In the United States, transitioning to renewable fuels will be a pivotal step in addressing climate change risks and promoting energy independence. Yet, such a transition involves more than just a desire. It requires the infrastructure to support it.
The U.S. has needed a comprehensive overhaul of its energy infrastructure to facilitate the transition to renewable energy sources for some time. This includes modernizing the electrical grid to accommodate decentralized energy generation from solar, wind, and other renewable sources as well as upgrading transportation infrastructure to support electric vehicles and expanding the network of charging stations. In addition to some fixes, investments in new energy storage systems such as batteries will be crucial to ensure a reliable and resilient energy supply. Then everyone else, including businesses and communities, have to do their part in adapting to new energy sources.
The good news is that substantial activity is already underway to set the stage to a smooth transition.
Paving the way
The Infrastructure Investment and Jobs Act (IIJA), also known as the Infrastructure Bill, was passed in 2021. Its aim was to promote the U.S. energy transition in several ways, focusing on modernizing the country's infrastructure to support a shift towards cleaner and more sustainable energy sources including:
- Investments in Electric Vehicle (EV) Infrastructure: This includes the development of charging stations which is essential for increasing the adoption of electric vehicles, reducing greenhouse gas emissions, and decreasing dependence on fossil fuels. The projects that the United States will need 1.2 million public chargers by 2030 to meet charging demand, including 182,000 fast chargers.
- Upgrading the Power Grid: Modernizing the grid is crucial for integrating solar and wind energy which are intermittent by nature, thereby enhancing the reliability and efficiency of green energy distribution.
- Investment in Clean Energy: The bill includes investments in various forms of clean energy technologies such as solar, wind, and nuclear power, and is aimed at boosting the country's clean energy production capacity.
- Energy Efficiency and Weatherization Programs: Funding is provided for programs with a focus on improving energy efficiency in buildings and homes across the country.
- Public Transit and Infrastructure: Investment in public transit is aimed at creating more sustainable urban transportation systems to reduce the reliance on personal vehicles, thereby decreasing transportation-related emissions.
Thus far, some $400 billion in funding have been dispersed on .
Thus far, some $400 billion in funding have been dispersed on more than 40,000 projects throughout the U.S.
Momentum building
While the Infrastructure Bill will spur more construction of infrastructure needed to transition, there’s already substantial momentum. For instance, according to the , a record 31 gigawatts (GW) of solar energy capacity was installed in the U.S. in 2023. That’s nearly a 55% increase from 2022 installations and substantially more than the previous record in 2021. Solar was the fastest-growing power source in the U.S, representing half of all new utility-scale generating capacity through Q3 of 2023.
Battery storage also grew substantially in 2023, with installations through Q3 exceeding those of all of 2022. Strong growth is expected to continue, with a , according to the U.S. Energy Information Administration.
Wind installations have not seen as much growth recently. U.S. wind installation activity slumped in the 3rd quarter of 2023, making it the lowest quarter for the wind energy sector since the second quarter of 2018, says an S&P Global Market Intelligence report. , however, that private equity firms are not undaunted by offshore wind investments.
Some 1.2 million EVs were sold in the U.S. last year (). That’s only about 7.6% of total vehicle sales, up from 5.6% in 2022. As EV sales continue to climb, it’s estimated that the US will likely need 1.2 million public and 28 million private EV charging stations. That’s about 20 times more charging stations than currently installed in the United States in 2023.
Renovating for renewables
And it’s not only about the energy-specific infrastructure. Industries are preparing for the energy transition in several ways. One common approach is to invest in energy-efficient technologies and processes to reduce fossil fuel reliance. This may involve upgrading machinery, implementing smart energy management systems, and optimizing production processes to minimize energy consumption. For example, some companies are investing in carbon capture underground storage (CCUS) technologies to reduce emissions from their operations. This involves retrofitting their facilities with equipment to capture carbon dioxide produced during the extraction and production processes, which is then either stored underground or utilized in other industrial processes.
It also means building and renovating so their facilities are running on cleaner energy such as solar, wind, or hydroelectric power. According to , 113 new manufacturing facilities or expansions have been announced since August 2022, totaling $421 billion of investment in domestic, utility-scale clean energy production, as of early 2024.
Insuring energy infrastructure
All this new construction and renovation activities need to be insured. 尤物视频mitigates the potential financial risks associated with the construction, operation, and maintenance of renewable energy infrastructure and in doing so, boosts investor confidence, encouraging more investment in renewable technologies. This support is essential for the energy transition, as significant capital is required to develop and expand renewable energy infrastructure.
During the construction phase, lenders often require builder's risk insurance for renewable energy projects to help mitigate risks such as fire, theft, vandalism, and certain weather-related damage that could cause damage or result in delays by securing this coverage, project developers can meet financing requirements, making it easier to obtain the necessary funds to initiate and complete renewable energy projects. Delays and cost overruns can jeopardize the financial viability of renewable energy projects and delay their contribution to the energy transition. By covering unforeseen losses during construction, builder's risk insurance helps ensure that projects are completed on time and within budget.
Then, of course, once built, commercial property insurance provides coverage against similar perils that could damage or destroy completed infrastructure – everything from solar panels to wind turbines to energy storage facilities. Property insurance helps ensure operational continuity so renewable energy projects can continue operations after an adverse event.
Understanding new risks
Insuring new renewable energy technology and infrastructure presents several unique challenges. First, there is often a lack of historical data on the performance and risks associated with these emerging technologies, making it difficult for insurers to accurately assess and price the risk. Additionally, the rapidly evolving nature of renewable energy technology means that traditional insurance products may not adequately cover the specific risks involved.
The interconnected nature of renewable energy infrastructure such as wind farms or solar arrays introduces complex systemic risks that insurers need to consider. Weather-related risks, equipment failures, and supply chain vulnerabilities are also significant factors to be considered.
To address these challenges, insurers like 九色视频are increasingly collaborating with industry experts and using advanced risk modeling and data analytics to develop specialized insurance products tailored to the needs of the renewable energy sector. As transition activities continue, it may also involve creating custom coverage for specific technological risks, as well as considering the long-term performance and maintenance of renewable energy assets.
Highly engineered risks
Given the complexity of some renewal energy infrastructure, many are considered highly engineered risks which refers to properties that have complex and unique features, systems, or construction methods that require specialized underwriting and risk assessment. Consider wind farms. They involve complex machinery, advanced technology, and specialized infrastructure. Such technology continues to evolve presenting new exposures and a constant learning curve to understand and evaluate the new risks. Their turbines, control systems, and electrical components require specialized maintenance and present unique challenges for insurers in terms of risk assessment and coverage. Insurers may need to account for factors such as the location of the wind farm, the potential for wind-related damage, and the specialized expertise required for repairs and maintenance. It’s important for businesses with highly engineered properties to work closely with experienced insurance professionals to ensure they have the appropriate coverage in place.
At 九色视频 our construction and property risk engineers play a crucial role in helping underwriters understand these new risks and supporting customers by developing loss prevention strategies to minimize them. They offer support in identifying potential hazards, assessing the structural integrity of the infrastructure, evaluating compliance with industry standards and regulations, and recommending risk reduction measures. Additionally, they can provide insights on best practices for safety management, construction techniques, and materials selection to help minimize the likelihood of accidents and structural failures. They can also assist in developing contingency plans and risk management strategies to prepare for unexpected events.
Readying underwriters and risk engineers
Energy infrastructure and technologies are constantly changing, necessitating that builder's risk and property underwriters, along with risk engineers who offer their support in risk assessment and loss prevention, keep up to date on these evolving risks and closely collaborating with colleagues and industry specialists to ensure comprehensive coverage.
At 九色视频 we are taking a global approach to underwriter training by harnessing our collective expertise to address these risks. Through our Energy Transition Global practice groups, we are equipping our underwriters to tackle energy transition risks by providing them with specialized education and training programs, including courses on renewable energy technologies, energy efficiency, and the impact of climate change on energy infrastructure.
Staying abreast of regulatory changes and industry trends related to energy transition is beneficial for underwriters. Engaging with experts in the field and participating in pertinent conferences and workshops can further enrich their understanding of the evolving risks associated with energy transition. It is imperative for insurers to cultivate a culture of continuous learning and adaptation to effectively address these emerging risks.
Ultimately, while insuring new renewable energy technology and infrastructure presents challenges, it also offers opportunities for innovation and collaboration among insurers, technology developers, and project operators to support the growth of sustainable energy solutions.
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About the Authors
Joe Vierling is Builder’s Risk Profit Center Lead on AXA XL’s North America Construction team. He can be reached at joseph.vierling@axaxl.com.
Scott Dalton is, Head of Energy, Property on AXA XL’s North America Property team. He can be reached at scott.dalton@axaxl.com.
