Demand for insurance within the renewable energy industry may rise to between $1.5 and $2.8 billion by the end of the decade, according to a new study by Bloomberg New Energy Finance.
Presently the sector spends around $850 million insuring its risks, but this figure is set to increase rapidly, particularly in leading renewable energy markets. Many of these markets also enjoy high levels of insurance penetration, which bodes well for insurance take-up.
The report found that total investment in renewable power capacity will, between now and 2030, reach $2 trillion, with six key markets— Australia, China, France, Germany, the UK and the US—accounting for a significant percentage of that investment globally.
Investors are exploring means of funding such projects, with risk mitigation proving a key consideration. Insurance has a leading role to play in the viability of such projects. As Juerg Trueb, head of environmental and commodity markets at Swiss Re Corporate Solutions explained: "New solar parks and wind farms require enormous investments. Not only that, you are also asking investors to put their money into relatively new and sometimes less mature technologies. To reassure investors you really need sound risk management."
Trueb admitted that insurance is “not a silver bullet” for such risks, but that it can “help improve the return on investment for renewable energy projects. This, in turn, would allow the sector to attract the scale of investment necessary to put the world's energy mix on a more sustainable footing."
Renewable energy, Swiss Re