Assets designed to help fight climate change may soon risk losing access to insurance unless they’re adequately shielded from extreme weather events.

Roughly 46% of Europe’s total renewable generation capacity will be at “critical risk” from the fallout of climate change unless owners do more to protect existing and planned assets, according to a report by Zurich Resilience Solutions, a unit of Zurich Insurance Group AG, and Mandala Partners. Energy storage and solar assets are particularly exposed, it said.

“If we don’t see a continued and increased focus on building resilience, it will be very difficult for us — or any other insurance company — to insure these assets in the future,” Sierra Signorelli, chief executive of commercial insurance at Zurich Insurance, said in an interview.

Zurich looked at 25,000 power-generation sites in the UK, France, Germany, Italy and Spain under a scenario of 2C of global warming. Without steps to boost resilience, Europe’s clean-energy assets will be relatively more exposed to extreme weather events than their fossil-fuel equivalents and may face as much as €270 billion ($312 billion) in losses by 2050, according to Zurich.

Unaddressed, “physical climate risks will act as a brake on clean-energy investment at the scale and speed required,” the report said.

In the five countries included in the study, the share of energy produced by coal, oil and gas is set to fall to 17% in 2030 from an average 28% today, according to the Swiss insurer. By contrast, the share of renewables is set to increase to 67% in 2030 from 49% currently.

Among the concerns is that solar farms and wind installations often occupy a larger physical space than fossil-fuel plants, leaving a bigger surface area exposed to the elements. “Renewable-energy assets tend to be more susceptible to weather-related events,” said Signorelli.

Zurich Insurance says renewable-energy companies can stress-test their assets against different climate scenarios, use drones to monitor infrastructure weaknesses, and build buffer zones to protect against fire and flood. Solar farms can be built on stilts to protect against floods and the panels can be made more heat resistant to protect against overheating.

“There are always some assets that are difficult to insure,” Signorelli said. “But if there’s a willingness to engage, we try to provide some insurance and work toward providing greater coverage as we align on the risk.”

Photograph: Arrays of photovoltaic panels at Iberdrola SA’s Puertollano II solar plant in Puertollano, Spain, on Thursday, May 19, 2022. Photo credit: Angel Garcia/Bloomberg

Topics
Energy