Leona Au

Spotlight on emerging renewable energy risks: 4 trends on the horizon

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    In this article, Leona Au, HSB Canada’s AVP Technical Risk Underwriting Solutions Team, talks about four key renewable energy emerging risks & trends.

    1.    Existing wind technology is becoming obsolete, while new technology is becoming larger and             more complex

    Wind technology has been around for some time and it continues to evolve and change. While the ‘latest and greatest’ wind turbines continue to grow in size and capacity, we must also be mindful of how quickly some of the original wind turbine installations are aging or becoming obsolete.

    The technologies used on wind farms installed 20-30 years ago are reaching, or have reached, the end of their lifespan. Many manufacturers may no longer be in business, making it difficult to obtain replacement parts. Additionally, some manufacturers may have ceased production of necessary replacement components. Maintaining and operating an older technology is a challenge many energy producers are facing in the wind industry.

    On the other hand, advancements in wind technologies are leading to larger and more complex turbines and designs. While these new technologies offer benefits, it may be too early to fully understand the challenges and risks they present. As turbines become bigger and more powerful, we must continue to learn, understand and address new risks they present.

    2.    Hydroelectric power is a mature technology, but not risk-free

    Hydroelectric power is a mature technology, and the factors determining risk are relatively well-understood. That said, the construction and operation of hydroelectric plants are not risk-free.

    In the past, our concerns related to hydro were primarily focused on large turbine and generator equipment. However, with climate change, we have begun to observe shifts in weather patterns. Consequently, new risks include wildfires, flooding, and issues with transmission and distribution lines. This is particularly relevant as we are now installing hydro facilities in remote locations that require connection to distribution systems. With wildfires becoming a significant concern, we must now consider additional exposures when addressing hydro.

    3.    Electrification is driving global energy sustainability and demand

    Electrification is an inevitable and pivotal movement driving the global energy transition towards sustainability. With various initiatives and the need for decarbonization, the momentum of this trend is expected to increase.

    Increasing demand for electrification offers significant opportunities. Assets such as wind and solar systems, heat pumps, battery energy storage systems, electrolyzers, and electric vehicle charging infrastructure are experiencing growing demand to meet the needs of green power, decarbonization of buildings, power grid resilience, green hydrogen production, and the evolving transportation industry.

    4.    Expanding infrastructure has resulted in technology becoming more complex and vulnerable              to severe weather events

    Energy production facilities, distribution systems, and buildings are growing in size, efficiency, and complexity. As the scale of infrastructure expands, the technology itself has become more complex and susceptable to changing risks and exposures, especially to those of severe weather, brought about by climate change.

    With the severity and frequency of related losses rising, insurers are under increasing pressure to innovate to meet new risk needs. Brokers and insurers need to work more closely with insureds to better understand exposures and manage these complex risks. 

    In summary, wind, hydro, electrification, and complex technology will continue to reshape Canada’s energy sector. Insurers are crafting specialized coverages to manage associated risks, and ensure the sustainability of renewable energy projects. Collaboration among industry players, governments, and insurers paves the way for a sustainable future. 

    Connect with Leona Au on LinkedIn

    This article is for informational purposes only and is not intended to convey or constitute legal advice. HSB makes no warranties or representations as to the accuracy or completeness of the content herein. Under no circumstances shall HSB or any party involved in creating or delivering this article be liable to you for any loss or damage that results from the use of the information contained herein. Except as otherwise expressly permitted by HSB in writing, no portion of this article may be reproduced, copied, or distributed in any way. This article does not modify or invalidate any of the provisions, exclusions, terms or conditions of the applicable policy and endorsements. For specific terms and conditions, please refer to the applicable insurance form. Posted on June, 2024

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