Insuring the Renewable Energy Sector: What Business Owners Need to Know
The renewable energy industry is on an upward trajectory. By 2021, the global renewable energy market is supposed to reach $226.1 billion, according to a study by Report Linker. But, the sector is not without challenges. The COVID-19 pandemic resulted in the sector’s first drop in growth in 20 years. Still, renewable energy is poised to recover and continue growing, predicts the International Energy Agency, so it’s important to understand the state of the industry and how to best insure for the unprecedented future ahead.
Even against the headwinds they are facing, renewables are the fastest growing energy source, faster than petroleum and fossil fuels. Recently, they have surged in popularity — and trends suggest that will continue. We are seeing increased renewable purchase power agreements (PPA) in which companies are purchasing power directly from a renewable energy generator. This long-term investment puts money into the clean energy sector and provides companies with a financially and environmentally benefial solution for their energy needs.
Renewables receive an electricity production tax credit (PTC) which expires at the end of 2020, says the Congressional Research Service. Only construction projects that are started before the end of the year will get the 10-year credit. However, sources like wind continue to fall in production price — by building taller towers, longer blades and other advancements — so the price of wind power will likely continue to fall, despite the PTC expiration, writes Utility Dive. It’s probable that other renewable energy sources will experience a similar price decrease due to technological growth.
A combination of the decreasing cost of renewables, social pressure to stop using coal, regulatory changes in incentive programs and more has made this moment ripe for a boom in renewable energy growth, says Deloitte. Renewables are expected to be competitive with traditional energy sources. Interest in energy storage is growing, too, with particular emphasis on the modernization of grids to add distributed energy resources or find another solution to allow local energy storage.
The key renewable energy sources in 2020 are:
Wind and solar are expected to grow the most in 2020. Solar can be easier to implement than other sources, both commercially or residentially (read what we’ve written about surety bonds for solar contractors in a previous blog post). The wind sector alone is expected to add around 43,000 jobs by 2030.
While the industry is making significant gains, there are also large challenges facing the sector. As mentioned above, renewable energy was hit hard by the pandemic due to supply chain disruption, stay-at-home orders, job losses and the economic slump. But according to the International Renewable Energy Agency, the continued transition to renewable energy could boost GDP and create jobs in the coming years as the economy continues to recover.
As the industry continues to evolve, it’s very important that renewable energy businesses have a comprehensive insurance plan. Insurance claims in the industry have significantly increased in the past five years. The most important step businesses can take is to develop a risk management plan to mitigate the likelihood of a claim, and to reduce and transfer a calamity’s impact if an accident does happen.
Some of the most common claims renewable energy companies make are for:
- Equipment failure or breakdown from a mechanical or electrical issue
- Extreme weather risks
It’s important to get an experienced insurance broker/agent involved in the early stages to help design the ideal insurance coverage for the business as it evolves — complete with a risk management plan. Partnering with a broker like Rose & Kiernan, Inc., can help businesses in the renewable energy sector find the best coverage that meets their unique needs, now and in the future.
To discuss how Rose & Kiernan could help your business with energy-specific insurance needs, please contact us here or by calling (800) 242-4433.