Insuring renewable energy projects: overcoming barriers and engaging the insurance sector

Introduction 

The United Nations Secretary General recently highlighted the need for USD 4.4 trillion annually to flow into renewable energy technologies by 2030 to achieve the world’s 2050 net-zero targets. However, the actual investments fall significantly short of this requirement.  

The Renewable Energy Sector: Current Landscape 

Renewable energy is crucial for decarbonizing the global energy system, yet the transition remains uneven. Despite the declining costs of renewable energy technologies, companies and governments face significant pressure to accelerate this transition. Private and public funding have been instrumental, but increased investments from all sources are necessary. 

Barriers in Underwriting Renewables 

While insurance is not a major hindrance to renewable energy growth, several challenges need addressing: 

• Changing Risk Exposures: Especially in remote locations, insurers face difficulties adapting to rapid technological changes. 
• Expertise Shortage: There is a notable lack of expertise within the renewables sector. 
• Data Challenges: Obtaining adequate and reliable data remains a perennial issue. 

Despite the push for renewables, insurers often favor fossil fuels due to their profitability and established risk profiles. Governments can play a crucial role by being transparent, making clear commitments, using subsidies wisely, and facilitating access to the energy grid, particularly in high-potential areas. 

Recommendations and Opportunities 

To support the insurance sector in underwriting renewable energy projects, the following recommendations are proposed: 

1. Leverage Regulator Announcements: Use these announcements to build capacity within the insurance sector. 
2. Celebrate Proactive Insurers: Highlight insurers actively transitioning their portfolios towards renewable energy. 
3. Increase Government Pressure: Encourage governments to align their commitments with low-carbon transition goals. 
4. Improve Data Access: Promote greater access to reliable data. 
5. Support Emerging Markets: Facilitate the growth of renewable energy in emerging markets. 
6. Expand Insurers’ Roles: Encourage insurers to take on greater roles as risk managers and advisors. 

Conclusion 

The insurance sector has a significant role to play in the transition to renewable energy. By addressing the barriers and leveraging the opportunities outlined, insurers can better support the growth of renewable energy projects, contributing to the global effort to meet net-zero targets. 

For a detailed analysis and more comprehensive recommendations, download the full report here. 

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This report was delivered by WeESG on behalf of The Sunrise Project in September 2022.