Installation of solar panels: commercial property insurance considerations

Rising energy costs, green energy targets and financial incentives offered by the government have driven the uplift in the use of solar power. Advancements in technology improving battery storage has driven businesses to investigate the benefit of solar power. In this article we examine the insurance implications for property owners who install Photovoltaic (PV) generation on the facades and roofs of their assets.

In short, PV panels on the roof of a structure increase an asset’s exposure to a range of perils.

Risks associated with PV panels
Increased risk of fire
  • Placing PV panels and associated cabling and equipment on the roof of a structure may cause the building’s existing fire protection and detection systems to be ineffective. They may also fail to activate if a fire starts in the solar generation system. Delay in fire may also exacerbate emergency response including manual firefighting. Whilst PV panels are not highly combustible, fire vulnerability may exist in the framing, mounting systems, cables and associated junction boxes.

  • PV panels continue to provide electricity even when isolated. When firefighters arrive, they are often unable to isolate the solar system (which requires isolation of each module with a micro invertor, which is not usually installed in current systems due to the cost of doing so) and as such if the sun is out, the panels will continue to produce electricity making it more difficult and dangerous for emergency services.

  • Property owners should also consider their own risk profile. If their business includes high hazard manufacturing or storage of combustible goods, the installation of solar panels may limit insurers’ appetite to provide coverage at the premises.
Roof design
  • Installation can add significant weight to the structure. Most roofs were not designed with the installation of solar panels in mind. Careful consideration should be given to the impact installation could have on the structure to avoid uninsured losses arising from damage to the roof due to excess weight.

  • During installation care must be given to the method used by contractors. In Australia solar panel installers are still somewhat unregulated and it is important property owners consider the experience of the firm selected to install the panels to ensure they do not cause damage leading to leaking and expensive repairs.

  • Design of the system should also consider the impact that wind may have on the existing roof structure. As a result of the roof not being designed to carry solar panels, high winds may cause damage to the roof.
Weather related risk
  • PV panels are more susceptible than metal or concrete roofs to hail, high wind and snow. If your property is located in an area exposed to severe weather events, careful consideration should be given to the additional likelihood of damage.

  • Bushfires (and their embers) may also cause significant damage to PV systems – even if the property is otherwise unaffected by the fire.
Business Interruption
  • Damage to the solar installation could expose the owner or tenant to business interruption. Whilst the system is down the business may still be able to operate but gross profit could be impacted as result of escalating electricity due to the requirement to draw power from the grid.
  • Insurers require evidence of regular inspection and performance testing of solar panels by qualified professionals. Such inspection should include looking for potential damage to the wiring from rodents, cockatoos and other pests. Infrared thermographic scanning should be undertaken at least annually to check for any “hot spots” in the system which should be addressed without delay.

Whilst the financial and environmental benefits of solar power are attractive, there are risks (and potential for increased costs) from an insurance perspective. As solar panels become more popular Insurers’ appetite will wax and wane depending on how losses develop in respect of PV systems.

When considering the installation of a solar system to your premises, consult your risk advisors early in the process. Obtain detailed design documentation from a qualified installer who can warrant that the system will be installed without damaging the existing infrastructure on site. Once installed the system needs to be properly maintained with evidence supporting this ongoing maintenance provided as part of the renewal of your property insurance.

Property owners who are approached by their tenants to install such systems (often at the tenant’s own cost) should carefully consider the increased risks and insurance costs this may create.

If you have any queries in relation to solar installation, please do not hesitate to contact Bellrock for further guidance and risk advice.

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