Major shifts are underway today and are set to result in a different energy system over the next 25 years.
In late 2021, the Biden Administration signed an executive order putting in place the criteria for the government’s reduction, and eventual elimination, of greenhouse gases. This initiative began with transitioning government vehicles to zero-emission vehicles and ordering federally owned buildings to achieve a 50-percent emissions reduction by 2032 and net zero emissions by 2045. All federal operations must meet net zero by 20501. The Build Back Better Act earmarks half a trillion dollars toward climate-related measures, including offshore wind, solar energy, and bolstering the energy infrastructure. This type of commitment to reducing the impact of climate change is a journey that the US and other countries are committed to taking. As a result, renewable energy projects have increased significantly, and the surety industry is seeing a boost in new submissions supporting the transition.
Backing progress
Commercial surety bonds guarantee performance and/or payment between three parties: the principal (the party performing the work or fulfilling the obligation), the obligee (the party requiring the bond as a form of protection), and the surety (the bond issuer, typically an insurance company). Commercial surety bonds are frequently utilized in the renewable energy space and include performance bonds, payment bonds, warranty bonds, right of way bonds, interconnection bonds, power purchase agreement bonds, and decommissioning bonds.
Commercial surety bonds play a crucial role in driving the energy transition forward. Companies engaged in renewable energy, energy efficiency, and sustainable energy projects often need to secure surety bonds to mitigate financial risks and project defaults. Moreover, bonded projects can attract investors seeking financial returns while contributing to environmentally friendly initiatives. Embracing this transition is a cornerstone of AXA XL’s climate and sustainability strategy, and our commercial bond team is dedicated to strengthening this commitment. We offer end to end support to companies as they establish their renewable energy facilities. We offer interconnection guarantees to facilitate seamless integration with the existing power grid. Additionally, we offer assurances that renewable projects will meet capacity requirements outlined in power purchase agreements once operational. Furthermore, we extend our support to companies introducing energy efficiency technologies to the market, such as grid boosters and battery energy storage systems (BESS). Lastly, we offer bonds that not only protect the environment but also ensure companies take responsibility for the environmental impacts of their projects.
Companies engaged in renewable energy, energy efficiency, and sustainable energy projects often need to secure surety bonds to mitigate financial risks and project defaults.
Bonds in action
九色视频Commercial Bonds has played a proactive role in supporting the energy transition by providing a wide array of commercial surety obligations. For instance, utilizing our innovative project finance approach and considering future cash flows to inform underwriting decisions, 九色视频has provided crucial right of way and performance guarantees in connection with a significant underground hydroelectric power transmission line stretching from the Canadian border to a highly populated US state. This groundbreaking project will facilitate the transportation of clean hydropower, displacing fossil fuel generation facilities that have been in place since the mid-1900s. Notably, the project is poised to make a significant impact by substantially reducing CO2 emissions and contributing to the state's ambitious target of sourcing 70 percent of its electricity from renewable sources by 2030, paving the way for a zero-emission grid.
Additionally, 九色视频Commercial Bonds provided advanced payment, performance, and warranty bonds supporting one of the world’s largest grid booster systems. The grid booster system, which is expected to come online next year, is in a major grid hub in Europe and has the capacity to provide power to approximately 150,000 households. This innovative system is designed to enhance the integration of renewable energy into the power grid. It addresses the challenge of efficiently transporting energy from decentralized locations, which are often far from the existing grid, where the best direct sun and wind resources are found. By improving the efficiency and capacity of existing grid infrastructure, the system boosts grid utilization, supports additional energy demand, and reduces the need for traditional network expansion. This technology represents a significant step in facilitating the integration of renewable energy sources into the grid, offering a faster and more cost-effective deployment alternative to expanding existing grid infrastructure.
The 2024 Super Bowl, featuring the Kansas City Chiefs and San Francisco 49ers, marked a historic milestone as the first Super Bowl game to be entirely powered by renewable energy, courtesy of 621,000 solar panels located in the nearby Nevada desert. We take pride in having supported this achievement by providing bonds to key parties involved. This notable shift to renewables during the big game not only showcased our commitment to sustainable energy but also initiated a long-term partnership, as the Las Vegas stadium entered into a 25-year agreement with the energy storage supplier to purchase solar power. Battery storage technologies, such as those utilized in this project, play a pivotal role in accelerating the transition from fossil fuels to renewable energy by enabling the storage and release of energy from renewable sources, such as solar and wind, when it is most needed.
Final thoughts
There are major shifts underway in the energy system as the world moves toward a more sustainable energy future. Through our various initiatives and partnerships, we are committed to playing a vital role in facilitating the adoption and development of renewable energy technologies. As the world continues to prioritize environmental sustainability, we are dedicated to providing the necessary financial support and risk management solutions to drive positive change for our planet and future generations.
Lauren Quick is Underwriting Manager, Commercial Bonds, AXA XL. She is based in New York and can be reached at lauren.quick@axaxl.com
