Willis Towers Watson (WTW) has launched a new report that takes a critical look at the renewable energy market, noting that the industry is facing “several new realities” at the beginning of the decade.
The global brokerage giant’s “Renewable Energy Market Review for 2020” identified five new realities that the renewable energy market has to contend with. They are:
Geopolitical clouds – Conflicts and other international tensions are threatening the renewable energy business, and it is not just limited to standoffs like the one between the US and Iran. Major conflicts, such as the ones between Turkey and Syria as well as India and Pakistan, are also points of concern.
Climate change threat – While the effects of climate change become more apparent as the years go by, the world has finally considered making the switch to renewables; it is generally accepted that renewable energy will make up the largest share of total global energy supply by 2050. However, WTW has found that the accelerated renewable energy market driven by climate change is exposing itself to new risks, particularly within certain subsectors such as floating offshore wind and hybrid renewable energy.
Hardening insurance market – The insurance market appears to be hardening after a long period of (re)insurance capital excess, with hard market conditions emerging over the past 12 months. The renewable energy market is no exception, and will have to face deteriorating loss ratios and increasing costs,
Cyber security threat – WTW found that there is considerable concern across the renewable energy industry over how to quantify and manage its exposure to cyber risk. A recent WTW seminar found that more than 84% of delegates expressed concerns that the industry did not know how to manage cyber risks.
Uninsurable weather risk – The renewable energy industry is particularly susceptible to weather volatility and the risks they bring, such as power generation risks, wind and low solar as well as power price volatility and power outages not linked to physical damage. Index-based solutions are increasingly being used to address these risks, WTW found.
“We are delighted to be launching this report, but we go to press at a time of unprecedented change in both the renewable and insurance/risk transfer industries,” commented Willis Towers Watson global natural resources head Graham Knight.
Knight gave assurances that while the renewable energy insurance industry faces new challenges, Willis Towers Watson will use “all its skills at [its] disposal” to help clients address the less-than-certain future.