Solar Insurance Costs Halve as Cheap Panels Quash Premium

The cost of insuring a solar plant has dropped by half since 2010 as cheaper photovoltaic panels lead to lower project costs and reduced premiums.

“Rates have significantly come down,” in mature markets including Germany, Spain and the U.K., said Jamie Fleming, a senior underwriter in London at GCube Insurance Services, which has insured 50,000 megawatts of clean-energy projects globally.

Claims for projects reveal few of the risks first feared such as module underperformance in hot climates, panel theft and defunct warranties from manufacturer bankruptcies, Fleming said. The price of crystalline silicon panels, most of a plant’s cost, fell 67 percent since 2010, data compiled by Bloomberg show.

The industry is benefiting as panel makers cut overcapacity and demand surges in China and Japan, where government policies drove the most installations last year. Deutsche Bank AG raised the industry’s growth outlook and Goldman Sachs Group Inc. last month called it “attractive.” The WilderHill New Energy index of renewable energy stocks rose 46 percent in the past year.

For insurers, the drop in premiums still leaves risks from the weather such as floods and lightning strikes, and in Italy the theft of copper cables, Fleming said. “The price of panels has dropped but that’s not where our key exposure is. The risk of weather, flood, theft is still there,” he said.

The market for insuring renewable-energy projects is set to triple to $2.8 billion of premiums by 2020 as developers who seek money from new sources try to lure institutional investors such as pension funds, said a report by Bloomberg New Energy Finance funded by Swiss Re AG, the second-largest reinsurer.