The Big Question: Can the industry meet the demands of renewable energy growth?

Renewable energy is undergoing an investment boom, bringing with it new risks and new opportunities for insurers.

2025 is set to be a pivotal period for the energy sector with tougher regulation coming into force in jurisdictions across the globe and the need for momentum in the scale of renewable capacity.

Research provider BloombergNEF warned this month disruptive changes, driven by economics and policy, are already underway across European energy markets. The region saw record levels of investment in the energy transition in 2023 in the wake of the energy crisis, boosting the outlook for clean technology deployments.

In BNEF’s base case, installed wind and solar capacity will more than double by 2030, reaching 50% of total power supply.

The International Energy Agency has said that the rapid uptake of clean energy technologies offers major opportunities for countries looking to manufacture and trade them but also presents challenging decisions for governments, which face tensions and trade-offs based on the industrial and trade policies they opt to pursue, according to a new IEA report out today.

Looking to the solar PV, wind turbines, electric cars, batteries, electrolysers and heat pumps the global market for these technologies is set to rise from $700 billion in 2023 to more than $2 trillion by 2035 – close to the value of the world’s crude oil market in recent years.

What is clear is that the insurance industry will be expected to play an increasing part in supporting the transition. Many underwriters have said their relationship with traditional energy companies has been predicated in the role they are playing in moving those clients to a sustainable future.

Ian Summers, Global Business Leader, AdvantageGo.

Alan Tucker, Global Head of loss adjuster Crawford’s Renewable Energy Practice says there is a need for a concerted approach to mirror the huge levels of investment into an ever wide range of renewable energy projects.

However he adds the surge in the level of investment, the arrival of new technologies and new projects means that the industry needs to solve several challenges if it is to respond to a rising demand for ever increasing values of cover.

Tucker adds that the industry needs to understand the risks if they are to respond, but the drive to create capacity is creating a demand for the talent required to deliver the necessary response.

“If the world is to meet its targets for the delivery of renewable energy it will require a tenfold increase in the current output in 25 years. This will be no mean feat,” he explains.

To deliver on the targets energy companies are looking at new technologies with which to realise the sustainable future.

It goes beyond the use of solar and wind power with cutting edge technologies such as hydrogen, the new breed of small nuclear reactors and rapid advances in nuclear frisson.

“The industry has to be prepared to face a number of issues that will need to be addressed,” he adds. “Energy underwriters who have been providing broad coverage for oil and gas, will need to contend with new technology that will be created to deliver renewable projects and as such insurance companies will need to ensure they understand what they are being asked to underwrite.”

The pace of change is also a risk for the market explains Tucker.

“Take wind energy for example. We are already seeing the size of the projects and their design change significantly on a very regular basis. New technology is being implemented in other areas such as solar power with new types of panels being constructed.

“These projects are by their very nature left open to the elements, and we are seeing ever more extreme weather events. Only recently we have seen a significant level of damage to solar farms in Saudi Arabia during hailstorms.”

While weather risk to technology which is being installed as it is being developed is a new risk for the energy market it also requires new skills.

“There is a growing demand for experts to manage the claims, which will occur,” says Tucker. “It is a challenge. The expertise we require is slow to come through.”

He continues: “We recognise there is a shortage in experience in the sector. The skills gap is becoming an issue.  There is a need for the industry to look to work on how we attract the next generation who will become adjusters, brokers and insurers.

“It will affect how claims are handled. We understand we must bring in skills potentially from academia. We don’t have a concerted approach but it might be something we need to do.”

Tucker says the industry has to be more involved in the projects from the outset, not only to ensure that risk management systems are in place but also to build an understanding of the systems and technology they use.

“We are in a period where we are learning about the technology, its uses and with it the potential risks. Like the evolution of any new technology or process we understand there will be claims.

“It will be how we respond to those claims which will be the deciding factor.”

Tucker says there is a need for the market to take some risks.

“In many respects we need to stick our necks out,” he adds. “There is undoubtedly a lot of optimism in the market for the opportunities that will come with the move to renewable energy production.

“What we need is a person or a company to make it clear they are committed to the sector and will look to underwrite these new and emerging risks, any which comes with little historic claims data.

“They may well see that profits are constrained but it will be a case of looking to take a position for the collective good of the sector.”

For Crawford the creation of the new renewable energy practice is testament to the demand and the future direction of the energy sector.

Tucker says the practice needs to reflect the nature of the industry it is there to serve.

“The market is being asked to respond to the increase in renewable energy and key to what we are doing will be the ability to identify where the growth will be and then identify the specialists, we need to further build our team.”

“Technology is making a difference it is enabling us to use people who are not in country to support those who are on site.”

Tucker continued: “We will look to employ staff where they need to be employed. Renewable energy is growing across the world but at a different pace in some regions to others.  The industry needs to ensure that its response reflects the need.”