Renewable energy projects accounted for 15 per cent of all extreme weather insurance losses last year – almost double that of previous years.
And this was in the year that insurers including Swiss Re and Munich Re reported that 2018 saw the fourth-highest natural catastrophe losses of all time.
Now renewables insurer GCube Insurance is calling for renewables to be better prepared for out-of-season extreme weather damage.
Fraser McLachlan, GCube Insurance chief executive, said: “Every so often, the market gets caught out. As the climate changes, so must our expectation of when and where losses will occur.”
In particular, GCube highlights the way that projects are often sited next to areas of high hazard natural catastrophe exposure. Projects sited on the edge of these zones, where insurance premiums have historically been lower because they have been perceived as non-critical natural catastrophe areas, still carry the same degree of risk.
McLachlan added: “Realistically, siting a project on the edge of a flood zone or wildfire area is no better than building one in a flood zone or the wildfire zone – it carries almost the same degree of risk.”
In recent years, GCube has seen several losses as a result of inadequate preparation for extreme weather. These include solar panels in a parking lot damaged by burning cars as a result of wildfires in California; A solar farm in Texas hit by unexpected flooding, causing delays and revenue loss; In Taiwan, incorrectly-installed concrete supports led to heavy damage to a solar farm following a storm; and in Australia, flooding caused major damage to a wind farm and significantly delayed a project during construction.
In light of this, GCube has highlighted the importance of evaluating projects on a case-by-case basis. It says asset owners and insurance managers must address each project independently, rather than relying on portfolio-wide risk analyses which may overlook individual project features or weather variability.
This involves ensuring that connected infrastructure and equipment are capable of resisting catastrophe-level events. GCube stresses that while turbines and solar plants are increasingly designed to resist tough conditions, such as hurricane-strength winds, this does not mean that connected infrastructure and surroundings do not pose a risk – such as trees touching transmission lines.
McLachlan added: “Every project has a unique risk profile. The past two years have taught us to think about how that might be affected by changing extreme weather.
“The US as a whole may not be at high risk of wildfires, but any project in California now needs unique consideration of how wildfire will affect surroundings – both on- and off-season. As extreme weather grows more erratic, preparing for the worst is of paramount importance.”
“Apart from anything, if a project causes third-party damage, the owner might be liable. Considering risk on a project-by-project basis is the best way to avoid this.”