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Solar Photovoltaic Systems

An Emerging Claims Field That Adjusters Should Understand


February 1, 2013   by Dione Scheltus and Scott Broad


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The practical use of solar energy is not new.  All systems and entities on earth are, or have been, touched by solar energy in one form or another. Photovoltaic (PV) technology is merely a simple method of concentrating the sun’s energy (radiation) and directly converting that solar radiation into an easily useable form of energy: electricity.

A rising market for solar PV systems means Canada is reducing its reliance on non-renewable sources of energy and creating investment opportunities and jobs. But what are the other, often unexpected, consequences of the explosion in the popularity of this technology? What happens when the systems are not manufactured or installed correctly and losses occur? And what are the relevant issues that face the insurance industry?

Overview of a PV System

PV systems function by converting energy from the sun and other light sources into electricity using PV modules (or solar panels). The light excites the molecular structure of the material from which the cells within a module are made, creating direct current (DC), which is the type of electricity found in batteries. This is in contrast to electricity in the form of alternating current (AC), the type provided through the electricity grid to your home.

The most common type of PV module used in Canada for commercial installations is the crystalline silicon module. This module is covered with tempered glass on top and ethylene vinyl acetate (EVA) on the back. The glass and EVA completely enclose the module to protect it from moisture, and the EVA provides a tough material on the back. An important feature of the crystalline module is that with every 1°C over 25°C, the module reduces in efficiency by 0.5%.

A commercial rooftop PV system generally comprises a few key components: the PV modules,  the string combiner boxes, the array combiner box, the inverter (allowing the system to be connected to the grid), transformer and the electical wires connecting the components.

When a PV system is ready to be installed on a roof, the modules arrive prefabricated. Electricians put together the frames to hold the modules at the required angle to the sun, secure the frames to the roof either by direct attachment or by weighing them down (ballasting), and then insert and secure the modules in the frames. The wiring is also completed by the installing electricians.

A small commercial PV array on the roof of a building or warehouse might comprise 1200 panels, 8 string combiner boxes and output approximately 250 kW of power. With approximately 2.5 wire connections per panel, over 3000 connections need to be created by the installing electricians.

Political and Industrial Context

According to CanSIA (Canadian Solar Industries Association), Canada’s solar PV market rose by 289 MW in 2011, an amazing 270% increase over 2010. This growth was mainly driven by the construction of PV systems in Ontario, where 91% of the capacity was installed. By 2016, the total installed PV capacity is estimated to be between 3,200 and 4,300 MW – an 11 fold increase over 2011.

A new policy environment in several provinces means that local and international companies are seeking opportunities in the Canadian solar PV market. While the installation of small residential rooftop mounted systems represents 100 MWDC of the market (with 11,000 installations), we are also starting to see very large roof-mounted PV systems connected directly into the grid.

Each Canadian province is approaching the promotion of renewable energy in a different way. Quebec has a solar assistance program focused on replacing fossil fuel use by commerce and industry; Alberta is providing grants for PV systems of up to 10 kW; and, British Columbia passed its Clean Energy Act in 2010 which promotes renewable energy technologies and proposes the introduction of a Feed-in Tariff (FIT).  

In May 2009, the Ontario government passed the Green Energy Act as part of its broader plan for a green economy and, within this framework, the FIT program was initiated. The FIT program provides a guaranteed pricing structure for the production of electricity using renewable sources including PV, biomass, biogas, on-shore wind and hydropower. Within 12 months of the initiation of the FIT program, applications for 15,000 MW of renewable supply were submitted, which is equivalent to 43% of Ontario’s electricity generating capacity.

The result of these policy programs is that Canada’s solar industry is moving rapidly towards becoming market competitive, with the cost of PV projects forecast to drop by more than 50% by 2025 to between 14.6 – 20.0 cents per kilowatt-hour (c/kWh), and the establishment of over 3,000 jobs in the solar industry in Canada.

Observations in PV Installations

We have been involved in a number of direct insurance events relating to rooftop PV systems. We have also provided inspection, testing and commissioning services for over 50 MW of rooftop PV installations (217,391 modules). In doing so, we have made several observations regarding the process as it currently exists in Ontario.

Because PV modules have no moving parts, they are relatively robust and long-lasting.  So robust, in fact, that many PV module manufacturers offer guarantees of up to 20 years.  Yet PV modules are still subject to environmental, mechanical, thermal and manufacturing anomalies that can shorten their lifespan or rated power output. These anomalies are usually related to water ingress or overheating.  

Most PV array installations operate unattended for extended periods and few receive scheduled re-commissioning or maintenance checks. In addition, although some PV inverters do have remote monitoring capabilities, those capabilities are more focused on the power output of the array and the general condition of the inverter itself. They cannot be monitored remotely to detect the presence of an anomalous condition or pending failure, which usually results in anomalies being discovered hours or days later after they occur.

The recent “gold rush-like” increase in PV projects in Ontario has led to an expedited process of manufacturing and installing PV modules. This has yielded many, often systemic, mechanical and electrical failure mechanisms that could (and have) resulted in catastrophic failures, with installation deficiencies as the primary culprit. Further, the development of applicable regulations, standards, existing infrastructure and installation has not kept pace with the expansion of the industry. 

PV modules are unique in that the electrical output is DC and not the typical AC provided by the local electrical grid. The vast majority of the codes and standards for power generation and distribution were designed for AC power, since that was what rotational generation methods such as hydro-electric, coal-heated steam turbines and wind turbines generated. Large-scale passive DC generation is relatively new to Canada and, as such, codes and standards for DC power generation and distribution are not as detailed as they are for AC power.

Furthermore, electrical trades and engineers who are more familiar with AC power do not always appreciate the important differences between AC and DC. Compounding this issue is the fact that, unlike most other power generation methods, PV systems are difficult to “shut off.” That is, while a typical building can be disconnected from the electrical grid by shutting off the incoming electrical feed (thereby de-energizing all the wiring), in a PV system all of the wiring connected to the modules will almost always contain energy, even at night (due to light emitted from other sources including thermal radiation).

Potential Risks for the Insurance Industry

Underwriting PV systems can be tricky for two main reasons: the technology is relatively new (yielding a short history of operational data) and there are fewer installations relative to other te
chnology deployments. Further complexity is added because PV installations typically involve many parties including installers, developers, investors, lenders and insurance companies. PV systems are typically connected to buildings owned and insured by different parties.

Insurers that may be impacted by the loss involving a PV system are not only those that insure the PV installation projects themselves, but also those that insure the buildings on which the PV system is mounted. While determining which insurer may carry the risk is obviously dependent upon the specific policy wording and leasing details, the following are some of the potential risks that we have identified to date:
•    Property damage to the PV installation from typical weather sources such as storm and snow/ice;
•    Property damage to the building, primarily the roof structure and roof covering, arising during the installation and/or ongoing maintenance of the PV system;
•    Property damage to the building due to failures of the PV system, including fire, water and electrical system damage (as the existing building electrical distribution system is directly connected to the PV system);
•    Liability for property damage and/or injuries resulting from PV system components blowing off the roof;
•    Damage to the PV system by building personnel during building maintenance (often inadvertently);
•    The high cost of roof replacement if a PV system is in place (and consideration of whether the property policy premium reflects this);
•    The possible nullification of the roofing contractor’s and roofing manufacturer’s warranties if panels are installed over an existing roof without the contractor’s or manufacturer’s permission;
•    Financial losses to the business that operates in the building due to fires or other property damage from the PV system loss; and,
•    Issues arising during firefighting on a roof with an electrical system that cannot be turned off.

Issues for Insurers to Consider

Insurers of buildings onto which PV systems are to be installed may not be consulted prior to the installation and hence may not be provided with the opportunity to consider the risks in advance. This may obviously cause issues if a claim occurs. Regardless, issues to be considered by the building insurer prior to installation include:

•    Has the existing roof structure been analyzed and approved by a structural engineer for the additional loads of the PV system? Note that issues like the increased potential for snow drifts and the related additional snow loads are among many impacts that should be considered.
•    Has the existing electrical system been fully vetted by an electrical engineer familiar with the requirements of a large DC power generation system?
•    Has the entire PV array been fully commissioned and verified by a qualified firm?
• Have building staff been educated about the hazards associated with the PV system?
• Has the overall risk profile of the building been re-evaluated to take into account the additional fire, water, and wind damage potential?
• How would building business interruption relating to a loss associated with the PV system be accounted for?
Issues to be considered by the insurer of the PV system include many of the above considerations, plus:
• What agreements are in place governing maintenance of the system and are they adequate to minimize damage to the PV system and ensure the maximum energy output? The latter point is particularly valid if there is any insurance coverage for poor energy output (i.e. failure to meet a certain performance specification).
• What agreements are in place governing protection of the PV system during building rooftop maintenance of the roofing system, HVAC systems, roof anchors, etc., and what risks may be incurred by such maintenance?

From the Canadian (and global) policy environment in place today, we predict that the number of installations of large, rooftop commercial PV systems is only going to increase. This presents an altered risk and loss scenario for insurers which may not, yet, be fully appreciated. Insurers, brokers and adjusters should become familiar with this relatively new risk and adjust their underwriting and claims processes accordingly.

Scott Broad is Principal of the Fire and Electrical Group at Giffin Koerth, which is involved in solar commissioning and other renewable energy technologies including wind turbine and geothermal systems.
Dione Scheltus is an Account Manager at Giffin Koerth and is currently undertaking her Master of Engineering, specializing in renewable energy technologies.


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