A report from the broking firm is upbeat on the renewable energy sector’s prospects to “weather the storm” of the risks and challenges it faces.
The renewable energy sector has shown resilience and optimism in 2024 despite facing constraints, according to WTW’s Renewable Energy Market Review.
Constraints facing renewavles include a cocktail of risks, such as climate issues, supply chain disruption, casualty deterioration, social inflation and geopolitical conflicts.
Overall profitability remains challenging due to variable results within energy classes, according to the broker’s new paper.
The review, titled Prepare for storms, plan for stability, includes commentary on battery energy storage systems (BESS), offshore wind, floating solar installations and green hydrogen, and analysis of the insurance markets for renewable energy.
Several key trends are summarised below:
- El Niño & La Niña effect and climate volatility: unpredictable weather patterns continue to challenge the renewable market, with significant natural catastrophe losses and an unprecedented number of individual weather events exceeding $1 billion
- Supply chain instability: four years post-COVID-19 pandemic, global supply chains remain unstable, influencing lead times for critical items and assessments of asset reinstatement and business interruption risk
- Technological advancements and market response: the renewable energy sector is seeing rapid growth in large wind turbines, floating solar installations, green hydrogen, and utility-scale battery energy storage systems, prompting markets to innovate and adapt their strategies
- Energy storage innovations: lithium-ion batteries and green hydrogen are ushering in a new era of energy storage, driving a renaissance in well-known technologies such as hydroelectric pumped storage
- Resource skills gap: the renewable energy insurance market faces a major challenge in resource skills, requiring the transfer of skills from traditional energy sectors to support the transition to low-carbon infrastructure.
“Recent challenges have tested the insurance markets, but resilience has improved,” said Steven Munday, natural resources global renewable energy leader, WTW.
“While surplus capacity exists for proven technologies, caution remains. The ongoing competition and potential for an La Niña year keep rates steady, with parametric solutions gaining traction despite integration challenges,” Munday continued.
“To capitalise on emerging opportunities, renewable energy risk and insurance buyers should continue to engage with advisors and markets, employing smarter solutions to navigate the complexities of the evolving landscape.”
The report can be downloaded here.
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