Solar farm insurance cost varies by coverage type and the specifics of your project. There are many types of solar farm insurance you can buy including, but not limited to, the coverages below:
- Property Insurance
- Commercial General Liability Insurance
- Offtake Insurance
- Solar Production Insurance (aka “Solar Shortfall Insurance”)
Below are some solar farm insurance cost estimates for property and commercial general liability (CGL) coverages…
If you are building a solar farm in the U.S. and have business insurance questions, you can easily schedule an appointment with me today.
Solar Farm Property Insurance
Solar farm property insurance protects solar photovoltaic systems against perils that may cause property damage or loss of business income.
Hail, wind, fire, flood and earthquake are just a few of the perils that solar farm insurance buyers need to consider.
Property and Business Income
Solar farm property insurance protects your investment, minimizes downtime, ensures continuity and provides critical financial assistance in the event of property damage and/or loss of income.1
Covered solar property includes photovoltaic panels, racks, inverters, batteries for energy storage, equipment and more.2
Income should also be covered, including any incentives, such as renewable energy certificates (RECs).
As you build – or acquire – new solar farms, each project should be scheduled on your portfolio which results in an incremental additional premium.
Solar property insurance may be written on a special form, also known as an “All Risk” form… All risk property insurance means that the insurance policy covers all perils except those that are specifically excluded in the form.
Additional perils may be added to cover risks such as theft, earthquake, flood, hail, wind, cyber risks and terrorism.
Inland marine or floater property insurance can be written for property and equipment held on site, in transit or held for others.
Solar farm insurance cost for property insurance coverage will vary from project to project based on the following factors:
- Project size and value (replacement cost/actual cash value)
- Project location (eg. if project is in a high hazard wind zone or hail zone, such as on the coast, etc. the property rate will be higher than a less hazardous zone)
- Risk management program and best practices
- Use of PV trackers and stowing systems
- Use of advanced warning sensors to detect bad weather
- Market conditions (eg. if we are in a “hard market” vs. a soft market)
- Capacity (insurers may have limited capacity based on the number of projects underwritten that year)
- Competition (are insurers interested in competing for solar farm insurance risks, or are they leaving the market because of unprofitability)
- Policy exclusions (the greater the number of exclusions in your insurance policy, the less coverage you have, which reduces the premium. The opposite is also true.)
- Deductible or self-insured retention
Some of the above factors are outside of your control whereas others you can control.
Solar Farm Property Insurance Cost Example
A solar farm property insurance estimate may be from 20-50 basis points (bps or bips) multiplied times the value of the solar system.3
For example, let’s use a solar farm with $9,000,000 of property values and $1,000,000 of business income (total $10,000,000).
If you received a quote for 32 basis points, this would translate to 0.0032 multiplied times $10 million in total value, resulting in a $32,000 annual premium for your property insurance annually.
- 32 Basis Points
- $10,000,000 solar farm value
- $32,000 annual premium
Your actual premium depends on many factors, including those listed above – some of which are outside of your control – and as such your particular cost may be lower or higher.
Solar Farm General Liability Insurance
Solar farm commercial general liability (CGL) insurance protects your solar farm from claims of third party bodily injury and property damage.
Solar farm CGL insurance cost is priced based on liability exposure.
The commercial general liability exposure basis may be quantified using one of a variety of measures, including, but not limited to:
- Energy output (kilowatts)
- Revenue (sales)
- Payroll
Your exposure basis is multiplied times a rate which the insurer uses to calculate the premium needed to stay profitable in return for assuming the CGL risk for your project.
Solar Farm Insurance Commercial General Liability Example
Assume you have a 10 megawatt system and the exposure used is kilowatts.
Using a hypothetical rate of 0.32 times the kilowatts of the 10 megawatt system (10,000 kilowatts x 0.32) equals $3,200 annual premium per year.4
Solar Farm Insurance Premium Calculation Factors
There are solar farm insurance cost underwriting factors that are within and outside of your control.
Within your control:
- Perils covered/purchased
- Deductibles and self-insured retentions
- Coverage limits of insurance (eg. $1,000,000/$2,000,000 per occurrence/aggregate or greater limits for commercial general liability)
- Location of project
- Risk management practices (eg. security of the site, monitoring, location, claims history, etc.)
- Broker expertise
Outside of your control:
- Minimum premiums (what the insurance carrier is willing to write a policy for)
- Market capacity issues
- Hard or soft market
- General underwriting appetite
You can control solar farm insurance cost by engaging in proven risk management efforts, carefully choosing the coverage limits you want, weighing coverage types, etc.
Solar Farm Insurance Cost Summary
There are many types of solar farm insurance, including solar farm property insurance, commercial general liability, solar farm offtake insurance and solar production insurance.
Depending on the type of insurance you choose, factors such as market conditions, your project’s location, risk management practices and coverage limits will affect the cost of your insurance.
Some factors are within your control and others are not.
Your broker should help you control solar farm insurance cost and guide you in proven risk management efforts, while working with you to carefully choose the coverage limits you want, weighing coverage types, etc.
Footnotes
- In addition to physical property, solar property insurance can also cover business income from solar projects, including renewable energy certificates (RECs) and other sources.
- Property insurance can also cover property in transit including installation equipment, machinery, tools, etc. or property at a covered office location, including office furniture, computers and equipment.
- This is only an estimate, and your actual property insurance rate may be higher or lower.
- It's important to emphasize that the actual calculated premium may be below what the insurance carrier will charge as a minimum premium for solar farm insurance.
