Renewables will remain the darling of the global energy transition, yet risk managers will face multiple challenges arising from a ‘new trilemma’, according to Renewable Energy Market Review 2023 published by WTW.
The new trilemma comprises the convergence of (i) the need for net-zero energy security, (ii) unsettled global macroeconomics and (iii) rising demand for renewable energy in an era of squeezed supply of inputs.
The new review published in January 2023 said this trilemma will escalate risk management and ESG as major issues for the renewables industry in the year ahead.
The review, ‘Geopolitics inflation and the energy transition – Where do renewables go from here?’, includes contributions from more than two dozen international experts and specialists. Together they provide a comprehensive and up-to-the-minute analysis of opportunity, risk, and insurance for the global sector, from floating solar in Singapore to battery storage in Ireland.
Climate Markets & Investment Association executive director and contributing author Margaret-Ann Splawn said, “Macro events and trends such as inflation, cost increases, security, and supply chains are impacting the renewable energy industry, making the current business environment a challenging one for risk managers.”
She said, “Several important steps will help them to assess their own vulnerabilities in the transition to net zero and protect themselves from current and future ESG and climate-related risks.”
WTW Natural Resources Global Renewable Energy Leader Steven Munday has predicted that general insurance rate increases will be tempered by individual insurers’ appetites for specific types of clients and assets.
Mr Munday said, “Buyers that fall within an insurer’s higher levels of risk appetite can expect low- to mid-single-digit price increases. Transient clients might achieve similar rates if insurers new to renewables fight for market share, but more circumspect risk carriers are likely to offer them middle to high single-digit increases. Finally, clients with challenging occupancies, poor claims experience, or a poor strategy may well see double-digit rate rises.”
“Working with an intermediary who understands each insurer’s specific risk appetite will be critical to moderating rate increases,” said Mr Munday. M