Earth, wind, and fire: Protecting your renewable energy business from catastrophic risks
Herbie Rolph, George Phillips
A famous musician once sang, "The times, they are a-changin'." This lyric can apply to the weather in the U.S., as well as the growing evolution of the renewable energy sector.
Throughout 2023, climate change increased damaging weather events across the U.S. According to the National Oceanic and Atmospheric Administration, there were 25 weather events with losses of over $1 billion last year.
To the same tune, renewable energy projects are growing in popularity and usage. Businesses are finding new ways to power their operations, from solar panels to wind farms. As with any property, renewable energy business owners must ensure their projects are ready for the changing weather.
Catastrophic risks brought on by damaging weather have been just one consistent trend in recent years. Learn more about this trend and other important ones to keep tabs on as you move your business forward.
The growing power of renewable energy projects
The limits and forms of energy are shifting across the country. As a result, numerous companies are looking into taking on different energy projects like wind farms, solar panels, and hydroelectric dams.
Renewable energy projects that harness wind power, in particular, are on the minds of many business owners looking to join the renewable energy movement. Projections around land-based wind energy in 2026 show a nearly 60% increase in megawatt power. This increase is enough to power about two million homes in the U.S.
The outlook for the renewable energy space looks promising. By 2030, researchers expect renewable energy to become the leading source of electricity generation. Further ahead, in 2040, renewable energy sources will provide 42% of the U.S.’s electricity.
Projections for the future aren’t the only timeframes that show a favorable view of renewable energy projects. In 2022 alone, renewable energy production and usage reached record highs. The growing number of solar, wind, and hydroelectric energy projects has helped empower these record-breaking trends.
Renewable energy’s rambunctious dance partner
While renewable energy projects continue to get off the ground, they face an emerging risk in the number of damaging weather events around the country. Depending on where they occur, adverse weather events can create various forms of catastrophic (CAT) risk. On the West Coast, states like California deal with wildfires and earthquakes. Across the country on the east coast, states face the threat of hurricanes and convective storms. Meanwhile, in states like Texas and Oklahoma, threats that range from hail to tornadoes make their presence felt.
The unsteady dance between renewable energy projects and damaging weather events plays out in states like Oklahoma and Texas. In 2019, the most extensive known loss related to a renewable energy effort was due to a hailstorm in Texas that created an $80 million loss for the project. Oklahoma and other Midwest states face their share of storms and tornadoes. However, recent years show that the “Tornado Alley” area is expanding in reach and occurrence.
CAT risks nationwide look to stick around going into the new year and beyond. Businesses undertaking renewable energy projects must ensure that these projects are ready for any potential storms.
How you can protect your renewable energy projects
Every renewable energy project will have its own unique needs, depending on the location it’s in. Solar energy projects in California may face the risk of earthquakes, while wind farms in Oklahoma face the threat of damaging convective storms and tornados. Whatever form the weather takes, ensuring your business has a disaster recovery plan is vital.
Insurers across the country are reducing insurance capacity for renewable energy projects that are in high-risk areas. With fewer protection options, renewable energy businesses must analyze the protective measures of their projects. The more you prepare your business’s disaster recovery efforts, the fewer headaches you’ll face when lousy weather shows up.
Bringing on risk engineers can help you decide what areas, current or future, to hold your projects on. By looking at the natural catastrophe exposures in the areas where your projects can take place, you can get a clearer picture of various sites’ risk levels.
The solutions you discover for your renewable energy projects will also vary across the country. For projects in flood-prone zones, proactive solutions can be actions such as elevating equipment above expected flood levels. Meanwhile, for projects dealing with hailstorms, solutions can include installing panels with a sturdier design to take on damaging storms. Solutions like these come with different price tags, so whatever route you take for your proactive protection efforts, always ensure they fit your budget.
Where Marsh McLennan Agency can help
Renewable energy projects take a lot of work to set up and run. Give your projects the support they deserve with a broker who provides insurance solutions to fit their needs. From insurance benchmarking and analytics to environmental risk consulting, we pair our specialists' local reach with Marsh's global resources to help you take on challenging weather.
One battery storage operating business learned firsthand about the perks of working with us. The Electric Reliability Council of Texas (ERCOT) brought the battery storage business to help buff up its power grid. In 2021, ERCOT's grid shut down due to a strong bout of winter weather, leaving hundreds of Texans without power and warmth. The battery storage operating business was to help prepare and keep ERCOT's grid running should it ever run into any bad weather down the line.
The catch was that the business used a new technology for its storage services. This technology was so new that many insurance carriers were apprehensive to insure them. Always looking to take on exciting avenues, we helped the business. The first step was contacting Marsh’s renewables team specialists to help find carriers offering ideal terms, placements, and prices. From there, the specialists utilized a Natural Catastrophe analysis report to create worst-case scenarios that could affect their business.
Finding a broker just as ready as them to take on new challenges, the battery storage operator became one of our clients. The battery storage business saved over $300,000 in premiums and expanded its facilities from three to 35.
This is just one example of businesses finding a ready and willing broker to help them solve their unique obstacles. Be the main character of your own success story with Marsh McLennan Agency.
