Navigating Renewable Energy Risks: Gaining Insight into Your Exposures

Ian Summers, AdvantageGo’s Global Business Leader, introduces a new thought leadership paper from the re/insurance technology provider, focused on the risks and opportunities of underwriting the booming renewables sector.

The world is approaching a crucial tipping point when it comes to the production of energy. According to the International Energy Association (IEA), renewables are projected to surpass coal, making up more than one-third of total electricity generation, by early 2025.

The prediction comes from the IEA’s latest annual report, Electricity 2024, which points out in 2023, global annual growth in electricity demand slightly eased to 2.2% due to reduced consumption in advanced economies. However, the IEA projects a subsequent acceleration, with an average growth rate of 3.4% from 2024 through 2026.

Crucially, the report underscores a significant shift towards low-emission electricity sources, including renewables such as solar, wind and hydro-electric, as well as nuclear power. By 2026, it suggests, these sources are expected to contribute nearly half of the world’s electricity generation, up from just under 40% in 2023.

That’s an impressive statistic, and it’s one that underwriters in the energy space are no doubt taking careful note of. Gone, I suspect, are the days when a portfolio could be based solely on oil and gas- the (re)insurance energy sector is keenly aware of the hurdles it faces and is in the process of transitioning to a greener future in line with the markets it serves.

Yet with new risks in the renewables space come new challenges. Renewable energy is growing at pace, both in terms of the sophistication of the technologies that underpin electricity generation, but also in terms of the scale of the projects under development.

We are not talking about a few solar panels on a factory roof anymore – the Golmud Solar Park in China is the world’s largest solar farm with an installed solar capacity of 2.8 GW, with nearly seven million solar panels all working to deliver clean energy.

China has big ambitions for the park, with plans to reach 16 GW within the next five to six years. To put that into context, a single gigawatt could power one million UK homes for an hour, or around 100 million LED light bulbs.

The good news is that with risks on this scale, we have the tool to ensure that underwriters in the renewables space can really manage their exposures to the level of granularity required.

AdvantageGo Exact is, we believe, a powerful exposure and risk management solution which enables (re)insurers to both quickly and accurately visualise their entire portfolio in real-time, utilising high-resolution location data.

Of course, we can’t guarantee that your renewables portfolio will be blemish-free as a result of such a tool, but we are confident that it will take you to the next level when it comes to effective risk management in what is a rapidly evolving energy space.

To read the paper in full, please click here: Renewable Energy Risk: Understanding Your Exposures.