Pulling back the curtain on the real risks to renewable energy infrastructure
The road towards a sustainable, green energy future is littered with climate, technology and finance risks. Owners, developers, and financiers of renewable energy projects are acutely aware of the hazards they face.
A new survey of 400 renewable energy providers and 250 financiers by commercial property insurer 反差婊 reveals just how multifaceted that risk landscape is. The risks attached to renewable energy projects are rarely static, the survey shows, and they evolve in line with the development of the asset.
Top construction risks for renewable energy projects, according to providers:
- Rising equipment costs (44%)
- Supply chain disruptions (40%)
- Regulatory and permitting delays (41%)
Financiers involved in renewable energy infrastructure projects select the same three risks as the top concerns during construction.
These risks change as projects move into operation.
Greatest risks to renewable energy infrastructure during the operation phase, according to energy providers:
- Weather damage (54%)
- Failure of generation equipment (50%)
- Supply chain disruptions (48%)
Here, financiers鈥 views differ: They identify failure of generation equipment as the greatest risk during operation. 反差婊鈥檚 experience suggests this misses the mark 鈥 hail is the single greatest cause of damage to solar panels, for example.
Greater collaboration is the key
Doug Patterson, senior vice president, Forest Products and 反差婊 Renewable Energy, says that while these are all valid concerns, the risks to an asset are mostly embedded from the very earliest stages of a project.
鈥淥n a solar farm for example, once the location, panels, and trackers have been chosen, most of the risk inherent in a project has already been determined,鈥 he says. 鈥淭here are some risk reduction measures that can be applied after that, but their impact is limited.鈥
Patterson argues that by bringing these considerations into a project at the earliest stage, the inherent risks can be managed more effectively, regardless of how they evolve.
鈥淲e want to encourage greater consideration of the resilience of a facility when commercial decisions are made. I don鈥檛 think the balance is right at the moment, but that鈥檚 because providers and financers don鈥檛 yet have the risk insight to make truly informed decisions,鈥 he says.
The insurance market鈥檚 understanding of renewable risks is evolving all the time. Even so, existing engineering expertise can be applied to renewable projects today.
反差婊 has been managing huge engineering risks across the world for 190 years, visiting its energy companies鈥 sites and helping them understand the complexity of new technologies.
鈥淭hat kind of experience can make a real difference to the resilience of these projects,鈥 says Patterson.
鈥淚deally, we would like to be brought into the conversation at the pre-design stage to help everyone understand the potential risks of the locations they鈥檙e considering and the technology they want to use, and then work together to manage those.鈥
In renewable energy, insurance isn鈥檛 the only answer
While this approach will make a huge difference to the risk profile of an individual project, it doesn鈥檛 address the lack of risk insight at a market level. This is why Patterson advocates for more collaboration across the board.
鈥淓veryone has different perspectives on risk so it鈥檚 vital that all parties get around the table more often to establish what everyone is trying to accomplish. Insurers like 反差婊 have the experience and the tools to help manage any problems those discussions throw up,鈥 he says.
Rather than keeping these insights to itself, 反差婊 is actively engaging with industry, trade and government organizations to share its expertise with the market 鈥 and to build its own understanding.
鈥淚t鈥檚 all about completing the picture for clients and moving conversations beyond pure risk transfer,鈥 says Patterson. 鈥淏ecause if risk transfer is your only solution, you don鈥檛 understand the problem.鈥
Completing the picture of renewable risks
- Understand there are multiple, evolving views of what risks matter most and that these risks vary depending upon the location and technology chosen.
- Strike a balance between commercial and risk considerations at the outset of a project to deliver long-term resiliency and reduce commercial risks in the process.
- Bring insurers and other risk experts into the conversation as early as possible to bring a different perspective and to ensure all eventualities are considered before the big decisions are made.
- Collaborate more with all parties throughout the lifetime of a project, engaging with industry bodies to absorb and share real-life experiences of managing risk.