In its latest forecast, the IEA forecasts a 2.400 GW growth of renewable energy capacity over 2022-2027. The energy mix is transforming, renewables reaching 38% by 2027.
The largest part of that growth comes from solar and wind energy. Together with hydro power, they are highly reliant on weather conditions, being directly exposed to them and using them to generate electricity. With extreme weather events, such as thunderstorms generating lightning, strong turbulent winds, and hail, renewable energy infrastructures are increasingly exposed to risks.
Lightning ⚡️ can set a wind turbine on fire or hit a substation. High speed winds 💨 can damage infrastructures directly or by flying debris. When hitting solar panels, hail 🧊 can produce micro cracks that will later impact the productivity. Facilities could also be impacted by water ingress from flooding. Droughts may affect water levels in reservoirs and rivers.
With extreme weather events increasing in quantity and in intensity, risks are growing for renewable energy infrastructures. Losses involved can reach tens of millions of dollars. The best known example is the one of a PV plant in Texas hit by a hailstorm, with damages on 400.000 panels and loss of revenues for the duration of the repairs. It resulted in $70 million of insured losses.
Having as a source of energy sun, wind and water creates a strong reliance on their availability to generate electricity. A loss in production due to changing weather conditions will impact the profitability of the power plant. Variability due to short term changes is already taken into account in the business models but more significant climate alteration could have a more dramatic economic impact on power plants and on the way they are insured.
With renewable energy infrastructures growing in numbers and in size, insurance companies are more and more exposed to loss risks.
These risks need to be assessed and modelled more precisely to avoid building in some areas but also for insurances to continue to play their part.
Relying on 20 years average of weather parameters is not enough anymore. The most recent meteorological evolutions need to be explored with more measures and better accuracy so analysis can bring the necessary proof of resources. Once risks are better comprehended, mitigating technologies can be installed and early warning systems put in place.
For insurance companies, early warning systems can provide valuable data and insights that can help them better understand and manage risks. By using this information, they can develop more effective insurance policies and pricing models that take into account the specific hazards and vulnerabilities of a particular area. This can help them provide more affordable and comprehensive coverage to their customers.
Because let’s face it, if insurers don’t want or can’t cover increasing risks, it will become very difficult to finance projects. This would undermine the much needed development of renewable energy.
Weather and renewable energy are two sides of the same coin. Climate change is impacting both, with insurance in the middle.