Built to last: Why insurers are helping design resilience into renewable energy and storage facilities

0:00Who would have thought falling rocks from the sky on glass, that's going to break? The hail impact it had to survive was the equivalent of dropping a golf ball from waist height onto the panel. So if your glass didn't crack, you passed the test. That's not a lot of impact energy relative to what it's going to see in reality. In the spring of 2024, a large hail storm went through southeast Texas and it devastated a facility that was partially still under construction. A hundred million dollar roughly lost. But another facility down the block was able to defensively stow. And the project lost roughly 500 solar panels.

0:40So a very, very positive result. As the energy landscape evolves, organizations are managing new risks and greater complexity. FM is one of the world's leading commercial property insurers, helping clients build resilience through a unique combination of engineering expertise, scientific research and risk insights. From renewables to thermal, from factories to data centres, FM helps organisations better understand risk before losses occur. Learn more at fm.com. FM, protect your purpose.

1:15Hello and welcome to The Energy Gang, a discussion show from Wynne McKenzie about the fast-changing world of energy. I'm Ed Crooks and on this special episode we're going to be talking about renewables and resilience. It's an increasingly important issue as renewable energy infrastructure gets built out and as the risks of hazards such as wildfires and hailstorms grow. To discuss it, I'm joined by two leaders in renewables insurance from FM, which is one of the world's largest commercial property insurance companies. Mike Perrin is FM's Renewable Energy Market Lead. Hello, Mike. Welcome to the show.

1:46Hi, Ed. Good morning. Great to see you. And Cassian Walker is an Operations Vice President and Renewables Engineering Manager also at FM. Hello, Cassian. Hello, Ed. Delighted to be here. Thank you both very much indeed for joining us today. Now, before we get to the meat of our discussion, when we have new people on the show, we always like to talk to them a little bit about their careers in energy, how they first got interested in the field and the paths they took to the roles they now hold. So maybe, Mike, perhaps to start with you, what's your story? What was the path that took you to energy?

2:16Sure. Thanks, Ed. I started out as growing up. My father was a chemical engineer, and I followed in his footsteps, studying chemical engineer at Villanova and looking to work in industry. And at the time, jobs were tough to find when I graduated. So I ended up taking a position working for an insurance company, as it was really the only thing that I could find at the time. I fell into insurance, but I really was really happy that I did. It's an interesting industry where you learn a lot about how a lot of things work. I've been in insurance most of my career and came to FM two years ago to help lead our renewable energy team.

3:07Fantastic. And Kathleen, what about you? Yeah, I grew up in the town called Hartlepool in northeast of England. So on the other side of the pond, my colleague, Mike. And in the family, I guess you could say there's a DNA in engineering, a lot of parents, grandparents who are chemical, mechanical engineers. And so I found myself at the University of Leeds looking at a chemical engineering degree and spotted fire engineering. And I thought to myself, oh, it's always going to be fires and explosions in my lifetime. So I pursued that. And during the course, I actually got insight to FM in terms of the large scale testing and research they do.

3:44And I guess that's very pertinent to why we're here. So 24 years ago, I joined FM and worked through a number of engineering roles and got into PowerGen about 10 years ago, and specifically renewables in the last three in terms of focusing on onshore wind, utility scale, solar and energy storage. So then tell us a bit more about FM. What does the company do in general and what are the services that you specifically provide to the renewable energy industry? Yeah, happy to kick off there. We're what's called a monoline insurance carrier. Essentially, we do one product, property insurance. We have to do it very well.

4:24So we were founded in 1835. And if you look through our entire history, we've had a very strong focus on engineering, understanding the risks that drive losses and exposures at clients' facilities. We're often called a company of engineers doing insurance, and I take that as a compliment because it speaks to how we look to understand those risks that our clients' operations face, not just in the present but into the future as well. Mike, anything to add on that? No, it's just that we really value the fact that our clients appreciate that we help them in challenging industries. That's really why we ended up joining and working a renewable energy group, why we formed a renewable energy group.

5:11It was an area where insurance was problematic and tumultuous for our clients. And our clients were growing in the renewable energy space. So we wanted to grow with them. Right. So how long ago was this? When did you first set up that specialized renewable energy unit? Yeah, we've been insuring renewable energy assets for nearly 80 years. And as you can imagine, that's more traditional hydro, waste to energy, biomass. The specific unit we set up to focus on onshore wind, solar and energy, we started about just under three years ago with a tailored policy and engineering model to service these assets.

5:50And Mike and I are part of the leadership team that was engaged and hired in to set up this unit. Right. And as we were saying, presumably, then the business is growing strongly, both because the industry is growing. There's a lot more assets out there. There's just a lot more stuff that needs insuring. And because the risks are constantly evolving and changing. It is. Yes. Our opportunities are coming more and more. And what we strive to do is work with clients that want to work with us to build these projects resiliently. Um, there's been a part of the reason we're in this space is because many of the projects are, were being pushed to get built as quickly as possible so that they could meet the needs of, of, uh, the, the power demand out there.

6:38But resilience hasn't always been considered fully in that, uh, development. And we help our clients develop the projects more resiliently so they last for the lifetime of the project? I think that's a great point, Mike, because what was very interesting to me is we have our traditional power generation clients. So those who are operating in the space, who are going through energy transition plans and strategies, and you see the scale up of the renewable energy assets. Also in our client base, we start to see clients who are perhaps in pulp and paper or chemical industries, and as part of their own sustainability and renewable energy objectives, are investing in large utility scale generation.

7:22And that's where, as the engineer, I help that client who's not really their core business understand and anticipate the risks that these assets could face. Oh, great point. Yeah, that's also a really interesting point. So, yes, as I was saying in the introduction, the focus is on resilience. Mike, you just used that word and you're saying that is your crucial focus. Probably helpful, I think, to talk a bit about what you mean by that exactly. We should define the terms of this debate. When you talk about resilience for renewable assets, what do you mean? Well, it's the ability to withstand, and Cass can talk about this a little more detail, the expected conditions that the site is going to face over its useful lifetime.

8:09What we've seen is a lot of projects are built quickly and the technology and the use of the components that go into the project have been changing significantly very quickly. And sometimes when you're doing that, you don't fully contemplate the exposures the sites are going to face over their useful lifetime. Cass, do you want to add to that? Yeah, I think when we look at resilience, I think engineering wise, we can kind of distill into two areas. There's what we'll call the inherent risks. So if you're building in a piece of land that is exposed to, for example, hurricane or flood or earthquake risks, there's not a lot you can change from the inherent risk.

8:54So firstly is understanding what are those inherent exposures. And then the second piece of this is really how the technology choices enhance the resilience or potentially create vulnerabilities depending on which paths you go down. So from the engineering standpoint, we look at those two kind of key angles to help our clients both understand those inherent risks and then make those technology choices that leads to a resilient development, a resilient outcome. So fundamentally, it's designed and braced for those events it's going to see over its lifetime. I'd just like to add one more point. It's a quote from someone named Roger Dennis I like to use.

9:34Resilience is very expensive, except in retrospect, because when the losses happened, that money would have been well spent ahead of time. Right, great line, yeah. And so, I mean, just to explore that a bit further then, when you're thinking about those kind of physical risks, something that occurs to me about the way the industry is changing as I say first is just more stuff out there to ensure are you also seeing the types of risk change I mean when we think about wildfires when we think about hailstorms possibly these are phenomena that are affected by climate change obviously there are huge debates about climate impacts and often it's difficult to draw a straight line between a particular weather event and particular climatic change.

10:30But even so, over time, it seems pretty clear that pans of precipitation, for instance, are very definitely being affected by climate change. And that has an effect then on fire risk and on hail still risk. Are those issues that loom large for you? Is that something you're thinking about a lot is the way those risks are changing? Absolutely. And our research focus on climate at risk and projecting them out into 2030 or 2050 timeframes is something we spend a lot of time looking to understand. The science clearly shows that there is an increase in the severity of certain severe convective storms, for example, and certain regions might be seen an increase in frequency and certain regions might be seen a shift in the geographical movement.

11:19But I think what is very interesting in the renewable energy space is a lot of these developments are going into areas where essentially there was no human habitat and there was no industry there so the data is not as comprehensive simply said if the hill fell and no one observed it no one measured it we weren't tracking it there isn't the depth of of research to speak to what the the actual events are. So this is where the modeling comes in. We put a lot of focus on understanding what the events are, the frequency of those events, and use that to help our clients understand these project developments from the inherent risk, as I alluded to, and then how those technology choices help mitigate or alleviate the risks that they're going to face.

12:07Yeah, just to add to that, we're really focused here mostly on solar, although there are weather impacts for wind projects and batteries as well. But the solar industry in the U.S. really started in California and projects on the East Coast where there was not much hail exposure. And what the industry did is took the same equipment, the same design, and put it in areas which were subject to that hail and who would have thought falling rocks from the sky on glass that's going to break. So that's what's happened and what the industry has adjusted and we're helping work with the people in the industry so that we can make those assets more resilient in those areas.

12:55Right. So how do you come in then as an insurer? I mean, thinking about it from an asset owner's point of view i've um just built a solar project or probably i'm thinking about building one i think well i'm going to need to get this insured how does the relationship work with fm yeah happy to lead with that um you hit on a key piece there ed which is you're thinking about it the contemplation of the risks really can't come early enough in the development phase And so what I mean by that is a typical utility scale solar farm, let's say 300 megawatts, you probably need about three and a half thousand acres of land.

13:39So as developers are out there, clients are out there looking at where these power markets are that they are maybe predisposed to going to, then where the land securement is, you can then start to very quickly bring in what are those inherent natural hazards that that development could face. And really top of your list is going to be things like hail, wind, flood, windstorm for those solar utility assets. A lot of the, I'll call it key markets in the US where there's fantastic irradiance, there's very amenable grid connection processes to kind of accelerate that through, also are quite significantly hail challenged.

14:25from Texas, maybe an obvious one, very severe, very frequent hail, maybe to less obvious like Arizona that has severe and frequent hail, but is probably not top of somebody's list from a hail risk standpoint, yet it would be from an ability to generate power from the irradiance values that are in Arizona. The future of energy depends on more than innovation. It depends on resilience. As one of the world's leading commercial property insurers, FM helps organizations understand and reduce risk through a unique blend of engineering expertise, scientific research and real-world experience. Our engineers work alongside clients to identify vulnerabilities, evaluate emerging risks and develop practical strategies that help prevent losses before they occur.

15:11From renewable energy and thermal power generation to manufacturing and critical infrastructure, FM helps organizations make informed decisions that strengthen resilience and improve long-term performance. For nearly 200 years, FM has been helping clients navigate uncertainty through a science-based approach to risk management. Learn more at fm.com. FM, protect your purpose. Yeah, so that raises a really interesting point again about the way that risk in the energy industry is evolving as renewables infrastructure gets built out. You mentioned that land footprint of 3 ,500 acres for a fairly average-sized solar project.

15:51Just the greater land footprint of renewables does presumably lead to some very different risk calculations compared to what you might be thinking about if you had a gas-fired power plant or a coal-fired plant. Is that right? Oh yeah, absolutely. It's an interesting point because on one side with a thermal plant you could argue there's concentration of risk in terms of the combustion steam turbine units. But when you look at the large footprint, you have got, particularly from the natural hazard standpoint, these events are normally large, wide, geographically aggregate events. And so when you've got a particularly large facility that can be exposed to several different things, the number one question that we normally get from our clients is, what is the hail risk associated with this?

16:42And really that speaks to some of the design progress Mike alluded to, but some significant industry events that have kind of raised awareness of both the frequency and severity of hail and the limitations of the technology. And that's where we've seen, I think, very significant advances in how trackers, which are primarily designed to optimize the output of the solar array, but serve a fundamental piece of the resilience equation in mitigating hail and windstorm effects in particular on these large footprint developments. And then you've got the solar panel itself in terms of understanding the energy it can absorb, i.e.

17:25the hail impact, before then it fails. Fails, grass cracked, punched through the panels, the damage that you've seen maybe in the media of some of these events. And it really is a system. So what we work hard to do is understand how that system performs in the environment it is so that the clients can make the best choices around the components of that system. What tracker, what store angle, does it need front or backloading wind design? What panel impact energy resilience? Do I need a hail optimized panel? Do I need an average performing fan panel? Or is it in a part of the US where there's minimal hail risk so that I can design my tracker for an impending event, even though the panel itself may be more susceptible to damage if I didn't have it stored in a particular angle?

18:16So you can see it can become very complex in terms of the variables you need to work through, but we bring the simplicity to help the client navigate through those choices. Let me just add with an example to what Cass was talking about. In the spring of 2024, a large hail storm went through southeast Texas, and it devastated a facility that was partially still under construction,$100 million roughly lost. But another facility down the block was able to defensively stow. And the project lost roughly 500 solar panels. So a very, very positive result. And actually, that project had less resilient panels than the one that had the$100 million loss because they were able to effectively and defensively stow.

19:08So these are the type of things that we're trying to work with coaches and coach clients to ensure that they take the precautions in advance of an impending storm so that they protect their assets. Right. That's really interesting. And when you talk about stowing, so what that's essentially sort of the tracker system enables you to tilt the panels to the vertical or closer to the vertical so the impact is not directly on them. Exactly. You're looking to what direction is the storm advancing. And this is where you get into the predictive climate and the weather information in the US. So the US pretty much gets scanned every five minutes from a Doppler radar standpoint.

19:49So if you've got a storm that's kind of tracking towards your facility, the operators have a real early heads up in terms of the direction vectors that it's coming. That allows them to make some strategic decisions around storing the system. And if it's a convective storm away from the oncoming storm. So that means the panels are facing away from the oncoming storm at a stow angle that could be anything from 60 up to 78 degrees is kind of the range of the trackers depending on your manufacturer. And the objective there is when the hill falls, it delivers more of a glancing blow. So less impact energy is directly transferred to the panel, thus minimizing or completely mitigating damage to that panel.

20:35And when you've got 700 ,000 panels out there in an array and they're all tilting away from the storm, that's the level of resilience. It's not quite as simple in terms of the industry has evolved. So some of these existing systems, they may not be able to stow away from the storm and survive maybe the expected wind speeds. So this is where the industry has come from to where it is today, where the most modern design is there. they can handle the front and back loading wind, as we say, so the wind loads associated with that. So you truly are focused on what best direction and angle to stow from the hail resilience standpoint.

21:16Yeah, one point to add on that, and Cass touched on this, you're dealing not just with potential hail, but also wind. And you can choose to stow for wind at a lower angle than, or for hail. And in some of these bigger events, that's what we think happened. And that's not the approach that's been effective. And some of the systems can't handle the wind and the hail at the same time. The other thing that's really important is making sure that these systems are tested. Everybody knows they should stow the projects in advance of the hailstorm, but sometimes it just hasn't worked. So it's like having a sprinkler system that's not connected to water.

21:58We work with our clients to make sure that they test their systems thoroughly so that when the hailstorm is coming, every panel stows in the way it's supposed to. It's a great point, Mike, because in working with the large tracker manufacturers in the industry, they've advanced some of their capabilities in terms of, I'll call them, successful store metrics. So speaking exactly to what Mike was saying, these are sensors, these are reports, these are confirmations that the Rose have stored as designed. And simply put, if you did a store test, you need to validate that you're, you know, 300 rows actually stored or if one or two didn't, you know, how do you become aware of that?

22:41And there's been different approaches out there, whether it's using, you know, drones to validate, the aerial imagery to validate, humans to validate in terms of observations. And as I alluded to, the tracker manufacturers building that into their current design so you get that confidence of store. So that is really interesting. It's very impressive what is possible now in terms of what the trackers can do. Presumably, all of that is more expensive, though. And if you're buying these modern, more advanced trackers, it's going to be a significant increase in cost compared to even earlier generations of trackers or to a simple rack system.

23:22so to your point Cassidy and earlier you were saying about it's a complicated calculation presumably working out when it's worth spending the money on that more expensive tracking system and when it isn't that's going to be difficult to work out isn't it it is complicated but the way we approach FM is we lean into our research to help guide our advice to our clients so So from a panel standpoint, we've done a lot of testing of these panels to hail resilience. And simply I'll just categorize it as the families of panels. You see bifacial, which is typically very thin, glass on the front and back.

24:01You see thin film panels. You see monofacial panels. And then you start to see hail optimized panels. And we've tested throughout. And when you take those test insights and then you look at the inherent natural hazard risk, so the hail risk for that location, and then you look at the tracker options, maybe 60 degree with a hail optimized panel is perfectly fine for that site. maybe a bifacial panel needs a higher store angle for the level of resilience the client's looking for i think that's a really important point because out there you will see several different i'll call them models there's the develop and flip the model which is they'll develop and sell into more of the space of our clients where they're developing to build own and operate through the life cycle.

24:53So for that type of profile and that client of ours, the resilience of the system over its lifetime is extremely important. So when you take the testing insights and you look at what the damaging events could be, this is where the research models the impacts and it dials it into a monetary number. So what's the physical damage on a given return frequency and what's that business interruption? You've lost the ability to export power through damaged panels? What does that mean from a business interruption standpoint? And so the clients can see what those levels of exposure is from a monetary standpoint.

25:31And that helps the ROI discussion around this development needs that level of resilience. And here's the numbers that back it up. Yeah, the economics part is so important. These projects often have very thin margins, so they can't do everything. It's our, we feel it's our job and clients value that we help them determine what's the best way to build their project economically. The insurance costs on these projects are significant. They're sometimes 30 % or more of their operating expenses. Over time, if we build projects more resiliently, those insurance costs should drop as we see less and less losses.

26:15I think analogy to maybe help crystallize some of the differences in performances, we mentioned the bifacial panel, the standard IEC 61215 test, and I'll get a little technical. The hill impact it had to survive was the equivalent of dropping a golf ball from waist height onto the panel. So if your glass didn't crack, you passed the test. That's not a lot of impact energy relative to what it's going to see in reality. So I'll bring you into Texas, where we've seen events throughout the solar industry there. And a two-inch hail ball has about 16 times more impact energy than that analogy I just gave.

27:01And the frequency of a two-inch hail event in large parts of Texas is a one-in-three-year event. So that means in any given year, there's a 33 % chance of it happening. that is not a good panel choice for texas even in the trackers because once you introduce the trackers you then introduce the complexity of the storing in the right direction the reliability of the communications the mechanical equipment functioning so that's where we will look at the the information and the science and really have an in-depth discussion with the clients on panel choice on tracker choice so they can see what that translates into in from a cost standpoint as mike alluded to on the insurance and the terms and conditions associated with that and it really helps them make that informed decision through understanding what the the risks are on a good day when everything works and what that level of risk is on a on a bad day when something fails we store in the wrong direction those types of catastrophic events right so to mike's point then about how insurance can be 30 % of the total cost of a project, making those kinds of decisions.

28:15And essentially, then you'd go to people and say, well, if you have those, as you know, bifacial panels, then the insurance will cost this much a year. But if you have this kind of tracker or this kind of panel, it'll be that much lower a year. That's something, as you say, which really kind of can clarify the technology choices that people are going to be making. Yeah, it does, but insurance is reactive and it's not quite that simple, Ed. Insurance is relatively simple. It's how much do we pay out in claims versus how much we collect in premium. And when a large loss happened, the cost of that insurance, it goes up for many clients.

28:59One of my clients used to say a hail loss is bad for all of us, so why can't we prevent all of them? because then if we are able to show that a project's going to be resilient, then the cost for their insurance will go down. I'd like to pick up that point on resilience you just made, Mike, because a lot of these developments are heavily debt financed. And one of the things very early on is the financiers, the banks, the lenders, consultants, they're all asking the questions around resilience. You know, how resilient is this development? What choices, what approaches have you taken? And what we find with our clients is being partnered very early on in that process to work through some of those scenarios.