Storm hardening and insuring energy systems in typhoon-prone regions: A techno-economic analysis of hybrid renewable energy systems in the Philippines’ Busuanga island cluster

Abstract

Hybrid renewable energy systems (HRES) have emerged as a promising solution for delivering sustainable energy to off-grid communities. However, the vulnerability of specific regions to extreme weather events has raised concerns about the resilience of these systems. This study undertakes a techno-economic analysis to assess the impact and significance of incorporating storm hardening measures and insurance into an HRES designed for the Busuanga island cluster. Central to our study is introducing a novel cost metric, the probability-averaged levelized cost of electricity (LCOE), which adeptly captures the inherently probabilistic nature of climate-induced damages to HRES energy assets. This metric serves as the linchpin for comparing the economic viability of HRES configurations, considering both scenarios with and without storm hardening or insurance. Our findings unveil a clear trend: for a solar photovoltaic (PV) panel with an annual probability of damage at 1%, insurance emerges as a financially prudent choice, while storm hardening gains merit at a probability of 4%. The weighted average cost of capital (WACC) is pivotal in shaping investment decisions. HRES setups featuring non-hardened solar PV panels become more economically appealing than their insured or hardened counterparts under higher WACC conditions, under the condition that the solar PV panels can maintain functionality for 15 years without impairment. Our study demonstrates the importance of accounting for often overlooked factors such as storm hardening and insurance premiums for solar PV panels in climate-vulnerable areas, which are commonly disregarded in many techno-economic studies. Moreover, our findings and conclusions on the optimal balance between capital costs, insurance premiums, and storm-hardening markups can readily extend to other climate-vulnerable areas.

Keywords

• Storm hardening
• Insurance
• Energy resilience
• Typhoon
• Philippines