughout the day. The nature of these systems requires specialty handling, equipment, and maintenance, which can be time-consuming and costly.  

Floatovoltaics, as an emerging technology, presents unique risks and opportunities that insurers, asset owners, and their brokers should fully comprehend. The unique benefits of repurposing non-recreational bodies of water also provide motivation. Beyond land constraints driving adoption, floating solar maximizes usage of available surface area to expand renewable energy generation potential compared to acreage-limited ground-mount developments. As further innovation addresses initial challenges, insurers can expect floatovoltaics' share of new solar installations to grow. 

Technology Overview & Project Development Considerations 

Fundamentally, floatovoltaics utilize similar photovoltaic panels, inverters, and other components as conventional ground or roof-mount solar installations. The differentiation arises in supporting these electrical assets over bodies of water instead of terrestrial real estate. This approach enables harnessing more surface area for solar resources without land constraints or clearing habitats. However, effectively designing equipment and infrastructure to withstand an aqueous environment also introduces unique engineering challenges.

Floatovoltaic systems comprise three primary elements - the floating platform, the electrical system, and anchoring/moorings. A common floating structure typically uses modular HDPE or composite plastic floats connected via polypropylene pins to assemble into a unified array. Strings of PV panels along with wiring, converters, and combiner boxes mount atop this buoyant platform, elevated safely above water. Underwater or floating Direct Current (DC) cables then transmit generated electricity to shoreside inverters and switchgear equipment, typically located near existing transmission infrastructure, or can be fastened to a floating equipment barge. If inverters are on floats near the arrays, an AC cable would then connect to the shore tie. The extensive anchoring and moorings keep this floating island securely fastened through waves, winds, and water level fluctuations. The system utilizes spreader bars (where the mooring line assemblies attach to the floating asset site, or ‘island’) adjustable chains, galvanized steel cabling, and elastic rope shock absorbers all corrosive-resistant and expertly tensioned. Site selection and system design confront additional considerations compared to traditional solar developments. Typically, water bodies are chosen based on technical limitations and functionality. Sites with limited recreational use, such as hydro dams, quarries, and reservoirs, make ideal placements for FPV. The water body itself must meet the following technical limits:

1. Max wave height: 1 meter

2. Max surface flow rate: 1 m/s

3. Lowest temperature: -40 F/C

4. Max ground snow load: 60 psf

5. Max water level variation achieved to date: 100 ft

Choice waterbodies limit sediment accumulation and depth changes while avoiding valuable recreational or commercial navigation routes. The bottom of the waterbody must be reachable in case maintenance activities or cleaning is required. The choice of site is extremely important: islands can be moved around on the water surface but are not intended to be removed or disassembled until decommissioning. If moving them, there needs to be secondary sets of anchors installed so the island(s) are always anchored.

The project development process for floating solar is the same as it would be for ground mount or rooftop with the following differences:

• Bathymetric surveys are utilized to map underwater bottom terrain to inform array placements and necessary cable slack. 

• Decisions occur on walkway access versus service boats for ongoing operations and maintenance needs. 

• Key design factors revolve around water conditions and weather resilience in the chosen location, and anchoring and float spacing adjustments are made accordingly with allowable wave heights and surface currents. 

Floatovoltaics are not immune to the effects of weather and natural catastrophes. As water levels periodically drop or seasonal ice thaws, low-sitting floating platforms that are properly moored can come to rest securely on exposed lakebed, as long as the tilt angle between floats does not exceed 15 degrees. These assets are not installed with trackers and do not typically have hail stow capability. To better protect from hail, enhanced tempered and thick glass is utilized. Integrated lightning rods and fire suppression equipment provide further safeguards.

Recent major global projects include the 8.9MW Canoe Brook installation in New Jersey. Meanwhile, Dezhou, China now hosts the world’s largest operational floatovoltaic site at over 320MW, exemplifying rapid adoption across Asia as the industry matures.

Risk Management & Loss Control

For covering unfamiliar technologies like floatovoltaics, clearly explaining the engineering basis and focusing on embedded risk mitigation strategies is key for securing insurer participation across critical property, equipment breakdown, and other coverage lines. Once a project receives the go-ahead, collaboration with clients is to outline potential equipment breakdown (PEB) risks is an important step to address how project risks were addressed from the design phase through the operational life of the asset. This collaborative communication ensures all stakeholders understand preventative preparations enabling performance.

Since there is no generally accepted engineering standards or guidelines specifically for  designing FPV, one should look at what current standards are utilized by the supplier, how they were applied specifically considering site requirements, followed by a review of how third-party certifications confirming the system will perform and survive for the expected life of the project. Examples of some standards references or guidelines that might be useful to review when pursuing a floating solar project includes:

• Bureau Veritas’ NI 605 DT R00, which was developed for use with foundations and anchoring of offshore structures.

• DNV-GL has developed a Recommended Practice, DNVGL-RP-0584, for the design, development and operation of floating photovoltaic systems

• World Bank’s Where Sun Meets Water, Floating Solar Handbook for Practitioners

• American Society of Civil Engineers (ASCE) design codes, while not pertaining to floating solar do provide guidance for structures to withstand wind, snow load, and similar conditions.

In preparing for a recent client’s initial floatovoltaic project, Willis Towers Watson’s renewable energy team held discussions with various insurers’ underwriters and risk engineers regarding their perspectives on this asset type. It became evident that floating PV was considered a new and unfamiliar solar application for most domestic insurance companies, especially at the utility-scales seen globally. Most US projects are below 10 MW, with some less than 1 MW, while Asia has commissioned over 300 MW in floating solar capacity.

Concurrent with the insurer dialogues, conversations also occurred with several floating solar system providers to understand their engineering, testing, and installation approaches. Perspectives were shared around the important role brokers and insurers play in supporting project developers to obtain appropriate insurance coverage and how system vendors can facilitate that process.

To further the understanding of floatovoltaic system risks, below is a review potential equipment breakdown exposures floating solar presents.

The mooring or anchoring system is the primary risk differentiator compared to conventional solar installations. The design and component materials must be tailored to characteristics unique to the site, including modeling conservative wind, wave, and flood assumptions when engineering mooring and anchor durability specifications. In-depth geotechnical studies help determine the optimal anchoring approach, whether submerged moorings, shoreline attachments, or a combination. Numerous techniques exist - such as deadweight anchors, driven screw piles, anchored perimeter pillars - each with merits and downsides. The flexible lines linking to these anchor points face exposures too, with options like steel wire cable, chains, and high-performance ropes to select appropriately. The modular floatation system warrants similar context-specific planning, with materials ranging from high density polyethylene to composites forming the bases that ultimately underpin the solar arrays. Hardware and connections must prove corrosion resistant while supporting loads. Even access walkways and equipment transport barges require deliberation to enable ongoing operations and maintenance. By tailoring these foundations to the conditions at hand, the resultant reliability fundamentally impacts overall system viability.

Image courtesy of Ciel & Terre International

The photovoltaic panels themselves resemble models utilized for ground-mounted installations, although tailored racking, mounting, and support hardware attaches instead to the floating platforms. Those component materials must withstand corrosion from the surrounding environment, with options including marine-grade aluminum, stainless steel, coated carbon steel, fiberglass reinforced plastics, polypropylene, and HDPE. Trackers and hail stow capability are generally not an option with this system type, which introduces some increased weather vulnerability. However, FPV is generally constructed in areas with low hail risk. 

The electronic components resemble standard ground-mount solar but warrant customizations for aquatic conditions. Inverters, transformers, junction boxes, combiners, monitoring systems, and most wiring use comparable components, albeit with specialized enclosures and connectors. Central inverter stations and transformers can float on equipment barges, and string inverters can be placed on the array. Particular considerations apply for routing cables - options include cable trays suspended above water or underwater marine-grade cables. While the layout mimics land-based equipment, the nuances of transmitting electricity from floating generation assets to distant interconnections require thoughtful adaptations without compromising safety or production.

Risk Considerations

Natural catastrophes pose immense threats to floatovoltaics that proper siting and engineering design strives to withstand. Detailed hazard models determine expected peak wind, precipitation, seismic activity, and flood levels that establish structural specifications. Still, failures leading to detached arrays or connecting cable breaks trigger revenue and equipment loss potentials. Innovation continues to protect this asset class: anchoring improvements continue to better adapt to rising waters, while ongoing surge suppression advances seek to limit lightning-sparked fire risks. Working with insurers as the technology continues to evolve will help create customized terms for this asset class. 

Ongoing operations and maintenance proves equally vital for preserving floatovoltaic functionality, albeit aquatic conditions introduce complications. Technician access usually necessitates boats or floating bridges, adding costs and weather-dependent delays. The lack of trackers avoids some moving part repairs but static positioning increases weather exposure. Reliable performance necessitates remote monitoring enables rapid diagnostics and response coordination for identified faults. Insurers can further aid resilience by requiring ample replacement component stocks and technician training programs.

General corrosion and erosion risks also multiply with FPV, necessitating durable materials selections and coatings. Pre-deployment water analysis determines precise chemical properties to model deterioration rates over decades and specify appropriate panel compounds and protective sealants. Ultraviolet radiation steadily degrades plastics, cabling jackets, and rubber without proper additive shields. Regular cleaning and scheduled underwater surveys can help confirm minimal accretion or insulation damage. Insurers complement via policy terms stipulating these inspection, testing, and replacement frequencies contractually. 

Insuring Floatovoltaics

New and rapidly evolving technologies are still niche in the PV industry, and dealing with the associated emerging risks has become an accepted cost of progress. This has proven to be quite challenging for the insurance industry, however, especially in predicting the loss profiles of new technology which has not had substantial time in the field. With any asset, the carrier’s mandate is to understand the losses that should be expected in a given year, and what losses are in extreme events, such as 1 in 500-year flood or fire events. This presents challenges, especially in the use of natural catastrophe, or ‘nat cat’ modeling software, which only support modeling of certain types of constructions, and are slow to incorporate new technologies. Without historical loss data and predictions from modeling, insurers have to get creative in the way they think about these emerging risks. The brightest and forward-thinking insurers turn to existing research, and sometimesconduct their own. 

Battery Energy Storage Systems, or BESS, serve as a great example of how carriers get their arms around cutting-edge continuously evolving technology. Diligent underwriters have worked with the industry and modeled data to understand what factors lead to thermal runaway events and how certain chemistries are more prone to thermal events than others. As another example,  hail stow trackers were introduced to the industry as a hail risk mitigator. Considering this resilience effort in underwriting included calculating the kinetic energy reduction due to the tilt angle of the panel when hail strikes, taking this into account along with lab testing results on different modules’ glass thicknesses. Each new type of technology requires new methods to evaluate the risk, which can be used in conjunction with any loss data available. 

kWh Analytics employs data scientists, some with engineering and physical science backgrounds, to work with underwriters to consider all the data and evidence as a whole when writing these risks. This method is applied to floatovoltaics as well, in understanding the effects of natural catastrophes on these systems, extrapolating loss data from other parts of the world to apply to US assets, and determining maintenance, replacement, and business interruption costs. 

Insurance policies for floatovoltaics projects diverge in critical ways from standard solar development coverage given the distinctive nature of these water surface based systems. As an emerging technology, inadequate historical data on damage frequency and claims experience further complicates reliable risk assessment. Insurers must collaborate closely with developers and equipment manufacturers to institute loss control stipulations and craft policy terms that balance premiums with adequate protections.

The effect of major natural catastrophes on these systems is an important consideration in underwriting floatovoltaics. From the anchoring and moorings securing arrays on the water surface to the transmission cables underneath, insurers must evaluate a range of site-specific perils. 

Flood: The anchoring and mooring systems are designed to adjust to varying water levels, providing resiliency against flood damage. This enables more favorable flood coverage compared to ground-mount solar sites. The anchorings also account for lateral wind and water flow forces.

Earthquake: The anchoring system's capacity to handle changes in water levels also provides secondary protection against lateral seismic activity and horizontal loads. This resiliency can allow for enhanced earthquake policy terms.

Hail: Most floatovoltaic installations utilize fixed-tilt racking, which leaves arrays more exposed to hail strikes since stow capabilities are not available. Hail coverage may need to account for this increased vulnerability.

Fire: Accessing floating arrays far from shore poses challenges for fire response, containing outbreaks, and controlling spread across water. Some sites employ a bridge to the island, allowing for easier access. Insurers may limit fire coverage or impose specific loss control measures to mitigate this risk.

Insurers can also reference other marine projects when evaluating floatovoltaics since certain characteristics overlap. This includes assessing resilience measures for floating platforms and docks, elevation tolerances for electrical components, and specialized considerations for fire protection and O&M services. As the floatovoltaics insurance market matures in step with broader industry growth, compiling data around actual losses will clarify how these assets perform through extreme weather and lifecycles. This will enable fine-tuning underwriting guidelines as challenges are conquered but new vulnerabilities also inevitably emerge with any pioneering technology.

As an emerging technology, education around the intricacies of floatovoltaics is imperative for insurance brokers and underwriters new to this sector. With rapid global growth projected in floating solar installations, gaining understanding now prepares stakeholders for the wave of new projects seeking insurance policies customized to their distinctive needs.

Proactively engaging with asset owners and manufacturers allows brokers and carriers to best advise clients on properly structuring risk management programs. For carriers, understanding the nuances enables appropriate policy terms, conditions, and pricing that matches the risk profile. While risk mitigation measures around priority perils continue maturing, the diligence today will allow insurers to incorporate best practices.

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CASE STUDY: CLAIMS SCENARIO

While advances continue improving durability against damage, floatovoltaics still present unique claims scenarios. Defective anchoring systems make arrays susceptible to panel detachments from high winds or large waves. Usually occurring during storms, they can also fail gradually over time from undiagnosed flaws and unnoticed corrosion. kWh Analytics currently insures a floating solar project utilizing high-quality equipment from industry leader Ciel & Terre. The anchoring system specs were reviewed to gain comfort over the system’s resilience to wind load and changes in water level. Site-specific considerations were also made for the anchoring and mooring system implementation. The anchoring utilizes galvanized steel shackles, cables, chains and stabilizers to prevent corrosion and account for water level changes.

Another vulnerable period is maintenance activities when accessing equipment on the water, which exposes technicians and parts to greater environmental hazards. Even theft, vandalism, or negligence, also known as attritional risks, increases during construction before safeguards are fully implemented. Other scenarios like snow load accumulations stressing structural integrity or cabling destruction from extended UV radiation exposure underscore the importance of insurance protection. The kWh insured site includes a floating bridge for routine maintenance access to the floating-ballasted array and supported PV equipment.

Overall, the insured’s robust design and installation, coupled with the manufacturer's expertise, provided strong resiliency measures that enable comprehensive underwriting analysis. Insuring this risk is an opportunity to cover best-in-class emerging technology and support the future growth of floatovoltaics.

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Floatovoltaics represent an exceptionally promising market expansion opportunity for solar energy. By siting photovoltaic systems on non-usable bodies of water rather than premium real estate, this technology can unlock additional renewable generation capacity critically needed for sustainability targets, often close to where the electrical demand is needed. Though floatovoltaics only make up a small portion of today’s renewable energy fleet, rapid cost improvements coupled with supportive government incentives position this sector for immense growth in suitable regions worldwide.

Yet as an emerging field still maturing, risks remain that may deter uptake if not adequately addressed. Insurers play a vital role not just in comprehensively evaluating floatovoltaic vulnerabilities, but also collaborating closely with developers to promote safety and resilience through loss control stipulations. Leveraging data science, engineering expertise, and lessons from analogous assets enables shaping prudent underwriting guidance during this formative market phase. Adoption of best practices will allow progressive improvement of insurance terms as statistical credibility accumulates over time.

The long-term outlook remains bright for floatovoltaics contributing materially to de-carbonization. However, maintaining sustainable expansion requires asset owners, brokers, and carriers to collaborate on the growth of this technology frontier. The efforts undertaken today to understand the intricacies of floatovoltaics will establish foundations for successfully scaling this innovative solar domain, unlocking its immense potential to combat climate change.

kWh Analytics Raises Property Insurance and BESS Capacity for Renewable Energy Projects with Leading Carrier Aspen Insurance

Capacity supports renewable energy growth to fight climate change

San Francisco, CA, [DATE] - kWh Analytics, Inc., the industry leader in climate insurance, announced today a significant increase in its capacity agreement with Aspen Insurance (“Aspen”) to support its property insurance offering for renewable energy projects. With this increase, kWh Analytics is able to underwrite up to USD$75 million per renewable energy project location and has full delegated authority to cover accounts compromising up to 100% of operational solar and/or battery energy storage systems (BESS) projects and up to 50% of wind and/or construction accounts.

kWh Analytics’ capacity increase comes one year after the company partnered with Aspen to launch property insurance underwriting and capacity for renewable energy assets in January 2023. In addition to this increase, kWh Analytics and Aspen now have four of the top ten global (re)insurance partners on their panel.

Jason Kaminsky, CEO at kWh Analytics, said: “This capacity raise is a strong indicator of confidence in our company’s data and sophisticated modeling capabilities and the industry’s desire to encourage resilient renewable assets. Adding capacity enables us to expand coverage options for responsible asset owners, supporting renewable energy growth amidst worsening natural disasters by incentivizing resilience and bridging the protection gap.”

Josh Jennings, SVP and Head of Inland Marine at Aspen Insurance, said: "kWh Analytics' data-driven approach is consistent with Aspen’s future-focused underwriting strategy, and we’re delighted to continue our collaboration to meet our clients’ evolving needs with innovative renewables solutions. This increased capacity provides additional options for asset owners who are proactively designing, building and maintaining resilient assets, and it further strengthens our commitment with kWh Analytics to offer solutions for the growing demands of the renewable energy market.”

Recent years have seen reduced limits and substantial cost increases for renewable asset owners, amidst a growing need for new solutions to manage and underwrite risk. kWh Analytics uses its proprietary database of over 300,000 renewable energy assets to accurately price and underwrite unique risk transfer products, as well as reward asset owners for resiliency measures. This year, kWh Analytics launched a microcracking endorsement for solar assets that simplifies the insurance claims process for this common but difficult-to-assess form of solar module damage.

In addition to its insurance products, kWh Analytics is leveraging data to encourage resilient design practices and to identify the most common failure modes among existing solar PV projects. The findings, which are incorporated in property insurance underwriting, are distributed to the company’s clients and broadly to manufacturers, operators, carrier partners and investors to reinforce the further development of sustainable renewable energy projects.

ABOUT KWH ANALYTICS

kWh Analytics is a leading provider of Climate Insurance for zero carbon assets. Utilizing their proprietary database of over 300,000 operating renewable energy assets, kWh Analytics uses real-world project performance data and decades of expertise to underwrite unique risk transfer products on behalf of insurance partners. kWh Analytics has recently been recognized on FinTech Global’s ESGFinTech100 list for their data and climate insurance innovations. Property Insurance offers comprehensive coverage against physical loss, with unique recognition and consideration for site-level resiliency practices, and the Solar Revenue Put production insurance protects against downside risk and unlocks preferred financing terms. These offerings, which have insured over $23 billion of assets to date, aim to further kWh Analytics’ mission to provide best-in-class Insurance for our Climate. To learn more, please visit https://www.kwhanalytics.com/, connect with us on LinkedIn, and follow us on Twitter.

About Aspen Insurance Holdings Limited 

Aspen provides insurance and reinsurance coverage to clients in various domestic and global markets through wholly-owned operating subsidiaries in Bermuda, the United States and the United Kingdom, as well as its branch operations in Canada, Singapore and Switzerland. For the year ended December 31, 2023, Aspen reported $15.2 billion in total assets, $7.8 billion in gross loss reserves, $2.9 billion in total shareholders’ equity and $4.0 billion in gross written premiums. Aspen's operating subsidiaries have been assigned a rating of “A-” by Standard & Poor’s Financial Services LLC and an “A” (“Excellent”) by A.M. Best Company Inc. For more information about Aspen, please visit www.aspen.co.

Media Contact

Nikky Venkataraman

Senior Marketing Manager

kWh Analytics

E | nikky.venkataraman@kwhanalytics.com

T | (720) 588-9361

Power Players: Right Sizing Solar Risk with Jason Kaminsky

In Episode 16 of Power Players by Origis®, host Michael Eyman discusses the history and future

trends of risk assessment and allocation for solar assets with Jason Kaminsky, co-founder and CEO of

kWh Analytics.

During their conversation, Kaminsky and Eyman discussed right sizing risk allocation. Three key

takeaways:

1. Risk for solar assets is being spread to more parties. It’s no longer just origination bankers

and developers, but also insurance companies, O&M operators and tax equity buyers.

2. Historically, solar projects have needed protection from physical damage and

underperformance, leading to financial losses. New provisions in the IRA create a blending

of these risks that have buyers demanding better models for production forecasts.

3. More data on weather risk mitigation and asset production are improving those forecast

models and creating an overall more reliable and resilient solar asset.

Cracking Open the Underwriting Vault: Insights into Renewable Nat Cat Resiliency

When disasters strike, is your solar site resilient enough to survive?

Data scientists and underwriters don’t often go on the record to talk about how they approach writing property risks. We believe so strongly in our methods that we’re taking a different approach. Data scientists Nicole Thompson, Veronica Anderson, and Charity Sotero recently consolidated their insights into this no-holds-barred video on actionable resiliency efforts. These are the very natural catastrophe mitigation measures that our data scientists and underwriters look for in every submission.

By analyzing past loss data and applied learnings, we help incentivize resiliency in every submission that we see. Learn what considerations across equipment, layout, and operations can boost preparedness and help your investment weather the worst scenarios. Crucial watch for solar developers and owners seeking to create disaster-ready renewable energy systems.

The perfect storm: Why solar insurers are tightening business interruption and equipment breakdown terms

Originally published on PV Tech
By Bobby McFadden, kWh Analytics, and Matt Shively, Brown & Brown


The renewable energy industry is facing a perfect storm of factors leading to tighter business interruption (BI) and equipment breakdown insurance terms. Supply chain disruptions and lagging equipment lead times have increased the tail risk of losses and exposures for insurers.

As a result, waiting periods before BI coverage applies are being increased from 15 days to anywhere between 45-90 days. Insurers are also scrutinising indemnity limits and revenue cycle assumptions. Indemnity periods are commonly limited to 12 months and in addition to insurer scrutiny, that limit is no longer sufficient given lead times for certain pieces of equipment.

Lengthy equipment lead times are exacerbating BI exposures, and carriers are becoming wary as a result. Essential solar equipment, such as transformers, inverters, panels and other electrical equipment, often have lead times of a year or more. Insurers are finding that BI losses comprise a larger percentage of the overall claim amount, and in some cases significantly exceed the physical damage portion of the claim. Insurance carriers are rightly concerned about their total potential exposure with BI losses accumulating for months while customers wait for equipment.

The situation is further exacerbated by the fact that even with a relatively small loss, the challenges of recovering to original operations are much greater.

Product instability

During a loss event, asset owners must consider a number of factors, beginning with modules. With the rapid development of worldwide solar, most manufacturers are back-ordered one to two years. Panels coming off the manufacturer’s line today are often not the same panels from five years ago, or even last year. Equipment manufacturers are offering new products to achieve higher generation output, which often have different electrical characteristics and differences in the physical footprint of the module.

The instability in product availability makes the true risk of a time element coverage substantially more volatile. Secondary panel markets are available but are difficult to navigate, not only in finding panels but also in the logistics of receiving supply.

Meanwhile, for racking, variations of panels often require new fasteners and may have mismatched loads on trackers and dampeners. Different panel size or format may require different panel spacing to prevent backshading. Often, damaged panels are not isolated to specific racks or strings, which requires a redistribution of undamaged panels. A change in panel size may also affect the racking’s wind load rating and coefficient of turbulence intensity.

An asset owner should be cognisant that decisions made when reducing a BI claim may directly impact their projects’ vulnerability to hazards. When done well, this will reduce the BI loss and improve the overall property damage risk to the asset.

Older solar systems utilise 600V or 1,000V architectures, raising questions about the availability of inverters and control stations, while more modern solar projects utilise 1,500V equipment. Higher voltage modules will typically require modern inverters. Having multiple inverters on site will require additional integration into transformers and control equipment.

Variations in hardware maintenance schedules and procedures include variations in monitoring and cleaning, which can affect operations and maintenance (O&M). This variation complicates the O&M service requirements. Spare part inventories may require a diversity of equipment not originally contemplated, all to be maintained and catalogued, and may present a new line of technical information letters and memoranda to monitor.

Finally, most operators do not have staff on hand with the knowledge of the most efficient reengineering options, nor the skilled and licensed team to implement the final replacement of reconfigured hardware. This work is more difficult than simply designing a new site as it must consider integration and loss cleanup. Similar to the major aforementioned parts of a solar project, the higher levels of engineering required for some replacement contracts are also in high demand and low supply.

As a result, those with claims need to review the increased cost for expediency with coverage extensions offered under their policies and contrast those costs with the indemnity basis of their BI coverage.

New policy directions

Insurers are also re-conceptualising how BI has been calculated on their policy forms. Some insurers’ policy forms apply the waiting period as a deductible which reduces the recoverable portion of the period of indemnity by that much, as the period of indemnity starts on the date of loss. In the case of a 90-day waiting period, there may only be nine months of indemnity instead of the 12 insureds may expect.

Although that may not be the intent of the underwriter, some claims have been adjusted on that basis. Seasonality of generation output also needs to be considered. Revenues for a project in the US during six weeks of the summer months may make up more than half the project’s annual revenues.

While there are some insurance solutions, such as the Solar Revenue Put, to protect against revenue fluctuations due to weather, traditional indemnity calculations use a monthly average throughout the year. Consequently, the annual monthly average may underestimate actual losses sustained.

Scheduled monthly indemnity limits with escalation clauses may help mitigate the underestimation but may not be available from every insurer and certainly require changes in structure and/or content in a statement of values, such as BI Values, which need to be provided broken down by month.

Insureds can take proactive steps to minimise these time element disruptions and reassure insurers through resilience and contingency planning. Having a repowering plan in place for older equipment and lining up alternative suppliers or parts for critical equipment is essential to reducing lead times. The more proactive planning and preparation done, the shorter the waiting periods insurers may allow. The key to managing BI risk in this environment is through resiliency in effort and design, and documenting proper contingency plans.

The importance of BI within property policies is only going to increase with the emergence of projects electing for the Production Tax Credit. As a result, BI limits are forecasted to increase significantly, putting relatively more exposure on operating risk for the carriers.

The renewable energy insurance market continues to tighten, and those who are reading this have probably felt those adverse effects. Working closely with brokers, risk management consultants, engineers, loss adjusters and carriers, insureds can develop plans to reduce supply chain vulnerabilities. It is increasingly relevant in disruptive times to operate proactively and cultivate transparent relationships with all parties whose interests are aligned with the same risk.

Bobby McFadden is an underwriter at kWh Analytics. Before joining kWh Analytics, he worked at Chubb for eight years in the commercial marine division, writing multi-line middle market risks throughout the United States. Prior to Chubb, Bobby worked at PwC for two years in audit services, earning his CPA licence. Bobby holds a B.S. & M.S. in accounting from Penn State University.

Matt Shively is an account manager with Brown & Brown’s Global Energy and Climate Tech Practice (formerly known as Beecher Carlson Insurance Services Global Energy Practice). Matt entered the renewables energy space in 2017 soon after receiving his bachelor’s degree in advanced chemistry from Oregon State University. He uses his scientific education and six years of experience to apply a unique attention to detail to how the renewables industry identifies, quantifies, mitigates, transfers and finances risk.

Powering Progress: Navigating the Challenges of Renewable Energy Insurance

Jason Kaminsky, CEO, kWh Analytics

I recently had the opportunity to participate in an Insurance 101 Webinar hosted by Solarplaza, with co-panelists Lindsey Chang of Marsh, and Jaime Carlson of SB Energy. Insurance continues to be an enigma in the renewable energy industry, albeit an increasingly important one. We wanted to provide some global context for understanding the space and the pivotal role insurance can play in financing and protecting your assets. 

The value chain of insurance typically flows from the client or sponsor, like SB Energy, through brokers, like Marsh, and then finally to the insurance carrier. You can also have managing general agents who help carriers understand and underwrite risk, and that is where kWh Analytics falls. Renewable Energy insurance is impacted by the entire (re)insurance ecosystem; it typically sits within a carrier’s Energy/Inland Marine book, which is within a Property insurance book. The carrier then buys reinsurance across multiple lines of business, which is essentially insurance that insurance companies purchase. Reinsurance typically renews on January 1, and this year’s renewals proved to be especially difficult. If you’ve followed the news, you’ll know that there were significant natural catastrophe losses in the past year. Reinsurance rates have shot up across many insurance types, particularly for natural catastrophe coverage, and the end clients and sponsors are feeling the effects in all lines of business, including renewables.

Since renewable energy is still a newer asset class, there are few underwriters and agencies with the expertise and specialization to truly understand the nuances and risks associated with solar panels, wind turbines, and storage. Believe it or not, some underwriters are still using the ‘tin roof’ model for solar, underwriting these assets as if they were a tin-roofed storage shed. There are a few criteria that underwriters should be looking at when assessing a project: 

• attritional risks, such as the chance of inverter failure, vandalism, etc 

• natural catastrophe risks like wind, hurricane, earthquake, fire, and flood. 

Natural catastrophe risks receive a lot of attention, and for good reason - such events have tripled in frequency in the past 50 years. These shocks to the system have caused the industry, and carriers in particular, significant concern when managing renewable energy. Major hail and hurricane events have resulted in outsized losses in carriers’ books, which are now passed onto end customers through higher premiums and tighter terms and conditions. 

The good news is that there is a lot of innovation in renewable energy, particularly around data and resiliency. With more and better data entering the space, modeling and pricing have become more accurate. At kWh Analytics, we utilize the largest database in renewable energy operating assets to understand weather predictions, the frequency of natural catastrophe events, and the actual outcomes for the assets. Today, we’re having conversations about correct hail stow angles and vegetation management, topics that were not nearly as active even 5 years ago. 

Pre-2019, insurance was abundant and asset owners could receive as much as they asked for. Between 2019 and 2022, outsized natural catastrophe losses catalyzed changing insurance terms, driving up premiums and driving down capacity, creating a difficult environment for insureds. Looking ahead, the key will be continued innovation and the further adoption of resilient practices. Sponsors can control some of their risk by diversifying their portfolio geographically, and ensuring that adequate operations and management protocols are in place for their sites. Insurance has become a crucial part of the development process and it’s important to understand it in a global context. Working with knowledgeable, specialized, and data-driven carriers will help unlock this lucrative form of capital for the renewable energy industry.

Thank you to Solarplaza for the opportunity to discuss renewable energy insurance on their platform. Check out the webinar here. Join us at Solarplaza Summit Asset Management North America this April in San Diego for further discussions on solar underproduction, mitigating natcat risks, and the future of solar insurance.

Sincerely,

Jason Kaminsky, CEO

kWh Analytics

Powering Progress: Launching Property Insurance

Jason Kaminsky, CEO, kWh Analytics

kWh has exciting news to share. This week we are introducing property insurance for renewable energy projects, backed by capacity partner Aspen Insurance. This new product plays a vital role in the company’s mission to power the growth of the clean energy industry - an industry critical to reducing greenhouse gas emissions and ultimately fighting climate change. 

Having worked in environmental finance prior to joining kWh, I witnessed first hand the struggles this rapidly growing industry faced securing capital to develop and maintain assets, and recognized the critical role insurance plays in the shift to a decarbonized economy. Although I didn’t go into my career thinking I would end up in insurance, insurance solves problems, and this is why we transformed kWh from a data company into an insurance provider. I’m honored to be a part of a highly experienced team of former renewable energy asset owners, bankers, equipment designers, underwriters, and program managers at kWh, all deeply committed to making a change - a team that knows renewable energy assets better than anyone and holds deep relationships with market actors across the value chain.

I was recently asked if our company is an insurtech. After braving the floor of Insurtech Connect in Las Vegas this year, I can confidently say “yes.” We are using data to improve underwriting and solve big problems. As the custodians of the largest proprietary database of solar asset performance, kWh analyzes loss data from $50B of exposed assets to provide insights into risk management and selection. This database allows us to take a novel approach to pricing, managing, and ultimately mitigating the new risks. 

However, we are not “new” – we’ve been at this for ten years. Our first product, the Solar Revenue Put, now insures over $4 billion in projects. Our new property offering is a natural extension of this platform. Using our database to bring new sophistication to the assessment of property risk and exposures for renewable assets, our property insurance introduces much-needed capacity to a rapidly growing industry at a time when traditional carriers are pulling back.

I am grateful and humbled to work with an experienced, mission-driven team at the forefront of innovation in an emerging industry. And I remain firm in my commitment to uphold the company’s mission to fight climate change through underwriting products that enable the financing of renewable assets. 

Sincerely, 

Jason Kaminsky, CEO

kWh Analytics 

Renewable Energy Premiums on the Rise: kWh Analytics Partners with Aspen Insurance to Launch Property Insurance

Utilizing its proprietary database of over 300,000 renewable energy assets. kWh Analytics’ new solution to underwriting risk offers much needed capacity to meet the rapid growth of generating facilities

San Francisco, CA, January 24, 2023 – kWh Analytics, the industry leader in Climate Insurance, announced today the launch of their highly anticipated Property Insurance for renewable energy assets with capacity partner Aspen Insurance. This new product, which provides coverage against physical damage for solar and other renewable projects, introduces much-needed capacity to a rapidly growing industry at a time when traditional carriers are tightening their portfolio exposure.

Recent years have seen reduced limits and substantial cost increases for asset owners, with a need for new solutions to managing and underwriting risk. kWh Analytics Property Insurance brings new sophistication to the assessment of property risk and exposures for renewable assets, utilizing kWh Analytics' proprietary database of over 300,000 renewable energy assets. 

“The shift to a decarbonized economy is the largest macroeconomic revolution of our generation, and insurance will play a critical role in securing its future. Recognizing that this transformation requires a new approach to pricing, managing, and ultimately mitigating the new risks of the clean energy asset class, kWh Analytics is committed to underwriting products that enable the financing of renewable assets,” said Jason Kaminsky, CEO of kWh Analytics. “Our new property product is a natural extension of our platform, and we are pleased to partner with Aspen to bring it to market as we continue to utilize our data to accurately price risk transfer products.” 

“Aspen partners with only the highest quality program managers that can offer competitive products to our client base,” commented Josh Jennings, Head of Inland Marine and Property Programs at Aspen Insurance. “We are proud to expand our offerings for renewable energy clients in support of the energy transition by partnering with kWh Analytics and their data-driven underwriting capabilities. Renewable energy is a growing segment complementary to our existing property insurance offerings.”

In addition to its insurance products, kWh Analytics is leveraging data to encourage resilient design practices. By evaluating historical operating data, the company is able to identify the most common failure modes among existing solar PV projects. The findings, which are incorporated in the Property Insurance underwriting, will be distributed to the company’s clients and broadly to manufacturers, operators, carrier partners, and investors to reinforce the further development of sustainable solar projects.

ABOUT Aspen Insurance Holdings Limited
Aspen provides reinsurance and insurance coverage to clients in various domestic and global markets through wholly-owned subsidiaries and offices in Australia, Bermuda, Canada, Singapore, Switzerland, the United Kingdom and the United States. For the year ended December 31, 2021, Aspen reported $13.8 billion in total assets, $7.6 billion in gross reserves, $2.8 billion in total shareholders’ equity and $3.9 billion in gross written premiums. Aspen's operating subsidiaries have been assigned a rating of “A” (“Excellent”) by A.M. Best Company Inc. and an “A-” (Strong) by Standard & Poor’s Financial Services LLC. For more information about Aspen, please visit www.aspen.co

ABOUT kWh Analytics
kWh Analytics is a leading provider of Climate Insurance for zero carbon assets. Utilizing their proprietary database of over 300,000 operating renewable energy assets, kWh Analytics uses real-world project performance data and decades of expertise to underwrite unique risk transfer products on behalf of insurance partners. kWh Analytics has recently been recognized on FinTech Global’s ESGFinTech100 list for their data and climate insurance innovations. The Solar Revenue Put production insurance protects against downside risk and unlocks preferred financing terms, and Property Insurance offers comprehensive coverage against physical loss. These offerings, which have insured over $4 billion of assets to date, aim to further kWh Analytics’ mission to provide best-in-class Insurance for our Climate. To learn more, please visit https://www.kwhanalytics.com/, connect with us on LinkedIn, and follow us on Twitter.

Media Contact
Nikky Venkataraman
Marketing Manager 
kWh Analytics
E | nikky.venkataraman@kwhanalytics.com
T | (720) 588-9361

Norton Rose Fulbright's Currents Episode 190: Climate Insurance and the Solar Industry

Originally posted in Norton Rose Fulbright’s Currents Podcast.

Jason Kaminsky, CEO of kWh Analytics, joins us to discuss the company’s $20M Series B fundraise and the emergence of climate insurance. We discuss what the fundraise means for the industry as a whole, why climate insurance hasn’t emerged yet and the challenges the insurance industry faces when insuring renewables, solutions he has seen on the insurance side, the partnerships that are happening in the industry, the improvement in modeling on the underwriting side and more.

kWh Analytics hires Property Insurance team

SAN FRANCISCO – kWh Analytics has expanded its team to establish an innovative property insurance product for renewable energy assets with the addition of two experienced insurance professionals. Issac McLean joins as the Head of Property and Darryl Harding joins as Senior Underwriter.

“As documented in our 2021 Solar Risk Assessment report, the renewable energy property insurance industry has significant room for growth in understanding and underwriting risks for this asset class. Our new team will allow kWh Analytics to offer a new, data-driven Property & Casualty (P&C) insurance line that underwrites risk using real data from over 30% of the US operating fleet, the world’s largest database of operating assets.” said Richard Matsui, Chief Executive Officer. “Isaac and Darryl will expand our capabilities to meet the needs of the solar community, while cementing kWh Analytics’ ability to achieve its goal of Insuring the Energy Transition”

Isaac McLean joined kWh Analytics from ICAT Managers, where he served as a Senior Product Manager. In this role, he led the development and launch of several successful insurance products and teams, including multiple P&C programs. Previous to ICAT Managers, Isaac worked at Safeco as a claims examiner and product analyst. Isaac brings over 18 years of experience in insurance, underwriting, sales, marketing, and product development. 

Darryl Harding joined kWh Analytics from Hartford Steam Boiler, a Munich Re company, where he served as a Senior Production Underwriter and supported the development of their Solar Property and Shortfall product lines. Prior to his role at Hartford Steam Boiler, he served as an underwriter for commercial lines at The Hartford. Darryl has over 10 years of experience underwriting insurance products and collaborating with brokers to find innovative solutions for insureds.  

For more information on the kWh Analytics team, visit https://www.kwhanalytics.com/.

Climate Change is Tightening Insurance Markets. That's No Good for the Solar Industry

Originally published on Greentech Media by Emma Foehringer Merchant.

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.

Solar, climate change and a hardening insurance market

Simply put, the insurance industry makes money by receiving more in premium payments than it has to pay out in claims. To do so, insurers analyze the risk associated with certain properties and price premiums accordingly. (While there are different types of solar insurance, this article focuses on property insurance, which protects projects from physical damage.)

Because the probability that something will go catastrophically — and expensively — awry is relatively slim for an entire portfolio of projects, insurers can generally make a profit by charging clients premiums and paying out a lower amount of money in claims.  

But in recent years, insurers haven’t seen the level of profits they’d like. So they’ve begun to charge higher premiums, a change in the industry that’s called a “hardening” market. Climate change is expected to sharpen that trend because damages will become more likely.

Within the group of insurers that underwrite solar projects, there’s also been a growing realization of the threats to such projects. Many experts cite the 2019 West Texas hail case as the impetus, but wildfires in California and natural disasters elsewhere have also raised concerns.  

“The view was, for solar specifically, ‘Oh, this stuff just [sits] there. What can really happen?” said Kane, who previously worked as an underwriter for renewable energy projects.

Now, insurers have a greater understanding of physical threats to renewables projects and are correcting for what Kane called “unsophisticated underwriting in the beginning.”

“Honestly, losses have caught up with us,” she said.

A hard market doesn’t usually last forever, but climate change — at least given the current policy environment — is not a problem that’s going away. And experts like Kane and Sam Jensen, a Stance co-founder, say costs aren’t likely to get much more affordable.  

“It’s safe to say, at least in our opinion, that those days are over,” said Jensen.

The current market has created numerous limitations for solar developers and financiers.

Natural-catastrophe-related sublimits (part of an insurance policy that defines coverage on certain types of losses) have shrunk, said Jordan Newman, a managing director at Wells Fargo that works on the bank’s tax equity investments for renewables. That means "the amount of coverage in dollars that you’re able to achieve has gotten lower and costs more,” he said. 

With lower sublimits, banks are seeing an uptick in the number of developers asking for waivers on insurance coverage. And since projects must re-insure each year, even in-service installations are navigating these challenges.

Banks are also giving more scrutiny to the track record of the developer and the location of the project. Financiers and insurers are wary of having too much exposure in one region, especially if it has known natural disaster potential, as almost every region of the United States now does.

Changing underwriting

Taken together, the limitations could impact where developers can site projects in order to guarantee adequate insurance and funding. The situation also calls for a re-evaluation of risk for investors and insurers, experts said.

Developers or an independent testing body will have to work to help insurers understand risk mitigation in solar, in part through better data analysis. Insurers currently pay more attention to location than technology choice.    

“Any new generation of technology is being insured assuming the history of that technology,” said Amy Schwab, a senior project leader at the National Renewable Energy Laboratory and the lead author on a December 2020 report on insuring PV. “It always takes a while for insurance rates to catch up.”

If building out clean energy is a political priority, the federal government may also need to act as “insurer of last resort,” as it does for some flood insurance, said Martin at Norton Rose Fulbright. 

The disastrous weather in Texas that cut electricity for millions in February is the most recent example of climate change’s potential to disrupt clean electricity. Though natural gas accounted for the majority of generation that went offline during the severe cold, Kane said many of Beecher Carlson’s renewables clients have reached out regarding business-interruption insurance. The event may add fuel to insurer concerns about underwriting renewables.

“Any large-scale weather event that reeks of climate change in that it’s unusual and that it’s severe will absolutely trickle its way into underwriting consideration,” she said.

Navigating those challenges will be essential for continued solar growth, a key aspect of the Biden administration's agenda on climate action.  

While climate impacts “are going to be felt across the entire economy,” said Kane, “it feels like a little bit of salt in the wound because the renewable industry is trying to help and getting dinged in the same way as industries that are not actually part of the solution.”

Soaring US solar insurance costs turn spotlight on site protection

Originally published on Reuters by Ed Pearcey. Edited by Robin Sayles.

More frequent extreme weather and surging insurance demand is creating a financial challenge for solar operators and putting pressure on durability and damage prevention.

US solar developers are bearing the brunt of climate change as more frequent extreme weather events hike insurance costs.

Hail storms, tornadoes and wildfires have pushed up insurance premiums for solar projects, impacted the scope of policies and reduced availability.

Property and casualty insurance premiums for solar plants have increased by as much as 400% over the last two years, kWh Analytics and Stance Renewable Risk Partners said in December.

“With so much of the solar construction taking place in natural catastrophe-exposed regions – Texas for example – the impact for the solar sector is particularly impactful,” Michael Kolodner, US Renewable Energy Practice Leader at Marsh insurance brokers, said.

The above-market corrections for solar are partly due to a "historical underpricing of the risk," Kolodner said. Projects in at-risk regions can face higher insurance costs and lower availability as underwriters limit their exposure, he said.

At the same time, the demand for solar insurance is soaring on a wave of construction that is set to last several years. Utility-scale PV installations are forecast to rise by almost 30% this year to 15.4 GW, the US Energy Information Administration (EIA) said, and similar build rates are expected in 2022 and 2023.

Texas is the fastest-growing solar market and will host 28% of new capacity this year, testing insurance carriers as they adapt to the new climate reality.

Texas trigger

A Texas hailstorm in 2019 highlighted the growing risks for solar operators and prompted insurance carriers to take action.

“We saw a $80 million hail loss in Texas in 2019, damaging 13,000 solar panels at a 160 MW solar farm, which really had a lot of underwriters and carriers taking notice,” Michael Cosgrave, a risk manager with Renewable Guard, a renewable energy insurance firm, said.

Insurance carriers started altering policies and now seldom offer more than $15 million of hail coverage, Cosgrave said.

"Up until that point they were providing full limit coverage," he said.

Carriers are also placing larger deductibles in solar policies and project owners may be required to set up reserves in an escrow account to fulfil investors' risk requirements, Cosgrave said.

“Historically, you would have seen a minimum $100,000 deductible, or 5% of the physical damage limit,” he said. “Over a few years, that grew to $250,000 and 5%, and I’ve seen $1,000,000 and 15% in Texas, which as far as I know is unprecedented.” A 100 MW solar project might have a physical damage limit of $95 million, he said.

Solar project costs are continuing to fall, increasing the importance of rising insurance costs. Back in 2010, insurance premiums made up around 25% of PV operating expenses (opex), according to the National Renewable Energy Laboratory (NREL). Recent data from the Lawrence Berkeley Lab indicates total opex has perhaps halved since then, partly due to longer operational lifespans. Proven performance of solar technology will have affected premiums but suppliers also continue to release new, higher efficiency products such as bifacial panels.

Industry action

Last year, Renewable Guard launched a "parametric" hail insurance policy that is triggered when an event exceeds agreed thresholds, such as hailstones larger than two inches in diameter.

Hail size is measured by an independent weather data provider using advanced 3D radar, an onsite hail station, and a series of algorithms.

The policy includes the supply of real-time weather monitoring to warn operators and allow them to stow the panels in a more protected vertical position, Cosgrave said.

However, hail can be difficult to predict and operators can face a trade-off between wind and hail damage when repositioning the modules.

Some manufactures have developed a passive wind-load mitigation system that automatically rotates modules to the safest position, locking the vulnerable modules in the full-tilt angle, Cosgrave said. Other design improvements include more robust tracking fasteners and framed modules to better distribute load during wind windy spells.

Many larger solar operators are already using advanced weather forecasting systems to mitigate solar intermittency. Cloud cameras and analytics are helping operators optimise downtime and reduce their exposure to swings in wholesale power prices.

Fire risk

Wildfires are also an "increasing” concern and insurers are tightening their policies accordingly, Cosgrave said.

Three solar plants in Rosamund and Bakersfield in California experienced significant wildfire claims during the 2020 wildfire season, Jason Kaminsky, Chief Operating Officer at kWh Analytics, said.

Insurers are adding wildfire deductibles to policies while also working with operators to reduce the physical risks, Cosgrave said.

“They’re looking into things such as clearing a project perimeter, the height of the brush and vegetation in and around a facility," he said.

Before an event, PV operators maintain vegetation to reduce the fuel available to the fire and detect and correct faults which could cause a fire, Andy Walker, Senior Research Fellow, Energy Systems at NREL, said.

Ahead of a storm, actions include securing loose items that could become windborne and ensuring stormwater channels are clear from debris, Walker said.

"Such preventative measures may be required of insurance policies or affect insurance premiums," he said.

Small print

Insurance carriers have also introduced restrictions or exclusions related to "microcracking" that may not be visible to the human eye, Kaminsky said.

Many underwriters now implement these regardless of geographic location and typically require owners to pay for microcrack inspections and testing, he said.

Testing techniques include electroluminescence, which can detect defects untraceable by other methods such as infrared imaging and thermal cameras.

Together, the tighter insurance terms create challenges for operators and developers, Kolodner warned.

Existing projects may find it more challenging to comply with historic investor commitments, while the tougher policies are also "complicating the solar energy industry’s ability to efficiently finance future projects," he said.

Extreme weather causes surge in solar power insurance costs

Full article available on Financial Times.

kWh Analytics was referenced in this article:

"Premiums for some US solar plant owners have soared as much as 400 per cent in the past two years, kWh Analytics and Stance Renewable Risk Partners of California wrote last week."