Why climate resilience matters for the renewables sector
Climate risk refers to the potential adverse effects of climate change on businesses, infrastructure, and ecosystems.
For renewable energy, the stakes are particularly high.
Solar and wind energy assets, designed to combat climate change, are not immune to its effects. Flooding, extreme heat, and wildfires threaten the operational efficiency and lifespan of renewable energy projects.
The urgency of addressing climate risks is amplified as the global energy mix evolves towards renewables. Countries worldwide are accelerating their transition to clean energy to meet net zero commitments. According to the International Energy Agency (IEA), renewable energy will account for 35% of global electricity generation by 2025, up from 28% in 2020. Solar energy alone is expected to add over 1,000 gigawatts of capacity between 2023 and 2030, reflecting its critical role in the decarbonisation of energy systems.
As this transition gathers momentum, renewable energy investments are skyrocketing. BloombergNEF estimates that global investment in renewables reached $495 billion in 2022, a record high.
This trend is expected to continue as governments and private sectors align with international climate goals. However, these growing investments are increasingly exposed to climate-related risks, which could undermine their contribution to sustainability and profitability.
Building resilience is crucial to ensure that renewable energy systems not only withstand climate impacts but also deliver uninterrupted clean energy.
For the renewable energy sector to fulfil its role in combating climate change, protecting these assets from the impacts of a warming world is non-negotiable.
Climate risks and the solar sector
Solar energy assets are increasingly exposed to a range of climate-related risks, driven by the intensifying effects of global warming and the rapid expansion of solar farms into more diverse and often risk-prone regions. Below, we explore key hazards, their geographic distribution, and their impacts, supported by real-world examples and data.
Hailstorms
- Risks: Hail can cause significant physical damage to solar panels, breaking glass, and impairing functionality. Panels in hail-prone areas often lack historical data due to their remote locations.
- Geographic Hotspots: The area in the Central United States region where Nebraska, Colorado, and Wyoming meet, is known as Hail Alley, due to the frequency and severity of hail events.
Image source: VDE Americas
- Example: The 2019 Midway Solar hailstorm in West Texas caused $70–$80 million in damages, marking one of the largest renewable energy losses in U.S. history. Since then, annual solar hail claims have ranged from $5 million to $80 million, with 2022 witnessing record-breaking insurance losses of $300–$400 million due to hail.
Wildfires
- Risks: Wildfires damage solar farm structures, reduce energy output through smoke and ash sedimentation, and hinder maintenance operations.
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- Geographic Hotspots: Western U.S., Southern Europe, and parts of Australia face increasing wildfire risks due to prolonged dry conditions.
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- Example: During the 2023 Canadian wildfires, smoke reduced solar energy production on the U.S. East Coast by 1,466 MW, equivalent to powering approximately 200,000 homes. Meanwhile, 25% of solar farms globally are located in regions with over 200 wildfire-prone days annually.
Extreme Heat
- Risks: Photovoltaic (PV) panels lose efficiency as temperatures rise above 25°C, with performance declining 0.3%–0.5% per degree increase in panel temperature. This leads to material degradation and decreased energy output.
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- Geographic Hotspots: Regions experiencing frequent heat waves, including Australia, Africa, and parts of India, are most affected.
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- Example: A study in regions with average panel efficiencies ranging from 16% to 22% found that higher temperatures led to long-term performance losses, especially in rooftop installations exposed to continuous heat.
Storms and High Winds
- Risks: Extreme weather events such as cyclones and hurricanes can destroy solar infrastructure, including panel mounts and trackers, leading to fires or complete loss of systems.
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- Geographic Hotspots: Coastal areas in Asia (Japan, China, Korea) and the Southeastern U.S. are at high risk due to tropical cyclones.
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- Example: In 2019, Typhoon Faxai destroyed a floating solar farm in Japan, causing significant damage and fires. Improper fastening during Hurricane Maria in 2017 led to the total loss of a solar PV system in the U.S. Virgin Islands.
Flooding
- Risks: Coastal and riverine flooding disrupts access to solar farms and damages critical infrastructure.
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- Geographic Hotspots: Flood-prone areas such as Southeast Asia, parts of Europe, and the Gulf Coast of the U.S.
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- Example: An EarthScan analysis of a solar plant in Spain revealed extensive flooding risks that could affect operational access and increase repair costs.
Watch the full webinar recording where we discuss how Capital Dynamics - an asset manager with $6 bn of assets under management - utilises Mitiga's EarthScan to identify and act upon rising climate risks across its solar installations.
How to integrate climate risks into your overall investment strategy and process to build resilience for your solar assets
As climate risks intensify, integrating these considerations into investment strategies becomes essential for long-term profitability and sustainability. Solar energy assets require targeted measures to adapt to climate impacts. This section explores the use of climate intelligence, practical steps for building resilience, and innovative examples that showcase effective adaptation techniques.
Using climate intelligence for portfolio monitoring and adaptation planning
Climate Intelligence platforms
Climate intelligence tools provide detailed insights into climate risks such as flooding, wildfire, heat stress, and hailstorms. These platforms allow asset managers to:
- Understand asset-level risk across your entire portfolio.
- Evaluate the climate risk of new opportunities and acquisitions in your due diligence process.
- Prioritise actions for at-risk assets, implementing adaptation measures, risk transfer solutions, or divesting.
- Communicate risk to investors and meet regulatory reporting obligations.
Make Portfolio Decisions
By understanding climate risk across your entire portfolio you can make divestment, adaptation, and risk transfer decisions, to suit your risk appetite.
Guide Adaptation Plans
Based on climate risk insights, investors can guide their portfolio companies to implement location-specific adaptation strategies. For example:
- - Advising solar operators to strengthen hail protection measures in storm-prone regions.
- - Recommending wildfire prevention tactics such as vegetation management in high-risk zones.
Using climate intelligence to build resilience into your investment strategy
Perform Due Diligence
Climate risk intelligence should be a cornerstone of the due diligence process. Understanding site-specific risks early allows investors to make informed decisions about project feasibility, expected costs, and potential returns. For energy assets, this also includes assessing the generation potential of the site under current and future climate scenarios. This helps to ensure investments are optimised for long-term performance and sustainability.
Build Portfolio Resilience
Building a diversified portfolio reduces exposure to localized climate events. A geographically spread-out portfolio of solar farms mitigates risks from region-specific hazards, such as hurricanes in the Pacific or wildfires in California.
Designate Financial Resources
Allocating funds for resilience-building measures - such as reinforcing structures or installing hail-resistant panels - at the investment planning stage enhances long-term returns and reduces insurance liabilities.
Differentiate Your Investment Strategy
Utilising climate risk intelligence as a strategic differentiator for your fund by communicating the competitive advantage it provides to potential investors during the fundraising process.
What resilience looks like in action
Example 1: Geo-Hazard Mitigation for Solar Farms
In the Southeastern U.S., a solar developer implemented slope stabilisation and erosion control measures to protect solar farms located on flood-prone hillsides. Using geotechnical assessments, the team reinforced soil stability with terracing and engineered drainage systems. These measures prevented flood-induced panel failures, ensuring reliable energy output.
Example 2: Enhanced Wind Resistance in the Caribbean
Solar farms in hurricane-prone regions, such as the Caribbean, have adopted flexible mounting systems designed to withstand high winds. These systems include adjustable panel angles and reinforced supports, reducing damage during storms like Hurricane Maria.
Example 3: Hail Resilience Reduced Insurance Premiums
In North Central Texas, a solar developer that was highly exposed to hail, implemented a number of resilience measures to reduce its vulnerability. Both physical hardening measures, such as thicker glass, and operational procedures, such as proactive stowing, were introduced across the 140MW asset valued at $100m. Using these resilience measures, the developer was able to leverage a 72% reduction in its NatCat insurance rate.
Case Study with EarthScan: Capital Dynamics and climate risk assessment
Capital Dynamics offers an example of integrating climate risk into your investment strategy. The organisation has partnered with Mitiga and leveraged EarthScan to analyse risks at specific solar sites in Spain and Italy, identifying vulnerabilities to flooding and wildfire. For instance:
- Southern Spain: EarthScan revealed significant flooding risks at a solar farm in Cadiz. By mapping the area beyond a single asset point, it identified vulnerable access routes, enabling preemptive action.
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- Sicily, Italy: Here, wildfire risks posed a major threat. EarthScan's grid-based analysis highlighted areas requiring vegetation management and firebreaks to protect the asset.
These insights have allowed Capital Dynamics to adopt targeted resilience measures, ensuring that assets remain operational and profitable despite escalating climate risks.
Examples of how to make solar assets resilient
Hailstorms:
- Use hail-resistant panels
- Reinforced glass
- Predictive hail monitoring systems
Wildfires:
- Maintain firebreaks
- Clear vegetation near installations
- Use fire-resistant materials
Extreme Heat:
- Utilise high-temperature-resistant panels
- Enable convective airflows beneath panels
- Consider floating solar installations over water
Flooding:
- Install elevated mounting systems
- Design robust drainage infrastructure
- Relocate vulnerable electrical components
Storms and High Winds:
- Reinforce mounting systems
- Use aerodynamic panel designs
- Ensure high-quality construction practices
What is the expected return on investment of building climate resilience within a portfolio?
Investing in climate resilience within a solar portfolio provides financial benefits while addressing the growing risks posed by climate change.
Proactively implementing measures to safeguard assets against hazards like floods, wildfires, and hailstorms can directly improve Return on Investment (ROI) by reducing operating costs such as maintenance and insurance premiums, and by enhancing energy output and asset performance. At Capital Dynamics, these resilience investments are central to its strategy, ensuring long-term profitability, mitigating risks, and building trust with stakeholders.
One of the most immediate benefits of resilience is the ability to lower insurance premiums. Assets protected by robust measures - such as reinforced infrastructure or firebreak systems - are less likely to suffer damage, making them less expensive to insure.
Alongside this, resilience reduces the need for costly repairs and mitigates revenue losses caused by downtime during extreme weather events. By addressing these vulnerabilities, Capital Dynamics has effectively reduced operating costs across its portfolio while maintaining steady energy production.
The financial advantages of resilience extend beyond immediate cost reductions. Investors and other external stakeholders increasingly recognise that climate resilience is essential for long-term value creation. At Capital Dynamics, a key focus has been communicating the financial and environmental returns of these investments clearly.
By providing detailed metrics - such as insurance savings, improved operational efficiency, and avoided revenue losses - the firm demonstrates how resilience is not just about managing risks but also about driving profitability. This transparency strengthens investor trust and reinforces the alignment between sustainable practices and financial performance.
Capital Dynamics’ approach highlights the broader value of investing in climate resilience. For example, by using tools like EarthScan to assess risks and implement targeted measures, the firm has successfully mitigated hazards and secured stable returns for its investors. These efforts underscore the importance of proactive risk management in ensuring the reliability and profitability of solar assets.
What changes in policy or regulation could impact the future of climate-resilient infrastructure investments?
The future of climate-resilient infrastructure investment is increasingly influenced by policy and regulation. Governments and organisations are stepping up efforts to address climate risks through measures that improve transparency and accountability, and incentivise climate adaptation. These changes are expected to significantly impact how companies incorporate climate resilience into their portfolios.
One major development is the introduction of the International Sustainability Standards Board (ISSB) standards and the Sustainable Finance Disclosure Regulation (SFDR), designed to standardise ESG (Environmental, Social, and Governance) reporting and climate risk disclosures. As these standards gain global traction, enhanced transparency and comparability will influence investors to favour companies, funds and assets that demonstrate a more proactive approach to risk, resilience and sustainability.
Firms like Capital Dynamics are already setting an example by utilising tools like EarthScan to incorporate climate risk data into their strategies. By aligning with these emerging regulations and adopting proactive adaptation measures, they position themselves as leaders in sustainable investing. This approach not only ensures compliance with evolving standards but also creates opportunities to attract capital, demonstrate leadership in the industry, and secure returns on their investments.
In addition to reporting regulations, governments are likely to introduce further incentives to encourage resilience-focused investments, such as tax breaks, grants, or subsidies for climate-adaptive projects. These measures will reduce the financial burden of implementing resilience strategies, making it easier for firms to align with regulatory expectations while enhancing their competitive position.
From compliance to competitive advantage: The evolution of climate intelligence
The way companies view climate risk is changing. Once seen as just a compliance requirement, understanding climate risks is now becoming a core part of smart business planning, as businesses increasingly realise that climate risk is also business risk.
New regulations are bringing more data and insights to light, helping companies identify gaps in their resilience. Businesses that act early can better prepare for climate challenges, while those that do not may face costly setbacks, including damaged assets and lower returns, as extreme weather events become more common.
After facing losses, more companies are turning to tools that help them predict and manage climate risks. These tools are becoming essential for making informed decisions about where and how to invest. Planning for climate risk is no longer optional; it is a smart way to protect business performance and stay competitive.
As more renewable energy projects are built to meet growing demand, and the best locations become harder to find, factoring in climate risks will be crucial. Companies that use this knowledge to guide their decisions will be better equipped to adapt, protect their assets, and succeed in an unpredictable future.
Build resilience with EarthScan
As climate risks become more pressing, integrating resilience into your solar energy investments is critical for long-term success. Protecting your assets from extreme weather, reducing costs, and maintaining energy generation are all essential steps to ensure your portfolio thrives in a changing climate. By planning ahead and taking proactive measures, you can safeguard your investments while reinforcing your commitment to sustainability.
This is where EarthScan comes in. With its ability to assess climate risks specific to your solar assets, EarthScan provides clear, actionable insights to help you identify potential vulnerabilities and make smart, informed decisions. Whether it is understanding flood risks, wildfire threats, or other climate hazards, EarthScan equips you with the tools to adapt and future-proof your investments.
Don’t leave your solar investments vulnerable to the impacts of a changing climate. Partner with EarthScan today and ensure your assets are ready to weather the future.
