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Private providers have started returning to the fire-ravaged state, but its insurer of last resort still has huge and growing exposure.
The massive wildfires in Pacific Palisades and Altadena in Southern California may deal a devastating blow to the state’s fragile home insurance market, which is in the midst of large-scale reforms as part of an effort to lure private insurers back to the state.
In the years running up to yesterday’s, today’s, and likely tomorrow’s fires, several home insurers announced plans to stop writing new policies in California, or even leave the state entirely. The industry and many analysts blamed not just California’s famously hostile mix of dry vegetation, high winds, and scarce rains, but also a rise in construction and reinsurance costs and a regulatory system that made it difficult for insurers to raise rates or think prospectively about risk when setting rates.
In other words, it was simply easier for insurers to not renew policies than it was for them to increase rates to better adjust for risk. Some of these non-renewals occurred in the area now affected by the Eaton Fire in Altadena, though they were most prevalent in the Bay Area and the Sierra Nevada foothills.
In response, California’s insurance commissioner Ricardo Lara rolled out a set of reforms last year that tried to both expand insurance in wildfire prone areas and lure insurers back to the state. The new rules would allow insurers to use models to determine risk (not just historical data, as the law had previously been interpreted to allow) while also mandating that insurance companies operating in the state write policies in fire-prone areas as well as in those that are relatively safe. Lara then issued another rule late last year allowing insurers to use the cost of reinsurance in determining their rates, which insurers in the rest of the country are allowed to do.
Allstate, which announced in November, 2022 that it would stop writing new home insurance policies in California, said last spring that it was considering a return to the state based on the possibility of models being allowed for ratemaking. At the end of last year, partly in response to the reforms, Farmers also said that it would restart writing new policies for some lines of business in California, and that it would increase the number of new homeowners insurance policies it writes every month after instituting limits in 2023. Last week, Verisk submitted a model to project wildfire risk to the state for regulatory agency review for use in rate-setting.
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Consumer advocates have warned that these rules would lead to increases in insurance rates. So has Lara’s predecessor, Dave Jones, who has been skeptical of trying to grow the private insurance market by giving it more flexibility to set rates without addressing the core issues of climate change and fire management policy.
“In the long term, we’re not going to be able to ‘rate increase’ ourselves out of this problem,” he said in an interview with the University of California, pointing to Florida’s insurance problems as an example, despite the flexibility that insurers have in setting rates there. “In the short-and mid-term for California, giving insurers proposed higher rates will get them to start writing new insurance again — although many homes in the wildland urban interface will continue to face challenges. But in the longer term, higher rates alone are likely to be overwhelmed by the higher risks and losses from climate change — just like in Florida.”
Like Florida, California has a backup for the private market, an insurer of last resort. And, like Florida, it’s been trying to make it smaller, to little avail. It may now be so large as to place the rest of the state at financial risk.
California’s FAIR Plan is a fire insurance pool that all property and casualty insurers operating in the state contribute to in proportion to how much business they have in the state; homeowners turn to FAIR when they can’t get insurance otherwise. As the state has experienced massive wildfires and insurers have pulled out, the size of the FAIR Plan has ballooned, with exposure rising to $458 billion in 2024 from $153 billion in 2020, even as it explicitly says that its “goal is attrition” (i.e. getting customers back on normal insurance plans).
“It’s a socialized cost,” Kate Gordon, the chief executive of California Forward, a policy nonprofit, and former advisor to Secretary of Energy Jennifer Granholm, told me. “We see more and more people switching to the FAIR plan. It’s getting massively oversubscribed. It’s going to hit some kind of wall at some point.”
The communities with the most wildfire exposure for the insurer include vacation areas throughout the state such as Lake Arrowhead, Truckee, and Big Bear Lake, and affluent residential communities including Berkeley and the San Francisco suburb Orinda. They also include Pacific Palisades, the fifth most wildfire-exposed market for FAIR in Southern California, with some $5.9 billion of exposure.
While the fires have yet to be substantially contained, let alone extinguished, and the damage has not yet been calculated, the still-raging fires will likely constitute a major hit to the FAIR Plan and California insurers. The number of residential FAIR policies in the Pacific Palisades zip code grew by over 80% between 2023 and 2024, and has quadrupled since 2020. The total financial exposure for residential insurance in Pacific Palisades doubled in the past year, growing to almost $3 billion. In one zipcode affected by the fire in Altadena, residential FAIR plan policies grew by over 40% since 2020, with around $950 million of total exposure.
“As the risk of more climate change-intensified wildfires increases in California, a major wildfire in one geographical area concentrated with FAIR Plan-insured properties could overwhelm the FAIR Plan’s reserves and its capacity to quickly and fully pay consumers’ claims,” Lara wrote in a bulletin in September.
Like other states with insurers of last resort, the FAIR Plan can seek cash from insurers — which could, if the losses are large enough, extract “temporary supplemental fees from their own policyholders,” according to new California insurance regulations. This would mean that Californians who were able to buy private insurance — because they don’t live in a region of the state that insurers have abandoned — could be on the hook for massive wildfire losses. While such an assessment has not occurred since 1994, Victoria Roach, the FAIR Plan’s president, warned in a hearing before the State Assembly last March that a major fire could knock out the plan’s reserves and force it to go to insurers — and their policyholders — to shell out for the difference.
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New York City may very well be the epicenter of this particular fight.
It’s official: the Moss Landing battery fire has galvanized a gigantic pipeline of opposition to energy storage systems across the country.
As I’ve chronicled extensively throughout this year, Moss Landing was a technological outlier that used outdated battery technology. But the January incident played into existing fears and anxieties across the U.S. about the dangers of large battery fires generally, latent from years of e-scooters and cellphones ablaze from faulty lithium-ion tech. Concerned residents fighting projects in their backyards have successfully seized upon the fact that there’s no known way to quickly extinguish big fires at energy storage sites, and are winning particularly in wildfire-prone areas.
How successful was Moss Landing at enlivening opponents of energy storage? Since the California disaster six months ago, more than 6 gigawatts of BESS has received opposition from activists explicitly tying their campaigns to the incident, Heatmap Pro® researcher Charlie Clynes told me in an interview earlier this month.
Matt Eisenson of Columbia University’s Sabin Center for Climate Law agreed that there’s been a spike in opposition, telling me that we are currently seeing “more instances of opposition to battery storage than we have in past years.” And while Eisenson said he couldn’t speak to the impacts of the fire specifically on that rise, he acknowledged that the disaster set “a harmful precedent” at the same time “battery storage is becoming much more present.”
“The type of fire that occurred there is unlikely to occur with modern technology, but the Moss Landing example [now] tends to come up across the country,” Eisenson said.
Some of the fresh opposition is in rural agricultural communities such as Grundy County, Illinois, which just banned energy storage systems indefinitely “until the science is settled.” But the most crucial place to watch seems to be New York City, for two reasons: One, it’s where a lot of energy storage is being developed all at once; and two, it has a hyper-saturated media market where criticism can receive more national media attention than it would in other parts of the country.
Someone who’s felt this pressure firsthand is Nick Lombardi, senior vice president of project development for battery storage company NineDot Energy. NineDot and other battery storage developers had spent years laying the groundwork in New York City to build out the energy storage necessary for the city to meet its net-zero climate goals. More recently they’ve faced crowds of protestors against a battery storage facility in Queens, and in Staten Island endured hecklers at public meetings.
“We’ve been developing projects in New York City for a few years now, and for a long time we didn’t run into opposition to our projects or really any sort of meaningful negative coverage in the press. All of that really changed about six months ago,” Lombardi said.
The battery storage developer insists that opposition to the technology is not popular and represents a fringe group. Lombardi told me that the company has more than 50 battery storage sites in development across New York City, and only faced “durable opposition” at “three or four sites.” The company also told me it has yet to receive the kind of email complaint flood that would demonstrate widespread opposition.
This is visible in the politicians who’ve picked up the anti-BESS mantle: GOP mayoral candidate Curtis Sliwa’s become a champion for the cause, but mayor Eric Adams’ “City of Yes” campaign itself would provide for the construction of these facilities. (While Democratic mayoral nominee Zohran Mamdani has not focused on BESS, it’s quite unlikely the climate hawkish democratic socialist would try to derail these projects.)
Lombardi told me he now views Moss Landing as a “catalyst” for opposition in the NYC metro area. “Suddenly there’s national headlines about what’s happening,” he told me. “There were incidents in the past that were in the news, but Moss Landing was headline news for a while, and that combined with the fact people knew it was happening in their city combined to create a new level of awareness.”
He added that six months after the blaze, it feels like developers in the city have a better handle on the situation. “We’ve spent a lot of time in reaction to that to make sure we’re organized and making sure we’re in contact with elected officials, community officials, [and] coordinated with utilities,” Lombardi said.
And more on the biggest conflicts around renewable energy projects in Kentucky, Ohio, and Maryland.
1. St. Croix County, Wisconsin - Solar opponents in this county see themselves as the front line in the fight over Trump’s “Big Beautiful” law and its repeal of Inflation Reduction Act tax credits.
2. Barren County, Kentucky - How much wood could a Wood Duck solar farm chuck if it didn’t get approved in the first place? We may be about to find out.
3. Iberia Parish, Louisiana - Another potential proxy battle over IRA tax credits is going down in Louisiana, where residents are calling to extend a solar moratorium that is about to expire so projects can’t start construction.
4. Baltimore County, Maryland – The fight over a transmission line in Maryland could have lasting impacts for renewable energy across the country.
5. Worcester County, Maryland – Elsewhere in Maryland, the MarWin offshore wind project appears to have landed in the crosshairs of Trump’s Environmental Protection Agency.
6. Clark County, Ohio - Consider me wishing Invenergy good luck getting a new solar farm permitted in Ohio.
7. Searcy County, Arkansas - An anti-wind state legislator has gone and posted a slide deck that RWE provided to county officials, ginning up fresh uproar against potential wind development.
Talking local development moratoria with Heatmap’s own Charlie Clynes.
This week’s conversation is special: I chatted with Charlie Clynes, Heatmap Pro®’s very own in-house researcher. Charlie just released a herculean project tracking all of the nation’s county-level moratoria and restrictive ordinances attacking renewable energy. The conclusion? Essentially a fifth of the country is now either closed off to solar and wind entirely or much harder to build. I decided to chat with him about the work so you could hear about why it’s an important report you should most definitely read.
The following chat was lightly edited for clarity. Let’s dive in.
Tell me about the project you embarked on here.
Heatmap’s research team set out last June to call every county in the United States that had zoning authority, and we asked them if they’ve passed ordinances to restrict renewable energy, or if they have renewable energy projects in their communities that have been opposed. There’s specific criteria we’ve used to determine if an ordinance is restrictive, but by and large, it’s pretty easy to tell once a county sends you an ordinance if it is going to restrict development or not.
The vast majority of counties responded, and this has been a process that’s allowed us to gather an extraordinary amount of data about whether counties have been restricting wind, solar and other renewables. The topline conclusion is that restrictions are much worse than previously accounted for. I mean, 605 counties now have some type of restriction on renewable energy — setbacks that make it really hard to build wind or solar, moratoriums that outright ban wind and solar. Then there’s 182 municipality laws where counties don’t have zoning jurisdiction.
We’re seeing this pretty much everywhere throughout the country. No place is safe except for states who put in laws preventing jurisdictions from passing restrictions — and even then, renewable energy companies are facing uphill battles in getting to a point in the process where the state will step in and overrule a county restriction. It’s bad.
Getting into the nitty-gritty, what has changed in the past few years? We’ve known these numbers were increasing, but what do you think accounts for the status we’re in now?
One is we’re seeing a high number of renewables coming into communities. But I think attitudes started changing too, especially in places that have been fairly saturated with renewable energy like Virginia, where solar’s been a presence for more than a decade now. There have been enough projects where people have bad experiences that color their opinion of the industry as a whole.
There’s also a few narratives that have taken shape. One is this idea solar is eating up prime farmland, or that it’ll erode the rural character of that area. Another big one is the environment, especially with wind on bird deaths, even though the number of birds killed by wind sounds big until you compare it to other sources.
There are so many developers and so many projects in so many places of the world that there are examples where either something goes wrong with a project or a developer doesn’t follow best practices. I think those have a lot more staying power in the public perception of renewable energy than the many successful projects that go without a hiccup and don’t bother people.
Are people saying no outright to renewable energy? Or is this saying yes with some form of reasonable restrictions?
It depends on where you look and how much solar there is in a community.
One thing I’ve seen in Virginia, for example, is counties setting caps on the total acreage solar can occupy, and those will be only 20 acres above the solar already built, so it’s effectively blocking solar. In places that are more sparsely populated, you tend to see restrictive setbacks that have the effect of outright banning wind — mile-long setbacks are often insurmountable for developers. Or there’ll be regulations to constrict the scale of a project quite a bit but don’t ban the technologies outright.
What in your research gives you hope?
States that have administrations determined to build out renewables have started to override these local restrictions: Michigan, Illinois, Washington, California, a few others. This is almost certainly going to have an impact.
I think the other thing is there are places in red states that have had very good experiences with renewable energy by and large. Texas, despite having the most wind generation in the nation, has not seen nearly as much opposition to wind, solar, and battery storage. It’s owing to the fact people in Texas generally are inclined to support energy projects in general and have seen wind and solar bring money into these small communities that otherwise wouldn’t get a lot of attention.