20 July 2022
The risks and rewards of rooftop solar?
Whether integrated into a new build or retrofitted to an existing, rooftop solar offers a range of potential rewards. But how do you ensure you bask in the benefits, and don’t get burnt to a crisp?
Rooftop solar: riding the renewable energy wave
Efforts to boost renewable energy have been high on governmental agendas around the world for several years now, part of efforts to limit global temperature rise and mitigate the impacts of climate change. Events in Ukraine have added fresh impetus to this clean energy drive: geopolitical fault lines in the globalized energy market have been exposed, resulting in soaring energy prices and rampant inflation.
Against this background, renewable energy enables the reshoring (and securing) of electricity supply chains, thereby reducing the exposure of domestic electricity markets to supply chain shocks. Within this, rooftop solar offers an attractive way forward. It does not require the construction of additional large-scale infrastructure, but can be integrated into both existing buildings and new-build construction projects. This makes it a viable option, even where space is at a premium, e.g., in densely-urbanized areas.
For businesses, rooftop solar offers opportunities to mitigate energy price rises in a volatile world. Bolstering ESG credential also brings reputational benefits among an increasingly eco-aware public. And there is a regulatory aspect too: real-estate investors, for example, may now find the granting of planning permission is linked to the inclusion of green measures such as rooftop solar. As a recent report from the UK Department of Business, Energy and Industrial Strategy succinctly puts up: ‘environmental considerations are [going] beyond “doing your bit” and [are] increasingly being seen as part of businesses’ license to operate in a net zero world.’
The risks of rooftop solar
Alongside these benefits, however, there are risks to rooftop solar that any property owner should consider from the earliest stages of a project to ensure adequate insurance cover is available. When it comes to retrofits, property owners and developers should also be aware that rooftop solar will change the risk profile of existing structures. Engaging early with the insurance implications thereof is critical if uninterrupted insurance cover is to be maintained. Particular risks include the following:
Fire risk: there is no escaping the fact the rooftop solar installations contribute to and increase a building’s fire load. Some of the factors at play include:
- Photovoltaic (PV) panels being inadvertently installed on combustible roofs.
- The ability of rooftop fires to spread quickly, placing the subject property and nearby buildings at risk.
- Extensive PV installation restricting firefighting measures.
Roof load: PV panels will increase the weight load on a roof. This increases the risk of roof collapse during extreme events, such as fire, when any roof collapse may also compromise internal fire retardation systems, as well as during weather events, e.g., heavy snowfall and sandstorms. In addition, PV panels can trap Autumn leaf fall, while lichen and moss may grow below panels (both of which may act as an ignition source and fuel source – contributing to the fire risk).
Access: PV panels can restrict safe access to the roof for servicing, maintenance and cleaning (of both panels and the roof itself), as well as for firefighting.
Electrical installation: in addition to the PV panels themselves, rooftop solar installations will include supporting electrics, e.g., cabling, connectors and/or junction boxes, and inverters, all of which come with their own risks, including fire and electrical shock.
Roof load: PV panels will increase the weight load on a roof. This increases the risk of roof collapse during extreme events, such as fire, when any roof collapse may also compromise internal fire retardation systems, as well as during weather events, e.g., heavy snowfall and sandstorms. In addition, PV panels can trap Autumn leaf fall, while lichen and moss may grow below panels (both of which may act as an ignition source and fuel source – contributing to the fire risk).
Installation and maintenance: Damage to the roof is also a risk during installation and maintenance of the PV panels. Insurers will want to understand the reputation of the installation company, e.g., whether they are part of any certification scheme, such as the Microgeneration Certification Scheme (MCS) in the UK. The panels themselves should also be manufactured to a recognized international standard, such as Underwriters Laboratory (UL), Factory Mutual (FM), VdS or TUV-SUD.
In addition, panel maintenance requirements should be understood and planned for (including access). This includes how often maintenance will take place and whether any thermographic surveys will be used to identify hotspots.
Estimated maximum loss: The addition of PV panels may affect the building’s estimated maximum loss value.
And what if the sun doesnt shine?
Another emerging risk of rooftop solar is associated with their inclusion in energy efficiency schemes, or when there are defined targets for generation and/or feed-in.
Although energy efficiency is acknowledged as a critical element in transitioning the built environment to a net zero future, funding for such schemes can be difficult to access, as banks cancautious about lending that is often secured against future cost savings. In countries where sunny weather is unreliable, there is a distinct risk that the actual amount of electricity generated will not meet forecasts; any schemes that incorporate PV panels as part of energy efficiency measures are therefore vulnerable to shortfalls in the savings achieved.
To support energy efficiency investment, insurers are now developing products that cover such risks, including material damage and breakdown of equipment, loss of revenue (e.g., income generated under an energy service contract or renewable energy incentives), and asset underperformance.
The addition of a battery storage system may also be considered to improve the overall utility (and therefore investability) of rooftop solar projects. But these also bring with them a range of associated considerations (increased fire load again being notable here) that raise a site’s risk profile.
The insurance perspective
Whilst this might feel like a long list of risks; the good news is that PV panels are not a brand-new technology, and insurers are familiar with the risks involved.
It is always a good idea to engage with your insurers early in any project, however. Underwriters will want to see that you too are familiar with the risks, and appropriate mitigation strategies have been incorporated in the plan. This will include, among other things, the commissioning of a structural survey, the inclusion of fire prevention/suppression systems, updates to health and safety risk assessments, and in the design of electrical systems (e.g., fire-rated compartments for PV panel inverters).
An experienced and specialist broker such as Gallagher, with its extensive knowledge of and connections in the real-estate insurance market, is an invaluable ally in this process, and can assist in obtaining adequate coverage, as efficiently and cost-effectively as possible.
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