Renewable energy is making significant strides in the United States, with recent data revealing that 80% of all new energy generation comes from renewable sources, primarily solar. This trend is also evident globally, with countries like Australia and the UK increasingly relying on solar energy to power their electricity grids. However, as the market grows, insurance brokers are finding new opportunities amid challenges posed by climate change and tariffs from the Trump administration.
The global insurance market is currently in a soft phase, which is beneficial for brokers. In the past, securing coverage for renewable energy assets was a tough task, but the situation has improved recently. More insurance carriers are entering the renewable energy sector, creating additional capacity and leading to lower prices. Jason Kaminsky, CEO of kWh Analytics, a firm focused on renewable energy underwriting, noted that this influx of carriers is a positive development.
Despite this progress, brokers still face challenges. They must manage large policy limits and address the increasing risks associated with extreme weather events, which are becoming more frequent and severe. Kaminsky emphasized the importance of adopting a resilience-first approach to insurance, urging carriers to encourage clients to prepare for these risks.
One major concern is the impact of tariffs imposed by the Trump administration. Stakeholders in the renewable energy sector worry that these tariffs could disrupt global supply chains and increase costs for projects relying on international manufacturing. Kaminsky pointed out that while tariffs might not halt the growth of solar energy, they will certainly alter project economics and slow down development timelines.
Investors in solar energy face the daunting task of making long-term decisions for assets that will last 30 to 40 years while dealing with an evolving insurance market. Kaminsky believes that those who invest in more resilient solar projects should receive better insurance pricing.
To support solar asset developers, Kaminsky suggested that insurance companies need to provide better risk management tools. This includes data on safety issues from audits and identifying common points of failure in solar equipment. By equipping brokers with this information, they can help clients make informed decisions and prioritize resilience in their projects.
Kaminsky also highlighted the need for insurance underwriters to differentiate risks more effectively. His firm, kWh, stands out by assessing specific risks related to location, technology, and operational choices in renewable energy projects. He stressed that in a market with fewer experienced underwriters, it’s crucial to evaluate projects based on their risk characteristics and reward clients who invest in protective measures.
As the renewable energy landscape evolves, large solar projects are emerging worldwide. Recently, China launched one of the largest solar plants, the 3.5 gigawatt Midong photovoltaic farm, while the UK began operations at the Cleve Hill solar park, the largest in England. In Australia, the growth of large-scale solar farms continues, with nearly 7 gigawatts of generation connected to the grid.
The insurance industry is at a pivotal moment, with opportunities and challenges ahead. Brokers and insurers alike must adapt to the changing landscape of renewable energy to ensure that projects are sustainable and resilient for the future.