Rapid expansion of roof mounted PV systems in commercial facilities - How can they be insured?

Abstract

PV system components that are exposed to unmanageable strain can be overheated, which subsequently results in a fire ignition. Common failure factors are poor component quality, mechanical exposure due to natural phenomena and poor craftmanship. The underlying problem is that PV regulations are lacking in quality or are non-existent. The rapid expansion of roof mounted PV system installation on commercial facilities, therefore led to the question “How can they be insured?”. This question was answered by the support of three research questions: “What is known in the scientific literature and the insurance industry about PV component failures and installation errors over the last 10 years?”; “What challenges and gaps in regulations of PV components, systems and installations are found in the insurance industry and are they described in the scientific literature?”; “What changes in PV regulations and demands are expected to be seen in a near future?” The research methodology consisted of a scoping study of scientific literature and a primary data collection performed as interviews with insurance company representatives. Relevant answers were provided, such as common component failures and recommendations for future insurance policies. The conclusion was that the development of new regulations that can be applied to the whole insurance industry relies on improvement of aspects such as definitions, technical understanding, and safety proactiveness. The implementation of these factors would make it easier for insurance companies to understand, assess and evaluate the risks related to a PV system. Consequently, when the underwriter is deciding on a premium, the pricing will be in line with the risk spectrum. This would preserve the risk appetite for future insurance policies.

Popular Abstract

Today’s energy situation gives incentives to invest in green transition solutions. As a way of reducing the production costs, industrial companies are installing solar panels, also known as photovoltaic (PV) system on facility rooftops. While these installations are encouraged by scientists and authorities, representatives of the insurance industry seem concerned due to the lack of applicable regulations.

“It is usually a go/no go-situation.” That is acommon answer when asking insurance representatives about the possibility of insuring
commercial facilities with a roof mounted PV system. A potential insurance policy is usually depending on choice of material in
combination with a PV system installation. Once the facility’s roof construction is made of combustible materials, it generally becomes a dealbreaker for the insurance company, since the risk of fire is dramatically higher. As a part of my thesis research, I wanted to discover and concretise what these dealbreakers were
founded in. Was it failing PV components and what were they? Were there any gaps in the regulations of PV systems? Was it a mix of
both?

Scientists and insurance industry representatives share a common view that there is a need for improved regulations within the PV spectrum, especially for commercial applications. Definitions of PV components need to be clearer and firmly framed so thatthey can be used globally. Standards and codes for installation, maintenance and monitoring should also be uniform so that it can be practically usable on a global level.

If not dealing with the issue, there will be not only direct effects, but also indirect effects. The lack of regulations initially has a negative impact on the insurance companies ́ risk
appetite, where insurance companies become more sceptical to provide insurance. Subsequently, the lack of risk appetite and
unwillingness to insure facilities using green transition solutions may have an inhibitory effect on the product development. Furthermore, the lack of customer interest and less purchases might culminate in a stagnation of PV technology development. This way, a problematic dilemma occurs, where insurance companies need to choose.

Insurance companies can either take a passive and safe approach by excluding insurances of commercial facilities with PV system, minimising the risk of property damage due to PV system failure. Alternatively, promoting green transition solutions, such as PV systems, which ultimately is a bigger economical risk for the insurance company, but also a step into the future investment market.

Insurance representatives find this choice very challenging. Still, they say that the product development must be prioritised. That leaves the question: “How can they be insured?” A question that permeated the thesis research. The answer incorporates not a single answer, but a compilation of many. To achieve compliance and sustainability in the insurance of these facilities, a contingency plan, including maintenance and monitoring of already existing PV installations should be founded for each insured client, to make sure that risks are mitigated. Further, as the product development continues, decision makers of PV regulations should unite and create standards that are in line with current technology and being globally applicable. This way, the risk appetite is preserved, and green transition solutions are encouraged.

• author: Lindén, Erik
• supervisor: Henrik Tehler
• organization: Risk Management and Safety Engineering (M.Sc.Eng.); Division of Risk Management and Societal Safety
• course: VRSM01 20231
• year: 2023
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering
• keywords: PV system fires, PV component failures, PV regulations, future PV regulations, PV risk assessment, PV risk evaluation, PV insurance price
• language: English
• id: 9130253
• date added to LUP: 2023-06-28 12:38:21
• date last changed: 2023-06-28 12:38:21