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Solar
The third article in Jan Pagán’s series on the global renewable energy market technologies investigates the global solar power industry, analysing the various risks presented from an insurer’s perspective.
Jan examines the current state and future prospects for the sector, discussing the challenges and opportunities that insurers and developers must address as the industry continues to evolve.
Solar summary
We place the solar sector frequency at: Unstable with a downward trend
- Market full of new developers with little project experience
- Vulnerable supply chain
- Limited adaptability to climate change and exposed to extreme weather
- Cheapest renewable energy technology, normalised module obsolescence
- Projects often lack reliable local weather data for design
Solar technology has been progressing consistently over the last 30 years. Higher energy conversion efficiencies, new photovoltaic (PV) module designs, innovative tracker designs for specific situations, smart inverters, etc. have allowed this sector to grow continuously since its inception. Projects are becoming ever larger and installed across every corner of the planet.
Ease of deployment
Solar is the easiest renewable energy technology to deploy, which brings both positive and negative consequences. Some losses seen by the insurance sector cover manufacturing defects of inverters, fire or storm damage due to inadequate design, hail, and poor/incorrect installation of electrical components, modules and mounting structures.
Weather resilience
The most devastating losses are usually caused by weather events, which often could have been avoided or reduced in size with the right planning and design. Contrary to wind or BESS, we don't expect to see major losses due to technology innovations.
Instead, we expect losses to be dominated by weather events and poor design as the sector continues to expand across different areas of the world. However, we do see the effects of rapid obsolescence having an impact on solar farms that suffer large-scale losses.
Design changes
Solar modules are changing in size and shape as new materials are used, which raises the risk of difficulty in replacing solar panels if the owner does not have sufficient spares.
The worst-case scenario could force owners to modify or even change the mounting structures that were originally used, at a significant cost to them. The process of finding new, compatible solar modules or having to modify the mounting structure could take many months to resolve, meaning extensive periods of downtime.
Solar energy is the fastest-growing – and soon to become the largest – sector in the renewable energy space. This has been driven in no small part by technology cost reductions and financial incentives from local governments.
Deployment
The ability to deploy solar practically anywhere in the world has made it the go-to source for developing countries or regions of developed countries that lack the specialised requirements for the construction and operation of wind farms.
We see this trend continuing for the next decade as new energy conversion efficiencies are reached and cheaper materials are used as a substitute for silicone or other traditional conductors. This has led to an influx of new and inexperienced contractors in the development, construction and operation of solar farms, which has in turn raised the risk of insuring solar projects.
Supply chain
Regarding the PV module supply chain, Chinese manufacturers have dominated for many years now and we don’t see that changing in the next five years. However, new entrants from outside China do now at least form part of the top 10 manufacturers.
The same goes for inverter manufacturers, where Chinese firms dominate with an 80% market share. As with the solar modules, we don’t see any significant changes in the inverter supply chain in the next five years.
We are seeing the gradual emergence of manufacturing plants outside China, specifically in southeast Asia.
This should add flexibility to the supply chain and ease the effects of any future trade volatility or trade barriers that might be put in place.
However, it will be a slow undertaking, with limited effects in the short term. And it is unlikely to address the current difficulty in sourcing replacement inverters, where lead times can extend for many months.
It is no secret that solar energy is the renewable energy source most susceptible to weather events.
It needs to find the right balance between producing sufficient energy to make it economically viable and, at the same time, being robust enough to survive weather events.
However, due to its expansion across the world, solar farms are increasingly being built in regions where there is little to no historical weather data. This makes it very difficult to design the project and will likely require the use of many assumptions. In other cases, solar farms are built in regions that are known to have severe weather events but are designed using weather modelling tools that are not keeping up with climate change effects.
Long-term view
And finally, we have seen a growing trend of developers using return periods for extreme weather events that are very optimistic, and susceptible to variations in probability as a consequence of climate change.
All of this has led to the growth of Nat-cat related losses that are increasingly reaching tens of millions of dollars just for physical damage. We must remember that these are projects that will be operational for at least 25 years, and any design inadequacy or error will stay with the project for the remainder of its operational life.
Endurance
Insuring such an energy project after it has suffered a significant Nat-cat-related loss becomes a challenging (and expensive) endeavour to say the least.
Unfortunately, we see this trend growing further in the coming years, driven by low development costs and financial incentives.
Solar projects have benefited from steady price reductions on solar modules over the years, fuelling its exponential growth.
Financial incentives vs. price reductions
As mentioned before, we still believe that further price reductions will occur due to technological innovations which we are already seeing in new projects. Furthermore, there is significant appetite and financial incentives available to build solar farms due to their low cost and ease of installation compared to wind farms.
Component supply
As with the wind sector, trade tensions can create component price volatility in the solar sector but, unlike in the wind sector, there is a significant oversupply of components which can offset any potential short term price increase. Insurance costs will, however, dampen the party due to the level of Nat-cat-related losses we have seen in the past two years. This will continue to be the case until owners are able to prove that their solar assets have been designed to cope with the local weather effects, specifically hail and windstorms.
Lead times
As with other energy projects, electrical infrastructure lead times are a major concern, and owners/operators will be increasingly pushed to implement an adequate spares strategy. This will of course affect the financial costs of the project but will also ensure that claim values not covered by insurance (deductibles, sub-limits, etc.) are significantly lower for the asset owner.
In the short to medium term, we do not see any financial difficulties for the continued rapid deployment of solar farms and expect the growth trend to continue.
Last updated: December 2025
Further reading
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Renewable energy reports
Markel investigates the intrinsic risks linked to the renewable energy sector and associated technologies.
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Offshore wind
For the second instalment in our series, Jan provides an informed analysis of the offshore wind sector.
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Onshore wind
In the first instalment of our series, Jan Pagan analyses the perceived risks within the onshore wind energy sector.