Batteries – Leading the way in Renewable Energy
09 November 2017- by Laura Gifford
Renewable energy has become an even hotter topic for investors; solar panels, wind turbines and other renewable technologies are now part of nearly every countries future energy mix. A new add on to the renewable energy mix is battery storage which is increasingly becoming the talk of the town. Underwriters such as Axis and Pioneer are leading the way in educating the market on the treatment of this contingent risk. Is this technology going to be the game changer, solar and wind has always had the availability issue, the sun does not always shine and the wind does not always blow?
In 2013, California launched an aggressive effort to ramp up large-scale energy storage with an initial goal of building 1,325 megawatts of storage by 2020, the equivalent capacity of two average sized coal-fired power plants. Today, the state is already home to 36% of the country’s battery storage capacity with projects continuing to open on a regular basis, according to a Climate Group report. If its renewable energy investment is successful, California will hit its ambitious target: to have 50% of all electricity come from renewables by 2050.
In emerging markets like Africa and South East Asia, this technology has allowed the increase of minigrid systems to be installed in remote areas where infrastructure (transmission and distribution) is limited and allow optimal utilization. Africa aims to increase their mix of renewables to 50 percent, while Asia at large already has players namely: Philippines, Vietnam and Thailand, committing to over a third of their mix by 2030.
So what does this mean for the insurance sector?
From an insurance perspective, the challenges and risks for the renewable energy sector are complex and each technology merits its own assessment of risk. From offshore wind power to solar PV and others, these risks need thorough and robust insurance covers.
The area of battery storage comes with its own unique set of risk factors: from the weather, to the location, weight and size, and more importantly the storage facility itself and risk mitigation techniques. If we are to continue to encourage investors and lenders into the industry, we need to be able to ensure these parties that their risk is understood and has been properly managed. This presents an opportunity for us as insurance professionals to ensure that developers and owners/operators and their respective energy storage projects have sophisticated and robust risk reduction strategies in place and that they are adequately protected.
When looking at risk mitigation and protection of revenue, the presentation of these risks to underwriters is vital, and will reduce later conflicts in potential claims situations. Due to the relatively large capital investment on battery storage, taking a standard approach, the loss of revenue position will theoretically mean that the insurance cover will not respond as expected. Risk managers should seek advice from insurance professionals to analyse the actual loss of revenue stream, what should be deducted and more importantly, what should be included when the calculation of indemnification is completed.
In this volatile insurance market it is imperative to ensure that we are providing the best cover and selling our risk management skill set, not just our cheapest price.
For further information or enquiries please contact: Poul Hansen (Head of Renewable Energy) at Price Forbes.
Laura GiffordMarketing & Communications Manager
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