Mitigating Extreme Weather Risks
Since 2015, insured losses associated with extreme weather events are roughly twice the magnitude of those stemming from natural catastrophes.
No one understands the natural perils associated with solar deployments better than renewable energy insurance specialists such as GCube Insurance. According to the company’s 2021 market report, Hail or High Water: The Rising Scale of Extreme Weather and Natural Catastrophe Losses in Renewable Energy, weather-related insurance claims have grown in frequency and severity as solar projects have increased in numbers, size and geographic distribution.
Given the rapid growth of the solar market globally, a commensurate rise in solar insurance claims is not entirely unexpected. However, the root cause of solar insurance claims has surprised some insurance industry insiders. Specifically, losses associated with extreme weather events eclipse those stemming from natural catastrophes. Viewed as a learning opportunity, this breakdown of weather-related losses is enlightening.
Weather-related damages account for 25% of solar claims volume (frequency) but more than 80% of claims value (losses). [See Nextracker]
NATURAL CATASTROPHES VS. EXTREME WEATHER EVENTS
As a loss category, natural catastrophes are low-incidence, high-severity events, such as hurricanes and floods, that cause significant damage. Insurance policies often refer to these perils as “acts of God,” which speaks to the fact that reasonable care and foresight cannot prevent damages associated with these forces of nature.
In comparison to natural disasters, extreme weather events are higher-incidence, lower-severity events, such as unseasonal or unusually severe thunderstorms and hailstorms. Though extreme weather events result in more insured losses than natural catastrophes do, insurance claims associated with the extreme weather loss category are not inevitable or unavoidable.
Project stakeholders can prevent or mitigate many extreme weather losses by exercising reasonable care and foresight in product selection and system design. Moreover, risk mitigation specialists can help tax equity investors and insurance companies understand the financial risks associated with severe weather.
Examples of preventable extreme weather perils include wind, hail and snow. Based on claims frequency, high wind events are a leading cause of insured losses in fielded solar assets. Based on the severity of losses, a widely publicized hailstorm in West Texas damaged some 400,000 PV modules and resulted in the largest-ever solar insurance claim. Snow is a relatively lesser hazard overall but presents significant risks at specific elevations or latitudes.
Location-specific risk mitigation improves system reliability. [Nextracker]
COMPARATIVE TESTING
Strategic product selection is an essential first step for mitigating the leading causes of extreme weather losses. RETC’s bankability and beyond-certification testing results demonstrate how different PV module designs or combinations of modules and racking resist these different types of environmental stresses. These differences are critical in the context of extreme weather risk mitigation.
The goal of comparative testing is to empower project stakeholders to identify and specify the best products and system designs for specific applications and environments.
Modules that perform well under dynamic mechanical load testing are well suited for deployment in high-wind environments. Modules that perform well in RETC’s Hail Durability Test (HDT) sequence are well suited for deployment in hail-prone regions. Modules that perform well in mechanical load tests are best suited for resisting the loads associated with ice and snow.
Comparative testing differentiates products based on risk profile.
Modules that do not perform well in these two comparative tests are not “bad” products, especially in the proper application. Modules hardened against wind and hail often incur higher manufacturing costs. The conditions for an installation in California’s Central Valley—which rarely experiences high winds, hail or snow—may not justify these additional costs.
To mitigate supply chain risks, developers often evaluate and source a variety of PV module models and vendors. Extreme weather susceptibility will vary across a portfolio of PV modules. By paying attention to these differences, developers can direct wind-, hail- or snow-hardened modules respectively to wind-, hail- or snow-prone sites. This type of selective deployment is a relatively simple and cost-effective way to reduce extreme weather risks.
DEFENSIVE STOW STRATEGIES
After filtering and selectively deploying modules based on resistance to site-specific conditions, project stakeholders can implement weather-responsive software control strategies to reduce extreme weather risks further in large utility applications.
Many large-scale PV systems integrate intelligently controlled single-axis trackers that use software to follow the sun while avoiding self-shading. As weather-related insurance claims have increased, industry-leading tracker manufacturers have implemented novel software-control responses, such as threat-specific defensive stow or load shed modes.
“Leveraging existing and secure software control capabilities, Nextracker was able to implement unique defensive responses to hurricanes, hail, high winds, snow loading and flooding,” says Kent Whitfield, the company’s vice president for quality. “ On- or off-site plant operators can use NX Navigator to securely trigger defensive stow or load shed protocols. Once a user-initiated command is given, all trackers will move to the specified position in roughly one minute. The entire operation is failsafe thanks to our self-powered independent-row architecture.”
Due to the highly localized and fast-moving nature of high wind events and hailstorms, severe weather alerts often give plant operators little advance warning. Moreover, the types of storms that produce high winds and large hail often result in downed power lines and loss of ac power. Active software controls can address these challenges and provide effective risk mitigation with product features such as local or remote initiation, rapid response times and failsafe battery backup.
Intelligent software controls mitigate extreme weather risk. [See Nextracker]
It is also important to consider coincident weather risks. “Optimizing risk reduction for any one particular threat in a vacuum may not be the best choice,” warns Whitfield. “To do a proper risk analysis, we can’t think only about the probabilities of hail occurring by itself or wind occurring by itself. We also need to account for the probability of hail in conjunction with wind. Otherwise, we can inadvertently increase the risk of wind damage in the process of mitigating risks associated with hail.”
PROBABILISTIC RISK ASSESSMENT
Though the insurance industry has long relied on probabilistic risk assessments to provide coverage sustainably, the challenge posed by solar projects is twofold. First, limited historical data is available to understand extreme weather risks, especially considering the rate of technological change and market expansion. Second, the natural catastrophe data that insurers typically rely on do not capture “uncategorized” extreme weather events.
Risk mitigation specialists, such as VDE Americas, are overcoming these challenges by working with leading climate scientists to better quantify the types of local weather risks that bedevil solar project developers and insurers. These detailed probabilistic analyses can assess extreme weather risk on a highly granular locational basis. Moreover, they can account for variances associated with weather phenomena.
“Traditionally, people have thought about weather across relatively large areas, such as one degree by one degree, which is roughly 10,000 square kilometers,” says John Sedgwick, president of VDE Americas. “Because PV power plants are much smaller than that, you need to think about risk at a more local level. That local perspective is fundamental to our risk assessments.
“We also account for the fact that all hail is not the same,” Sedgwick continues. “Hail varies from one event to another in terms of its size, density and shape. Some hailstones are similar to solid ice; other hailstones contain more air and are less aerodynamic. Hail also varies within a single event in terms of hailstone size distribution. After accounting for these differences, we can begin to calculate the risks associated with hail strikes for a given utility-scale solar power plant.”
RETC’s beyond-certification testing data are fundamental to a multilayered probabilistic assessment of extreme weather risk. Testing data not only quantify how well a module design resists dynamic wind loads or ballistic hail strikes but also how effective software-controlled tracker stow strategies are at mitigating these natural perils.
Projects in Texas, the leading US market for solar, are at elevated risk of damage due to large-diameter hail. [See Nextracker]
“To analyze the financial impact of risk on the overall investment, we need to understand technical resiliency,” explains Sedgwick. “Coupling RETC’s measuring capabilities with our risk assessment tools, we’ve been able to quantify the value of mitigation approaches from a financial perspective.
“Selecting the right equipment and correctly operating it provides extreme value on a dollar basis,” Sedgwick concludes. “A PV system’s hail-resiliency characteristics make a huge difference to the probable maximum loss and average annual loss—and this risk profile drives insurance premiums. If the risk is lower, the insurance premiums should be better.”
For more information see:
RETC’s 2022 PV Module Index Report