Shining a Light on Solar Energy

Over the past several years, interest in alternative energy sources has continued to grow. Solar power has become popular, and while not all locations are as sunny as others, frequently only space on the roof or yard is needed.

In 2010, 667 megawatts (MW) of solar energy were installed in homes, and by 2020 that had increased to 18,061 MW. A megawatt is one million watts, and a kilowatt is 1,000 watts. How many watts any given home uses depends on a number of variables, including the size of the home, location, climate, and other factors, making it difficult to provide an average number of how many houses can be powered by a certain amount of power. According to the Solar Energy Industries Association, there are 219.8 GW of solar currently installed in the U.S with 5,289,576 solar systems installed.

With the growth in solar energy, coverage issues begin to arise. Before we address these issues, we first need to understand how solar energy works and what technology is involved.

A solar roof consists of multiple components. The roof material itself, the unit converting solar energy to usable energy, and batteries are all important factors in using solar power.

But not all solar power is the same - there are solar roofs, solar panels, and solar tiles. Racking is important, and is how the solar panels or shingles are attached to the roof itself. Ground mounts are common for commercial properties and those with more space. Ground mounting makes the system easy to clean and maintain, and allows it to be facing the optimal direction to catch the sun's rays. There are also pole mounts, which allow the panels to be tiled at a steeper angle and are good for snowier climates. Ballasted racking uses a container with a frame on which to mount the solar panels. This allows the property owner to mount the panels on the ground without having to ding holes and create ground anchors to hold the panels.

Solar Roofs 

A solar roof is just that, a roof constructed of solar panels. No roofing layer is required, as the roof itself is made of various materials designed to absorb sunlight directly and act as photovoltaic cells. Solar metal roofs contain several layers with a solar cell layer with tempered glass on top. However, an underlayment is required, in order to ensure watertightness. The underlayment provides ventilation and a watertight layer.

The underlayment of any roof protects the building from condensation, rainwater, and moisture. It also lets the building breathe and allows water vapor from the structure to escape. Ventilation also helps keep the solar panels efficient, as overheating reduces efficiency.

Solar Panels 

Solar panels can be installed over existing roofing material in order to provide energy to the dwelling. Panels are modules mounted onto the existing roof structure and may have limits based on protrusions such as chimneys, vents or skylights. The panels may replace traditional shingles or tiles or may be mounted on the ground. Panels have some advantages in that they can be angled to maximize energy efficiency, can be removed and reinstalled, and are less expensive than an entire solar roof.

Solar Shingles 

Similar to asphalt, slate, or other roofing materials, solar shingles protect the dwelling from elements and contain solar cells that convert the sun’s radiation into energy. The shingles are generally UL-certified to withstand rain, wind, and hail. Active solar shingles can be mixed with inactive shingles - inactive shingles will be placed to create uniform looks around chimneys, skylights, and other protrusions.

The difference between shingles and solar panels is how they’re installed - shingles act as a structural roof. Panels are solar modules mounted onto the existing roof structure.

Other Components

Beyond tiles and shingles - an inverter is needed to convert the DC electricity generated by the solar panels to the alternating current (AC) electricity used in most buildings. Inverters may be strung together or may have an optimizer attached that allows each panel to operate independently. This allows a panel in the sun to still operate when other panels are shaded.

Then a monitoring system is needed, in order to advise the building owner about the amount of energy generated to the solar provider. The system must then be connected to a local utility grid - once the sun sets, the solar panels are no longer collecting any solar energy. The utility meter measures power consumption and output.

Batteries are also needed in order to store energy not being used. There are three types of batteries available - flooded lead-acid, sealed lead-acid, and lithium. Flooded lead-acid batteries are called “wet cell”, as the electrolyte is in liquid form. The units must be regularly refilled with distilled water as the water evaporates over time. Otherwise, the units may fail.

Sealed lead-acid batteries are just that, sealed. They require minimal maintenance and can be installed in any orientation since the units are sealed.

Lithium batteries are more expensive, but also last much longer, evening out costs over the life of the system. They are maintenance-free and modular so that the battery bank can readily be expanded as needed.

Because the whole point of solar roofs is to generate electricity, some other components are needed. Grounding systems should ensure that if a ground fault occurs, the inverter detects the fault, sends an alert and shuts down the system. Likewise, proper grounding of the system minimizes damage if lightning strikes nearby. Rapid shutdown systems are another important component, and these systems ensure that in the event of an emergency, or when the panels are being maintained, the panels can quickly be de-energized to prevent generating electricity.

Ownership

Another important consideration is who actually owns the solar technology. While many buy the solar roof/panels/shingles, it’s possible just to lease the technology. This saves a considerable amount of money upfront, but then the building owner does not own the panels. Maintenance is the responsibility of the lessor as long as that’s what is provided for in the leasing contract. Leases generally run 20 - 25 years; at the end of the lease the building owner has the option to buy the system outright at market price, including some additional fees. Leasing allows a building owner to use solar energy without the initial outlay. The lessor sells the solar energy to the building owner at a predetermined monthly rate. If the solar panels are leased, it is the responsibility of the leasing company to insure them.

Net Metering and Billing

One of the benefits of solar panels or shingles is the ability in some states to sell energy back to the utility company. This is known as net metering, and availability varies by state. In order for someone to sell unused power to the local utility, you may need an adjustment to the electrical meter or an entirely new meter installed, depending. This ties the solar energy directly to the grid, so the utility can monitor the excess energy generated and compensate the user. Net metering generally lowers electricity bills.

Net billing works a little differently than net metering. With net billing, the end user receives a lower rate of compensation for the extra energy. The excess electricity is sent back to the grid and the user is credited a certain amount from the utility company, but at wholesale rates. Net metering is a retail rate, so the user receives a little more in exchange for the excess energy created.

Perils 

Now that we understand the basics of solar technology, what are the risks? First, the panels/shingles/roof must be properly installed. Panels add considerable weight to an existing roof, so the underlying structure must be strong enough to support it. In order to avoid future leaks, sagging, or the potential of collapse, before a solar roof is installed the structure should be assessed to determine if it’s strong enough for the solar components. The installation should be done by a professional so that all electrical connections are sound and secure.

Fire

Fire is a risk if the roof/panels/shingles are not installed correctly or are not properly maintained. All electrical connections must be secure, and the system must be safely integrated with the existing electrical infrastructure. Electrical faults and other system failures can result in hot spots that could lead to fire. The panels themselves may not cause fires, but they can impede fire suppression efforts by presenting a shock hazard and preventing the use of water on the underlying roof system. Emergency shut-offs are critical so firefighters do not get shocked.

With ground-based solar panels, the overgrowth of vegetation could present an issue. It is important to keep surrounding vegetation appropriately trimmed so as not to provide fuel for fires sparked by ground-based solar panels.

Wind/Hail

Most solar panels are certified to withstand up to 140 mph winds, which is equivalent to cat 4 hurricanes (130-156 mph) or EF 3 tornadoes (136-165 mph). For reference, under ASTM D7158 class D sealed asphalt shingles are rated up to 90 mph, class G 120 mph, and class H 150 mph. Proper installation is key. As with any roof, keeping branches trimmed away from the building helps prevent tree limbs from falling on the roof and causing damage.

Hail is an obvious hazard. While solar panels are covered by a layer of glass, the glass is tempered. Tempered glass is strong enough to fend off light hail, less than an inch in diameter. There are hail-resistant solar panels with a UL 61730 rating. These panels are tested by having steel balls dropped on them and ice chunks fired at them from a cannon. These panels can survive hail stones up to 3 inches in diameter. While losses to solar installations are generally low, the industry has seen reports of claims totaling $5 million to $80 million. In 2022 a hailstorm in Texas caused more than $300 million in damage to solar fields.

Snow

Snow is an issue in that it blocks the panels from receiving light. Due to the fact that the panels are glass and tend to stay warm, the snow usually melts off faster than from a shingled or tiled roof. Snow sliding off the solar roof might damage gutters, outdoor furniture, or cars parked nearby. If enough snow lands on a roof, say during a blizzard or large storm producing several feet of snow, small cracks could occur in the glass or the racks could be warped.

Theft

Theft of panels is also an issue. Thieves reportedly use Google Earth and drones to scope out targets, and either steal whole panels to be resold, or the materials contained within the panels, such as copper.

Roof overload

Again, the structure of the underlying roof is important when panels or shingles are installed. If the roof isn’t designed to handle additional loads, the possibility of leaks, sagging, or even collapse due to the excess weight is an issue. Even if the roof can accommodate the weight of the panels, in areas with heavy snowfall, the roof needs to be able to support both the panels and the extra weight from a heavy snow load.

Insurance

Now that we have a better understanding of the components involved in solar energy, we need to look at insurance. Does coverage vary if an insured has solar panels on the roof, or is a roof a roof, and solar panels are just a detail?

Homeowners 

Under the standard ISO HO 00 03, there are no parameters referring to the type of roof an insured has, so whether the roof is asphalt, tile, or solar shingles, the roof is the roof. Where it could be an issue is the overall Coverage A limit if the solar panels/shingles were added later, that could increase the value of the home enough to affect the insurance to value requirement. Likewise there are no exclusions for solar panels either. If the solar panels/shingles are installed on the roof, then they are part of Coverage A. If the solar panels are installed on the ground next to or near the dwelling, then they become part of Coverage B, other structures. Other structures need to be separated from the structure by a clear space, and structures connected to the dwelling by only a fence, utility line or similar connection are still other structures.

However, structures from which a “business” is conducted is excluded. So what if the insured is selling energy back to the utility company? Is that a business? For that we need to look at the definition of “business”. The definition of business includes a trade, profession or occupation engaged in on a full-time, part-time, or occasional basis. It’s likely that an insured selling excess power back to the utility is not engaged in it as a trade, profession or occupation. But what about the parameters for “any other activity engaged in for money or other compensation, except those: for which no “insured” receives more than $5,000 in total compensation for the 12 months before the beginning of the policy period”. With this clause, as long as the insured is not receiving more than $5,000 in credits from the utility company, then selling power back to the utility would not be considered a business. Currently there are no endorsements that provide any special coverage or exclusions for solar panels installed on a dwelling.

Debris removal is an issue. Specialized labor is required to remove damaged panels to avoid shattering them before they get into the truck. Some states may consider solar panels/shingles as hazardous waste due to the minor amounts of heavy metals contained in them. The homeowners policy provides coverage for debris removal if a peril insured against damaged the property. Coverage is included in the property limit, but an additional 5% is available if the damage and debris removal costs exceed the limit of liability available on the policy. Ordinance or law coverage also includes increased costs to remove debris when required by an ordinance or law.

Commercial Property 

The Business and Personal Property form CP 00 10, does not separate outdoor fixtures into a separate coverage section - Covered Property includes the building, including completed additions, fixtures, including outdoor fixtures, and permanently installed machinery and equipment. The only mention of type of roof is under the exclusion for property not covered that describes “land, water, growing crops or lawns (other than lawns which are part of a vegetated roof)” and later in that section under q.(2) Fences, ration or television antennas…shrubs or plants (other than trees, shrubs or plants which are “stock” or are part of a vegetated roof)”. Under the Causes of Loss - Special Form CP 10 30, roof is mentioned only a few times and there are no references to solar roof components. Damage to the roof that allows rain in, weight of rain on the roof, and lawns that are part of a vegetated roof are the only places roof is mentioned in particular. There is no mention in either policy of solar components. So solar panels or other components on a roof would be treated like any other component. The Increased Cost of Loss and Related Expenses for Green Upgrades endorsement CP 04 02 mentions solar one time, regarding an exclusion for replacing electrical wiring on a vegetated roof with solar panels, since the purpose of the vegetated roof is not to generate electric power.

Similar to the homeowners policy, debris removal is an additional coverage. An additional $25,000 is available for debris removal if the total of debris removal plus the amount of the loss exceeds the available limits, or if the debris removal exceeds 25% of the sum of the deductible and the amount paid for direct physical damage to the property.

Conclusion

So there are currently no endorsements addressing the unique exposures of solar panels. ISO is however taking a look at the issue. In the December 19 circular, the minutes from the November 19, 2024 Personal Property Panel meeting were provided. ISO staff had requested input on potential solar panel exposures. Items discussed included possible exclusions with buybacks, sublimits, total exclusions, agreed value settlement, additional interest endorsements to address ownership issues, different rating for leased solar panels, the definition of business when selling power back to the grid, and differences in exposure because of full solar roofs versus solar panels and solar shingles. ISO is considering the information provided to determine what actions may be needed going forward.