Addressing insurance risks
The need to address climate change, growing global awareness, legislative changes, and, not least, the reduction in the costs of producing green energy have led to a dramatic rise in the use of renewable energy sources over the past decades.
Nearly 40% of the world’s electricity is now generated from renewable sources, including nuclear energy. Solar and wind power contributed 12% to global electricity production in 2022. The share of electricity from solar and wind reached a record 12% of total production that year. Hydropower remains the largest source of renewable energy, with its share in global electricity generation at approximately 15-16%.
„The expansion of new energy sources introduces new risks into insurance practices, which must be addressed not only by clients but also by insurers and reinsurers. While the insurance market welcomes efforts to expand renewable energy sources and is ready to support and protect new investments, these sources are considered high-risk areas with a significant potential for losses from an insurance perspective. Therefore, ongoing communication between insurers and the public is essential. Only through mutual discussion of risks can damages associated with green energy be mitigated, allowing the insurance market to contribute to its development through tailored products“, Renáta Doktoríková, Senior Underwriter of the Slovak Colonnade branch summarized.
The most discussed topic in the insurance industry in our region is currently solar energy and its storage. Insurers are working to adapt to the rapid growth of solar power plants, especially those installed on existing properties, primarily rooftops, and are seeking solutions to offer clients coverage and help protect their assets. This situation is complicated by the lack of legislative support in the area of fire safety for new energy sources, which is why insurers are taking on an educational role, offering clients advice on how to best protect their properties.
Clients must be aware that solar power plants increase the fire risk to existing properties, and therefore it is essential to inform the insurer of the new installation of a photovoltaic system on already insured properties.
Key elements contributing to the safety of photovoltaic systems on existing properties:
- Structural resilience of the building where the power plant is installed, from a fire and structural standpoint (e.g., recalculating roof load capacity, including the new installation, non-flammable roof structures, and building cladding).
- Ability to safely shut off electricity in the event of a crisis.
- Sourcing components from reputable suppliers – poor-quality components can lead to short circuits and fires.
- Weather resistance of solar panels in the given region. Given the worsening weather conditions in recent years, it is recommended to buy panels with greater resilience.
- Maintenance of the solar power plant’s components and regular cleaning of the solar panels.
All these points apply to all types of renewable energy generation, but maintenance and cleaning are undoubtedly the most crucial aspects of prevention. Regular maintenance of machinery, monitoring, and proper evaluation of various energy production parameters, and also appropriate responses to the measured values are the best ways to protect assets from unwanted risks.
The most common cause of damage across all types of renewable energy generation is so-called machinery breakdown, which refers to damage to the technological components, whether mechanically from external forces or from internal electrical causes. These risks can be effectively prevented through high-quality maintenance and cleaning, as mentioned above.
Another important topic in the area of renewable energy utilization is energy storage. Battery storage systems and the use of batteries themselves, such as in electric vehicles, bring new risks that were not considered during the construction of existing facilities. It is therefore essential to understand and mitigate these risks when installing battery storage systems to protect both existing properties and the storage systems or battery-powered devices themselves. Considering the challenges of extinguishing current battery fires, it is crucial to plan for fire protection and ensure the proper separation of battery storage from flammable materials.
Renewable energy production is a key topic not only today but also in the coming years. It is important to understand the associated risks and work together with clients and insurers to reduce them through discussion, finding ways to move into the future with these technologies while minimizing losses.