Why partnership is key to a green energy revolution
Renewable energy providers are center stage in the decarbonization of the global economy. The weight of this expectation on their shoulders is matched by their ambition, our exclusive survey of 400 risk decision-makers in the industry reveals.
- 97% of solar power generators plan to increase their capacity in the next three years, including 45% who expect to more than double it
- 95% of onshore wind operators are planning to grow, with 40% hoping to grow by more than 100%
And the finance community is ready to back this ambition.
- Nearly three quarters (73%) of financiers plan to increase their investment in renewable energy infrastructure projects
But recent high-cost insurance claims – such as the hailstorm that “crippled” a 3,000-acre solar facility in Texas last year – threaten to dampen this enthusiasm.
This has brought the issue of resilience to the fore. “After some of these big losses, many insurers reduced their risk appetite,” says Michael Perron, vice president, renewable energy market lead at FM Renewable Energy.
“There is plenty of capacity in the market – except for natural catastrophe risks, with a significant focus on severe convective storm and particularly hail."
The urgent need for collaboration on renewable energy resilience
FM's survey found a renewable energy industry brimming with ambition—but also attuned to risks, particularly around insurance coverage.
Providers already feeling the pinch:
- Nearly half (47%) fear a lack of clarity on project resilience will increase the cost of insurance with 44% worrying it will limit their ability to secure coverage.
And financiers are increasingly alert to the risks:
- Two thirds (66%) of financiers say the resilience of a renewable energy project would influence their decision to invest.
“Something needs to be done to mitigate these hail losses,” says Perron. So what can the industry do?
Collaboration, in his view, is key. Insurers, OEMs, financiers, and energy providers must work together more regularly and effectively to paint a clearer picture of renewable risks, with insurance brokers playing a key role in these collaborative efforts. “We all have to learn from each other and we need to create more vehicles for that information sharing.”
A culture of secrecy often hampers information sharing, however. “At the moment, if someone experiences a large hail loss, they are often restricted by non-disclosure agreements from sharing any insight more widely,” says Perron.
But this is starting to change, he adds. “If a broker’s client experiences a battery fire, they share any insight with other clients.”
Following the lead of the IT industry, brokers are also facilitating user groups, in which customers of a particular technology vendor share insights their insights and experience, Perron says.
Drawing insight from risk engineering expertise
Thankfully, claims aren’t the only way to secure risk insight. Risk engineering is also a rich source of data, particularly when applied at the earliest stages of the design and construction process.
“When the market was more competitive, many insurers looked to cut costs by reducing their investment in risk engineering and we’re seeing the results of that now,” says Perron.
“But FM continued to invest in our risk engineering expertise, and we use that to provide project-specific advice to clients, working with them on things like solar panel stowing protocols, transformer maintenance, and design and maintenance of lightning protection systems.”
To get the most out of risk engineering renewable energy providers must partner with experts as early as possible.
Here, insurance brokers also play a crucial role, Perron believes. “They have a much better understanding of the client as they are working with them regularly and can help bring our risk engineering into the process much earlier.
“A good broker can see which insurer is the best fit for which client before anyone else does. That is hugely valuable.”
“The end game, however we get there, is to build more resilient renewable energy projects,” Perron concludes. “The key to that is bringing more insight and more risk engineering expertise into more projects, preferably at the design stage”
Boost your resilience through collaboration
- Gather insight early. Draw on the experience of every stakeholder – especially risk engineering experts - as early as possible, ideally before the site and technology have been chosen.
- Learn from what works, as well as what doesn’t. Damage claims help the industry understand risk, but successful mitigation techniques also offer valuable data.
- Share with your peers. Forums such as user groups allow experiences and insight to be shared without breaching non-disclosure agreements.