Implications of Texas Hail Storm for Solar Project Insurance
Assessing Risk Mitigation and Coverage Needs in Hail-Prone Regions
The recent destructive hail storm that severely damaged a large solar project in Texas has brought into sharp focus the need to re-evaluate risk mitigation strategies and insurance coverage for renewable energy assets in hail-prone regions. This event serves as an important case study for both project developers and insurers, highlighting areas where current practices may need to be revised to adequately address the risks posed by severe weather events.
Capacity Damaged and Project Details
The solar project that was severely damaged by the hailstorm is called the Fighting Jays Solar farm, located in Fort Bend County, Texas.
The Fighting Jays Solar farm has a total capacity of 350 MW and spans over 3,300 acres.
The hailstorm on March 15, 2024 caused significant damage to hundreds of solar panels across the massive solar farm.
Several key implications and considerations arising from this incident are discussed below:
Tightening of Coverage Availability: Insurance coverage for hail damage in Texas, Nebraska, Colorado, and other states with a high risk of severe hail storms is likely to become more restrictive. The recent loss occurred in an area of Texas not typically considered high-risk, suggesting that even regions previously deemed relatively safe may now face increased scrutiny from insurers. As a result, rate increases, reduced coverage limits, and higher deductibles are anticipated as insurers reassess their exposure.
Tensions with Lenders and Tax Equity Providers: Determining adequate hail coverage limits is likely to become a growing source of friction between project owners and their construction lenders, term lenders, and tax equity investors. Reaching consensus on what constitutes sufficient coverage may become increasingly challenging as the insurance market tightens.
Equity Return Expectations: Despite the heightened risks, equity investor return expectations for projects in Texas are unlikely to adjust upward, even though a re-evaluation of expected returns may be warranted to account for the potential impact of hail damage on project performance and profitability.
Keep reading with a 7-day free trial
Subscribe to Carbon Rank to keep reading this post and get 7 days of free access to the full post archives.