An analysis of the most pressing concerns based on insights from 1,000 UK business leaders.
Author: Carl Gurney
The energy transition has also been accelerated by key legislation and following COVID the drive to become less reliant on overseas supply chains. This in turn increases the energy demands domestically as territories strive to become far more reliant on their own manufacturing capabilities.
Add to this the increase in population in cities and the central role they must play in the mitigation of climate change then all these factors result in far more renewable energy assets and infrastructure being needed.
Therefore, Renewable energy projects often require project owners to consider various risk transfer and risk mitigation measures to address an array of potential exposures, including construction, environmental, regulatory, technological, and operational risks. The ability to manage risks and insurance placements when developing a renewable energy project can contribute to the success of the organisation and its bottom line. As with all sectors this does not come without risk and regardless of the technologies being deployed the risks fundamentally remain the same and these phases are explored in more detail below, but this is by no means an exhaustive list.
Concept / design
Financial risk is the moist significant risk at this stage of the project so a review of insurance risks including the design of projects is paramount in achieving the best outcomes both from an insurance perspective but also funding.
An early review of insurances should be considered as a new entity, or multiple entities are set up as there may be legal and/or contractual requirements to consider.
Early insurer feedback is critical as there will be loss control requirements from insurers, regardless of technology, that must be factored in to secure a commercially viable insurance programme but if not carried out this can result in the project being uninsurable.
In addition, the relevant due diligence reviews on your supply chain must be done.
Construction
As your project moves into the construction phase your insurance and risk programme will need to evolve to cover this phase of the project.
Site safety and control of contractors will be paramount to the safe deployment of the project and ensuring construction contracts have been reviewed will be a necessity and that the project is constructed to insurer specifications.
Understanding the handover phase will also be critical as this will depict ownership responsibilities and ultimately insurance placement.
Project owners will also need to consider whether they will ensure the project or rely on their supply chain and a full discussion on the pros and cons with your insurance advisor is paramount in making this decision.
Operation
Once the project has been tested, commissioned and handed over then usually the insurance responsibility will fall to the owner, and this is where the project “switches” from a construction policy to an operational policy. Note that sometimes you may be able to include the first-year operational insurance within your construction policy.
It is important that the right Operational and Maintenance contracts are in force for key pieces of equipment (adhering to the manufacturer’s guidance) including high voltage, statutory inspections and business continuity systems. The companies engaged to carry out these works should also be reviewed during the design and concept stage by insurers.
Site controls are also key especially those of sub-contractors on site to ensure they carry out the correct scope of works with the right permits.
Decommissioning
This is something that may be required by the landlord or as part of the panning permissions. There are certain policies that can be put into force to cater for this requirement or in addition you could consider a more commercial / contractual approach.
Conclusion
The Renewable Energy sector is not only fast growing but also technology changes at a rate of knots insurers can sometimes find difficult to keep up with. This creates markets challenges and there isn’t a vast pool of insurers who wish to underwrite these risks.
Therefore, early engagement with a renewable energy insurance professional will be paramount to the project’s success and will also drive optimal results in terms of risk mitigation and transfer and ultimately the bankability of the project.
