Solar PV Risk Review: Managing Risk Across the Project Lifecycle

Indonesia's solar energy transition is creating significant opportunities for developers, investors, and businesses—but with growth comes a broader and more complex risk landscape. This Risk Review examines the risks and exposures surrounding solar PV projects, from construction and natural perils to equipment failure, BESS, business interruption, and the financial consequences of prolonged downtime, helping stakeholders understand what can threaten project value and how those risks can be managed before they become losses.

Why This Matters

The growth of solar power is often measured in megawatts, investment value, and the number of projects entering development or operation. These indicators are important, but they do not tell the full story.

A solar PV project is a long-term infrastructure investment. Its value depends not only on the successful completion of construction, but on its ability to operate safely, reliably, and profitably throughout its intended operating life.

This means that risk can emerge at every stage of the project lifecycle.

Before construction begins, decisions around site selection, technology, engineering design, contractors, supply chains, and contractual arrangements can shape the project’s future risk profile. During construction, transportation, storage, installation, testing, and commissioning create additional exposures. Once operational, equipment reliability, natural hazards, fire, electrical systems, grid connections, maintenance, and business interruption become increasingly important.

The risk becomes even more complex as the industry adopts new technologies and project configurations.

Commercial and industrial rooftop solar becomes part of an existing operating facility. Floating solar introduces marine and environmental considerations. Solar-plus-BESS projects combine photovoltaic generation with energy storage technologies that bring their own technical and fire-related exposures.

A loss affecting one component can therefore have consequences far beyond the damaged asset itself.

A failed transformer can interrupt generation. A fire can affect an entire installation. Flooding can prevent access to a site and delay recovery. A BESS incident can affect both the storage system and surrounding infrastructure. And prolonged equipment failure can turn a physical loss into a significant business interruption and financing exposure.

For project owners, investors, lenders, and other stakeholders, the central question is therefore not simply whether a particular risk can occur.

It is whether the project has been designed and prepared to withstand, respond to, and recover from that risk without undermining its long-term value.

This is where risk management becomes an integral part of project development.

Insurance can provide an important layer of financial protection, but insurance alone does not make a project resilient. Effective risk management requires an understanding of the underlying exposures and how they interact—with appropriate attention to prevention, engineering controls, contractual risk allocation, emergency planning, business continuity, risk retention, and risk transfer.

The purpose of this Risk Review is to examine that broader risk landscape.

Rather than looking at solar projects only from the perspective of insurance coverage, it considers the risks that can affect the asset, the operation, the revenue stream, and ultimately the investment itself.

The Context

Indonesia’s Solar Ambition Is Growing Alongside a New Risk Landscape

Indonesia is entering a new chapter in its energy transition. Solar power is no longer viewed simply as a promising renewable-energy technology; it is increasingly becoming part of the country's broader energy strategy.

The ambition is substantial, with the government targeting 100 GW of solar power. An initial phase of approximately 17 GW of solar capacity is being considered alongside around 33 GW of battery energy storage systems (BESS).

Yet Indonesia's installed solar capacity remains relatively modest. By the end of 2025, cumulative solar capacity had reached approximately 1.49 GW, with around 546 MW of new capacity added during the year.

The gap between current capacity and future ambition represents a significant investment opportunity.

Utility-scale solar, commercial and industrial rooftop systems, floating solar, and solar-plus-BESS projects are all expected to play a role in Indonesia's energy transition.

For investors and developers, however, the opportunity should not be viewed only in terms of installed capacity, energy output, or project returns.

A solar PV project is a long-term infrastructure investment involving land, structures, electrical systems, inverters, transformers, transmission connections, batteries, software, contractors, financing, and operations.

Each component introduces its own risk.

More importantly, these risks are interconnected.

A physical loss to a critical piece of equipment can become an operational disruption. An operational disruption can become lost revenue. A construction delay can affect contractual obligations and financing. A failure within a BESS can create consequences extending beyond the battery itself.

The challenge, therefore, is not simply how quickly solar projects can be built.

It is whether the risks surrounding those investments are being understood and managed well enough to protect their long-term value.

For a project expected to operate for decades, risk management should be considered part of the investment strategy—not an administrative exercise after the project has already been designed and financed.

The Risk

A Solar Project Is Not a Low-Risk Asset

Solar PV is often perceived as relatively straightforward compared with conventional power generation.

There is no fuel combustion, relatively few moving mechanical components, and the primary energy source—the sun—is freely available.

But free energy does not mean free risk.

A solar project can suffer losses at virtually every stage of its lifecycle.

During construction, solar modules, mounting structures, cables, inverters, transformers, and other equipment must be transported, stored, handled, and installed. Large-scale projects may involve multiple contractors and subcontractors working simultaneously across extensive sites.

This creates exposures including:

Damage during transportation
Improper storage
Handling damage
Installation errors
Electrical accidents
Fire
Theft
Weather-related damage
Contractor accidents
Third-party liability
Construction delays

Once the project becomes operational, the risk profile changes—but it does not disappear.

Inverters, transformers, switchgear, cables, monitoring systems, and grid connections can become critical to the continuity of electricity generation. The failure of a single component may have consequences disproportionate to its physical value if it interrupts the operation of the wider generation system.

Natural perils create another layer of uncertainty.

Indonesia is exposed to earthquakes, floods, landslides, volcanic activity, strong winds, lightning, and other weather-related events. A solar project site therefore needs to be evaluated for more than solar irradiation.

Questions should include:

Is the site exposed to flooding?
What is the seismic profile?
Is the project located near a volcano?
Is the site vulnerable to landslides?
What are the prevailing wind conditions?
Is drainage adequate?
Is the access road vulnerable?
Can emergency services reach the site?
What happens if the grid connection is interrupted?

These questions should be addressed during project development—not after a loss occurs.

The risk landscape also changes as solar technology evolves.

Rooftop Solar

Commercial and industrial rooftop solar becomes part of an existing facility. The installation therefore interacts with manufacturing operations, warehouses, chemical processes, electrical systems, fire protection, building structures, employees, and existing machinery.

The solar installation must consequently be assessed not only as an energy asset but also as part of the existing property risk.

Structural integrity, electrical safety, fire exposure, maintenance access, and emergency response all matter.

For industrial customers, an additional question becomes critical:

What happens to production if the solar installation causes or contributes to an incident at the facility?

This is where solar risk management extends beyond the solar system itself.

Floating Solar

Indonesia is also exploring floating solar PV.

Floating solar offers an attractive solution where land availability is limited, but placing solar equipment on water introduces a different risk environment.

Additional considerations include:

Floating structures
Mooring systems
Water-level changes
Strong winds
Waves
Corrosion
Access for maintenance
Electrical safety
Water quality
Environmental considerations
Marine and weather-related exposures

The lesson is important:

New technology creates new opportunities—but also new risk profiles.

Risk management and insurance solutions therefore cannot simply replicate the approach used for conventional ground-mounted solar projects.

Battery Energy Storage Systems

One of the most significant developments in Indonesia's solar strategy is the increasing role of Battery Energy Storage Systems.

Solar generation is intermittent. Energy storage can help balance supply and demand, improve system flexibility, and support grid reliability.

But batteries introduce another category of risk.

Thermal events, electrical faults, battery degradation, fire propagation, and system-control failures require specialized consideration.

A solar-plus-BESS project therefore needs to be assessed as a combined system, rather than treating the PV plant and battery installation as completely separate exposures.

Questions should include:

Where is the BESS located?
What battery technology is being used?
What fire protection system is installed?
How is thermal runaway detected?
What emergency response procedures exist?
What separation distances are maintained?
How quickly can the system be isolated?
What happens to revenue if the BESS becomes unavailable?

The larger and more integrated the system becomes, the more important these questions are.

The Exposure

The Real Financial Exposure Goes Beyond the Physical Asset

The financial exposure of a solar project extends well beyond the replacement value of its physical assets.

A damaged solar module may be relatively straightforward to replace.

But the failure of an inverter, transformer, BESS component, or grid connection can potentially interrupt the generation capability of the entire project.

This creates a critical distinction between asset value and business value.

A solar project may contain millions of dollars of physical equipment, but its economic value ultimately comes from its ability to generate electricity and produce revenue over its operating life.

The financial consequences of a major loss may therefore include:

Physical asset loss — damage to modules, structures, inverters, transformers, cables, BESS, and other equipment.
Construction loss — damage during transportation, storage, installation, testing, commissioning, or construction activities.
Natural catastrophe loss — flooding, earthquake, landslide, volcanic activity, strong wind, lightning, and other site-specific perils.
Operational loss — equipment breakdown, electrical faults, system failure, maintenance issues, and grid interruption.
Business interruption — lost generation revenue, continuing fixed costs, additional operating expenses, and delayed recovery.
Contractual exposure — obligations between owners, EPC contractors, suppliers, operators, lenders, and other project stakeholders.
Financing exposure — continuing debt and financing obligations while the project is unable to generate expected revenue.
Third-party liability — injury, property damage, or other losses affecting third parties arising from project activities.
Emerging technology exposure — additional risks associated with floating solar, BESS, digital monitoring, and increasingly integrated energy systems.

Business interruption deserves particular attention.

The panels and equipment may eventually be repaired or replaced. The more difficult question is what happens to the project's financial performance while it is unable to generate electricity.

Lost revenue can continue while fixed costs, financing obligations, and other commitments remain.

A project can therefore survive physical damage but still face significant financial pressure from prolonged downtime.

This is why the risk assessment of a solar project should not stop at the question:

“What could damage the equipment?”

The more important questions are:

“What could interrupt the investment?”

“How long could the project be unable to operate?”

“What would that interruption mean for revenue, financing obligations, contractual commitments, and overall investment value?”

Understanding these exposures is the foundation for determining which risks should be prevented, mitigated, retained, contractually allocated, or transferred.

L&G Perspective

From Insurance Buying to Managing Investment Risk

At L&G, we believe the risk conversation around solar projects should begin well before an insurance policy is placed.

The fundamental question should not be:

“What insurance can we buy?”

It should be:

“What risks can threaten the investment, and what is the most effective way to manage each one?”

For a solar PV project, risk management should begin during project development and continue throughout the asset lifecycle.

This means understanding the project's physical characteristics, location, technology, construction methodology, contractual structure, operational dependencies, financing arrangements, and revenue model.

A meaningful risk assessment should identify not only what can go wrong, but also how one event can create consequences across the wider investment.

For example, damage to a transformer is initially a physical loss. But if that transformer is critical to the plant's generation capacity, the resulting downtime can become a business interruption loss. If the interruption continues for an extended period, it may affect revenue, debt servicing, contractual commitments, and ultimately the project's financial performance.

The same principle applies to emerging technologies such as BESS and floating solar. Their risks cannot be assessed in isolation from the wider system in which they operate.

This is why we believe effective risk management requires a combination of prevention, engineering, contractual risk allocation, contingency planning, operational controls, and insurance.

Insurance has an important role—but it is only one part of the solution.

For investors and project owners, the objective should be to understand which risks can be eliminated or reduced, which risks should be retained, which should be allocated to contractors or other parties, and which risks are better transferred to insurers.

This approach also changes the role of the insurance broker.

A professional broker should not simply compare quotations or identify available policy limits. The broker should understand the technology, project structure, contractual obligations, potential loss scenarios, financial consequences, and the client's broader business objectives.

Only with that understanding can insurance function effectively as a risk-transfer mechanism within a broader risk management strategy.

For solar projects, the ultimate objective is not simply to insure the panels, inverters, transformers, or batteries.

It is to protect the ability of the project to deliver its intended value over its operating life.

That means looking beyond the individual asset and considering the resilience of the entire investment.

Building Solar Capacity Is Not Enough

Indonesia's solar ambition creates enormous opportunities for developers, EPC contractors, equipment manufacturers, financiers, technology providers, and investors.

But the next phase of solar development should not be measured only by how many megawatts are installed.

It should also be measured by:

How resilient are those megawatts?

A solar project that generates clean electricity reliably for 25 years is a valuable asset.

A solar project that repeatedly suffers avoidable failures, prolonged downtime, or inadequate risk protection is a very different investment proposition.

The objective should therefore be simple:

Build renewable energy.

Build it efficiently.

Build it safely.

And build it to last.

Because ultimately, the energy transition is not only about generating clean power.

It is about creating infrastructure capable of delivering value reliably for decades.

And that requires something that is often overlooked in the excitement of new investment:

Risk Management.

A Question for Developers, Investors and Project Owners

If your solar project suffered a major loss tomorrow, would your risk management strategy protect not only the equipment—but also your revenue, financing obligations, contractual commitments, and long-term investment value?

If the answer is uncertain, perhaps the risk assessment should start before the next panel is installed.

L&G Insurance Broker — Risk Management. Insurance Advisory. Claims Advocacy.

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