Green energy is an essential part of the government’s plans to achieve net zero and long-term energy security. Peter Grocock, public sector practice leader, South West, Wales & Central at Aon, looks at some of the initiatives in the public sector and examines the operational risk management and insurance considerations.
Renewable energy sources such as wind, solar and hydrogen are key components of the government’s strategy for achieving net zero by 2050. But, while switching to renewables is greener, managing the risks they introduce will be essential to their success.
Switching to greener energies is a must. As well as its net zero target, the government has also outlined its plans to boost the UK’s energy security. Its plan – the British Energy Security Strategy – sets out its ambitions to supercharge clean energy and ensure long-term energy independence.
Recent events have highlighted the importance of this strategy. Russia’s invasion of Ukraine pushed wholesale energy prices to an all-time high as the US, EU and UK placed restrictions on Russian oil and gas imports. As gas levels were already depleted after a particularly cold winter in Europe, energy prices sky rocketed.
But it’s not an easy transition, with green energy introducing a new set of challenges and costs. As an example, UK battery start-up Britishvolt was a casualty of these challenges, collapsing into administration in January despite being hailed as a levelling up opportunity that would boost the region’s economy and the wider UK car manufacturing sector.
Embracing green energy
While there will be some false starts along the way, there are also plenty of examples of success and ambition in the green energy space. Across the UK, local authorities are leading the way with a broad range of green energy projects including:
- Cardiff Capital Region’s, which represents 10 local authorities in south east Wales, purchase of Aberthaw Power Station in 2022, with plans to transform the 489-acre site into a green energy hub employing thousands of people.
- Warrington Borough Council’s use of a green investment scheme, a community municipal investment, to raise £1m to help fund the development of a new solar farm.
- Gloucester City Council accessing a Salix grant to enable it to maximise carbon savings on one of its buildings, a tennis centre. Initiatives including solar panels on the flat roof through initiatives including solar panels, a ground source heat pump and replacement floodlights to a sports field.
- City of York Council’s zero carbon homes programme aims to deliver 600 Passivhaus certified homes across eight sites. By using air source heat pumps and solar panels as well as energy-efficient construction, properties will generate at least the same energy they use.
Green risk management
As the UK adopts more green energy sources, it is also important to understand the operational risk management and insurance considerations. The risks associated with these new technologies are different to those for more traditional energy generation methods, going far beyond needing the right weather.
Take solar energy installations as an example. As well as the risk of theft or attempted theft of panels, weather events such as windstorm and hail could potentially cause damage. The technology itself could fail too, whether through the trackers, the electrical equipment or the substation. There are also more traditional risks such as impact damage and fire.
As an example, in a recent claim, ground mounted photovoltaic panels were damaged by strong winds, causing nearly £25,000 of material damage. The equipment was only a year old but a failure in the tracker orientation system meant that the panels were unable to fully turn to protect themselves from the wind and hail.
These different risks require different insurance cover too. For example, where an organisation is involved with the construction of a solar energy site, they may want to consider marine damage and marine delay of start up cover to cover the transit of equipment; full contract works, for any damage during the construction phase; advance loss of profit, to cover revenue lost due to delays in construction; and third party liability for accidental injury to public or property.
Once operational, an organisation should consider business interruption cover alongside material damage and third party liability, to ensure cover for periods of operational downtime as a result of an insured peril.
Harnessing the power of renewable energy sources is a major benefit for the UK, with public sector organisations already pushing ahead with many innovative projects. Managing risk and insurance requirements will ensure the transition to green energy is a success.
More information
To find out more about how Aon can support you, speak to your account manager or contact Peter Grocock at [email protected].