The global transition to clean power presents significant opportunities for renewable energy investors, developers, and operators. With projects rapidly scaling up and diversifying, insurance has established itself as a key enabler of investment.
However, to secure favourable terms and keep premiums down, recognising and understanding insurers’ concerns around the risks introduced by rapid evolution in the clean energy generation sector is crucial.
Abundant opportunities in renewables
Governments around the globe are committed to transitioning to clean power at a remarkable pace. Between 2015 and 2025, global installed renewable electricity capacity increased by about 3,300 GW (opens a new window), a rise of roughly 180%.
In 2024 alone, more than 90% (opens a new window) of all new electricity generation capacity added worldwide came from renewable sources such as solar, wind, hydro, and geothermal. Of this, the largest growth took place in China. In 2024, China added more renewable capacity than the rest of the world combined, installing over 260 GW (opens a new window) of new renewables, of which more than 190 GW was solar.
The transition to clean energy brings substantial economic opportunities. But any investment comes with risk. Specialist insurance products can help industry participants mitigate these threats effectively.
Current challenges in insuring renewable energy projects
Having robust insurance coverage in place is often a prerequisite for securing financing and meeting contractual obligations. It gives stakeholders the confidence to proceed with large-scale investments, knowing that financial losses from unexpected events will be mitigated.
However, arranging cover for renewable energy projects can be a complex process. The rapid pace of technological innovation and the fast-evolving nature of the risks entailed, present insurers with significant challenges. To be certain of getting a project adequately insured at an affordable price, investors and developers need to be aware of, and address, underwriters’ concerns. These include:
Technology risks: New and evolving technologies - larger wind turbine blades and more advanced battery storage systems, for example - introduce fresh uncertainties for insurers. Developers using less familiar and less tested technologies are likely to face higher premiums and/or more restrictive terms. Developers who can provide strong evidence of appropriate risk mitigation will be better positioned to secure competitive rates.
Climate impacts: Stronger winds, heavier rainfall, and extreme weather events driven by climate change are increasing both the frequency and severity of losses. Projects located in areas more prone to extreme weather are likely to see higher premiums. As such, projects in areas vulnerable to extreme weather need to go the extra mile to demonstrate robust resilience measures.
Limited historical data: Many emerging renewable energy technologies lack the long-term performance data insurers rely on when assessing risks. Developers and investors can mitigate this by providing detailed project assessments and evidence of strong risk management strategies. To further allay such fears, industry participants should follow best practices that have been adequately tested and certified by a relevant body or authority.
Rising loss costs: As renewable energy projects grow in scale, the financial impact of individual claims is increasing. For instance, the cost of replacing a wind turbine blade has risen from around GBP 20k in the early 2010s, to more than GBP 1m today, driven by technological advances and the increasing scale of installations.
How to mitigate insurance costs
There are a number of strategies investors and developers can adopt to address insurers’ concerns and keep their insurance costs down, these include:
Proactive risk management: By implementing predictive maintenance technologies and proactive monitoring, developers can identify potential issues before they escalate, reducing the likelihood of claims and improving their risk profile.
Resilient project design: Projects that incorporate features like excess capacity, multiple substations, and diversified energy sources are more robust and less prone to single points of failure. Insurers tend to view such designs more favourably.
Proven technology: Developers who select equipment with an established track record and comprehensive warranties are likely to engage with underwriters easier. While innovative technology is always appealing, untested systems often attract higher premiums and more restrictive coverage.
Contract transparency: Having clear terms in contracts with equipment manufacturers and service providers demonstrates a commitment to risk mitigation and long-term maintenance. This, again, is likely to prove reassuring to insurers.
Engage early: Collaborating with insurance brokers and insurers during the project-planning stage opens a path to smoother negotiations at a later date. This also creates opportunities to make small changes that could have a big effect in keeping risk mitigation costs in check. Having the opportunity to understand a project’s risk profile in its early stages helps insurers gain comfort they’re in responsible hands.
As a leading insurance broker within the renewable energy arena, Lockton’s Energy and Power Team has extensive experience placing targeted, accurate cover and creating effective risk management solutions for clients.
For further information, please contact a member of the team, or visit our Renewable Energy page (opens a new window).