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With a clear goal of achieving Net Zero by 2050, the nation is moving towards a future powered by renewable energy sources.
Paul Latham, Business Development Manager, Public Sector, Gallagher comments: “by prioritising climate change, clean air, and energy security, local authorities are playing a crucial role in driving the nation's energy transition and creating a sustainable future.”
It is an essential transition, but there are inherent risks. Unfamiliar technologies, volatile markets, and complex supply chains introduce uncertainties that could derail even well-planned projects. To navigate the challenges a robust safety net is necessary, and early planning is crucial.
Sector challenges
The renewable energy sector is not without its challenges, as Carl Gurney, Gallagher’s Renewable Energy Director observes: “... for instance, skill sets and supply of materials.” And businesses have to manage the impacts, like: “...what is best suited for their business, and how do they start decarbonising their organisation to get on that green journey.”
The UK Government has set an ambitious target for the closure of coal-fired power plants (October 2024) and the continued transition away from fossil fuels. The contribution of coal to the UK's electricity generation has already plummeted from 40% in 2010 to around 2% in 2020.
The recent global energy crisis caused by the Russia-Ukraine war has highlighted the vulnerabilities of relying on imported fossil fuels and the importance of seeking energy independence. Avoiding wholesale pricing volatility has become urgent.
A full range of renewable and clean energy technologies are required to achieve Net Zero. Wind power is currently the dominant contributor, with offshore and onshore wind farms producing 80,000 GWh and providing nearly 60% of all renewable power generation. Biomass power and solar energy also make significant contributions.
New industries
Other renewable technologies like anaerobic digestion, hydro and tidal plants, and waste-to-energy generation are growing and expected to contribute more.
Chris Noah, Renewable Energy Managing Director, Gallagher says: “long duration energy storage systems and EV charging stations need to be developed to meet demand, but these are huge infrastructure changes that require government impetus. Loss control for projects needs to be included in the build because retrofitting down the line is not only costly, but the down time also causes business interruption.”
Government policies, such as the Climate Change Act and the Net Zero Strategy, are catalysts for the development and adoption of renewable energy sources. Financial incentives and regulatory frameworks will accelerate the transition. For example, the Government has allocated significant funding to projects in the hydrogen sector, with the aim of achieving 1GW of electrolytic hydrogen production by 2025.
Government legislation is playing a significant role in shaping waste management practices. In England, separate food waste collections will become mandatory by 2026. The Department for Environment, Food and Rural Affairs (Defra) has identified Anaerobic Digestion (AD) plants as the preferred treatment method for this waste stream.
This legislation reflects the government's commitment to reducing food waste and promoting sustainable waste management practices. By implementing separate food waste collections and prioritizing AD plants, the government aims to minimise the environmental impact of food waste and maximise its potential for energy generation through anaerobic digestion.
New technologies
Technological advancements are also driving the renewable energy sector forward. Floating wind farms, once a futuristic dream, are now a reality in the UK. The Kincardine wind farm in Scotland, the world’s largest floating wind farm, has been operational since 2021 and is generating enough electricity to power 50,000 households. Hydrogen, produced from renewable energy sources, could revolutionise transportation, heating, and industry. The UK is a pioneer in leveraging this technology.
While the future of renewable energy in the UK looks promising, complex risks need to be navigated. Insurers face challenges in underwriting risks associated with emerging technologies, volatile pricing, and a lack of historical data. The sector also faces a shortage of experienced engineering, procurement, and construction contractors, as well as supply chain issues. Securing essential materials and skilled labour can be a time-consuming and costly process.
A lack of historical data regarding the performance of renewable energy technologies has caused insurers difficulty in terms of pricing and risk profiling. With new technologies now entering the sector, such as Long Duration Energy Storage (LDES) and hydrogen; coupled with larger more complex sites being developed, expertise and knowledge sharing is paramount to ensure long-term insurance security.
Business continuity plans, contractual relationships with Original Equipment Manufacturers (OEMs) and system resilience will all compliment a robust insurance programme. This will in turn help mitigate supply chain constraints and ultimately protect investments.
Early engagement with renewable energy insurance specialists is crucial for project success. These specialists can assess risks, provide mitigation strategies, and secure optimal insurance coverage. Gallagher, a global insurance brokerage and risk management company, has extensive experience serving clients in the renewable energy industry.
The UK's renewable energy sector is at a pivotal moment. The nation is moving towards a future powered by renewable energy sources.
