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The renewable energy challenge

Now, more than ever before, the UK’s £46.7bn1 renewable energy sector faces uncertainty and changes in the market. From targeted net-zero emissions by 2050, to concerns around new technologies, the increasing awareness of climate change issues and a challenging renewable energy insurance market, the UK renewable energy sector is facing significant challenges from political, environmental and social pressures.

Government response to renewable energy

Politicised issues make for uncertainty and change in the market. We’ve seen increasingly urgent appeals for governments to act on climate change. And in June 2019 the UK became the first major economy to agree to a legally-binding target of net-zero emissions by 2050. To achieve this the government will need to enact an ambitious policy response and businesses are planning for all eventualities dependent on changing policies.

Climate change effects

Global warming has resulted in noticeable changes to our seasons. In early 2020, storms Brendan, Ciara, Dennis and Jorge delivered high winds (some exceeding 80mph) and a vast volume of rainfall over parts of the UK. In fact, February 2020 was the wettest ever according to the Met Office2. The UK’s weather is becoming more extreme, renewable energy plants are increasingly vulnerable to damage from these drastic storms and floods as projects are often sited next to areas of high hazard natural catastrophe exposure. The effects of climate change also has consequences for energy supply. Capacity is highly dependent on weather conditions, and these unpredictable changes are creating numerous challenges when it comes to reliability and stability.

Socially, the UK’s seen increasing awareness of climate change issues with various protests and high visibility of the renewable energy sector being critical to the solution. There’s a rising tide of support looking for solutions. And this is reflected in the rise of renewables in 2019 which helped drive generation from coal and gas plants down by 6% from the year before3.

Following the COVID-19 lockdown, the UK has beaten its previous record for the longest period of time where we have had no coal-fired power generation on the grid4. This has huge implications for the industry as it shows the national grid can in fact take renewable energy power.

Financial modelling in the renewable energy sector

The new support mechanisms (tariffs or grants) that the government are introducing in the UK, must support the long-term growth of the renewable energy sector to continue to encourage investment. The support mechanisms should also drive good behaviours in order that the deployment of technologies and other environmentally beneficial measures are delivered in the right way. This will ensure the UK renewable energy sector will assist in delivering the net zero target in a safe and productive manner.

New renewable energy technologies

The sector incorporates a range of technologies; battery storage, wind turbines, solar panels, hydroelectric plants, biomass power stations, anaerobic digestion systems, wave and tidal power generators, ground source heat pumps and hydrogen cells, with many at different stages of development. However, some projects remain vulnerable to mechanical and electrical breakdown in a period of continued technical innovation in the sector. Looking forward, offshore floating solar has huge potential and static compensators is something to keep an eye on. But more radical breakthroughs might be needed to solve longer-term seasonal/regional weather variation challenges, such as the merging of technologies to work together.

Insurance for renewable energy projects

The renewable energy insurance market is currently a challenging environment. Rates and excesses are increasing and cover is harder to find. Reasons for this range from component vulnerability, defective designs, extreme weather damage and increasing fire and theft claims. Plus, changes in technology bring new ways of doing things that carry unknown levels of risk. ‘Normal’ levels of risk are therefore increasingly tougher to estimate and needs to be repeatedly re-understood, making insurance more difficult to secure.

Owners, operators, developers and contractors should seek guidance at the design stage so the risks and insurance implications that a proposed project may have (fire and flood protections, process design and appropriate security standards) are better understood to help negotiate appropriate cover.

The power behind your renewable energy project

Engrained in the renewable energy industry, we’re committed to supporting the evolving needs of your growing business. And as your insurance partner to lean on - whatever the deadline, we make it achievable.

Find out more about us, download our renewable energy credentials brochure here.



1. https://www.businessleader.co.uk/low-carbon-and-renewable-energy-turnover-grows-to-46-7bn/77883/
 https://www.theguardian.com/business/2020/jan/07/renewables-beat-fossil-fuels-greenest-year-uk-energy#:~:text=The rise of renewables helped,and 83 days last year

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