Direct lightning strikes on solar installations (generators) are rare, but can be devastating without an external protection system. Similarly, indirect strikes that are much more common can lead to an electrical surge unless you’ve installed tiered surge protection.
For project developers, identifying lightning as a potential hazard to their installation is easy. Now, reducing the risk is simple as the answer to the problem is embedded into the actual construction of the system. But not all risks come as a flash of electricity in the sky or a thunderclap boom to grab your attention.
Project risks run the gamut from construction and environmental siting hazards to financial, market, political and regulatory concerns to operational and company issues to potential sabotage and theft. Addressing all of those risks can be challenging and time consuming. Rather than take a holistic approach to deal with these hazards and perils, some project developers take chances because they don’t understand how to quantify or mitigate those risks.
While all risks are not the same, some create much more uncertainty than others. For example, project developers looking to finance a deal now have to contend with the problem of consolidation in the solar manufacturing industry and the potential issue of some manufacturers’ warranties being unenforceable.
Many project developers, as is their right, will use the warranty every time it is applicable. But what if the manufacturer is no longer in business? What will happen to their project if the panels they purchased have defects or develop other performance issues under the defunct warranty? This very real risk threatens to reduce investment in the solar industry as the long-term viability of the projects are cast in doubt.
These days reducing risk through a warranty backstop is becoming more of a necessity than a luxury to protect project cash flows and provide security to lenders throughout the project’s lifespan. In response, the insurance industry is addressing this problem through innovative warranty solutions now available to market participants. Such solutions range from guaranteed coverage for a particular manufacturer’s panels over a set period of time while others provide protection for all warrantied components in a single project development. Assurant, for example, recently launched its own warranty backstop for commercial-sized project developments.
Other operational risks exist that can affect return on investment if energy production falls. When the output of a solar project installation drops precipitously, it may be easy to immediately find the source of energy loss and fix the problem. But what happens if the power drop doesn’t hit like a lightning strike? What happens if instead it is more like an energy drip – where slowly the project generates incrementally less and less power?
From a claims management standpoint, it is often easier to deal with the lightning strikes scenario. You can quickly locate the damage to solar installation. Figuring out where an energy drip comes from can by trickier. One reason for the difficulty is that not all solar projects are alike. Project designs vary depending on developer, location and literally where the sun shines. Consider that myriad interpretations exist of the codes and standards in place for solar project installations from state to state, county to county and inspector to inspector.
Developing consistent maintenance standards for these systems is critical to ensure consistent energy generation. Annual quality checks and performance tests are needed and real-time system monitoring should be required to guarantee optimal performance. Last year alone, solar electricity production facilities produced a total of 4,458 GWh according to NREL, 1 a national laboratory of the U.S. Department of Energy. That represents more than a 100 percent significant increase in capacity from 2010. With this remarkable growth in the solar capacity in recent years and the strong projected future growth, it will become even more important for national maintenance standards to emerge.
Of course, identifying minimum maintenance procedures for solar project systems that go beyond cleaning the solar panel arrays will take some due diligence. However, the benefits of such standards are clear. They could be used to ensure consistent quality maintenance service in the industry as well as improve productivity, increase efficiency and reduce life of project costs. Such standards also could have the further benefit of increasing investor confidence by further ensuring the long-term viability of solar projects.
David A. Schroeder is vice president of operations and industry relations for the solar industry at Assurant, Inc.
Jeanne Schwartz is vice president of new venture commercialization for Assurant, Inc.
Lead image: Lightning via Shutterstock