As Europe braces for intensifying summer heatwaves, a government-commissioned report has revealed that key technologies underpinning the UK’s transition to net zero are themselves vulnerable to climate-related risks - posing new challenges for infrastructure insurers, energy underwriters and loss adjusters.
The Department for Energy Security and Net Zero has warned that technologies including solar panels, heat pumps, electric vehicles and even nuclear power stations may underperform or be forced offline during heat events. The findings will raise urgent questions across the insurance sector about resilience planning, business interruption exposure, and the adequacy of current risk modelling for critical energy systems.
The UK’s decarbonisation drive, encompassing widespread deployment of heat pumps, EVs and rooftop solar, is central to its 2050 net zero target. But the latest risk assessment warns these systems are susceptible to failure, degradation or safety incidents as temperatures climb above 27°C - an increasingly frequent occurrence.
Solar panels, the report notes, can lose efficiency by up to 0.5% per degree above 25°C, and may require shutdown to avoid long-term damage. Heat pumps, expected to become standard in new homes by 2027, will contribute to surging electricity demand during summer heat events—particularly in the evening, when solar output fades.
Electric vehicles also face heightened operational risks. Lithium-ion batteries degrade faster above 35°C, with elevated potential for thermal runaway or fire if cooling systems are overwhelmed. In aggregate, these challenges increase the likelihood of grid overloads, power outages, and insured losses linked to equipment failure, supply chain disruption and liability exposures.
Insurers should take particular note of the April 2025 power outage that blacked out much of Spain and Portugal. An “overvoltage” event triggered a cascading grid failure - disrupting hospitals, airports, internet systems and public transport.
While not caused by renewable technologies directly, the incident exposed the fragility of modern interconnected grids and underscored the potential for knock-on losses. Business interruption, contingent business interruption (CBI), and event cancellation covers may come under scrutiny should similar incidents arise in the UK under comparable thermal stress.
The report warns of a mismatch between cooling demand and energy availability during heatwaves, particularly in the evening peak when grid usage spikes. The National Grid’s existing infrastructure, though resilient by historical standards, is now under increasing pressure from electrification trends - many of which are linked to the insurance sector’s commercial property and industrial client base.
Underwriters of energy-intensive sectors - manufacturing, healthcare, data centres, logistics - will need to reassess exposure in light of this “compounded risk environment.” The convergence of high demand, reduced generation, and ageing infrastructure introduces the prospect of load-shedding or rolling blackouts, heightening the importance of resilience planning and embedded risk mitigation.
Nuclear energy - long considered the ‘firm’ backbone of low-carbon power - may not be immune. The report identifies temperature-related impacts on reactor cooling and notes output reductions of up to 0.5% per degree of ambient heat. In extreme cases, facilities may be taken offline altogether—placing further stress on insurers’ modelling of grid stability, property loss potential, and political risk in the energy transition.
From a risk-transfer perspective, the findings reinforce the need for a more dynamic approach to modelling energy infrastructure under extreme weather scenarios. Property and casualty carriers may face elevated claims risk across a range of products:
A government spokesperson maintained that the UK’s electricity system is “already set up to cope with extreme scenarios.” Nonetheless, the Department’s own report acknowledges that increased supervision, upgraded capacity and improved interconnections with continental Europe will be needed to bolster resilience.
The insurance industry may play a pivotal role in both identifying vulnerabilities and incentivising mitigation. Risk engineers, loss prevention consultants and underwriters are now tasked with integrating climate resilience into the assessment of net zero technologies - not merely as a long-term goal, but as an immediate operational necessity.
