Insurance concepts for renewable energies – For a low-carbon future
Munich Re believes that renewable energy has a key part to play in the transition to low-carbon energy. We provide visionary insurance solutions and expertise that promote the development and propagation of technology to generate electricity from renewable energy sources.
The importance of renewable energies is set to increase further for two reasons. Firstly, wind, solar and geothermal energy help reduce greenhouse gas emissions. Secondly, unlike oil, coal and other fossil fuel resources, supplies are inexhaustible. However, tapping into the energy supplies of the future brings with it not only enterprise risks but also other, new types of risk. Whether lack of wind, not enough sunshine, or an unsuccessful geothermal drilling project – Munich Re can provide risk transfer solutions and programmes for many of these problems, paving the way for investments in technologies to a low-carbon future.
New policies – Making projects viable
Munich Re devises insurance solutions that promote the use of new technologies in the field of renewable energies. Our products make such projects possible, because returns on the relevant investments are often subject to a special type of risk, e.g. weather conditions, that are beyond anyone’s control. Whether we are talking becalmed wind turbines or cloud cover over a solar park – Munich Re provides innovative coverage programmes that give technology developers, operators and investors the necessary planning certainty.
Special cover for offshore facilities
The investment risks are particularly great in the case of offshore wind technology. It takes approximately three years of planning, technological and logistical effort before a plant is operational and ready to withstand the elements it is exposed to at sea, so that the construction phase alone can be problematical for all parties. With the extensive experience we have gained from insurance products for offshore wind farms and our work with research institutes worldwide, we can help assess the risks and determine the conditions under which they can be insured.
The same applies to onshore technology. Since the beginning of 2011, for instance, we have insured a manufacturer of wind turbines that gives its clients a multi-year guarantee for its up to 2.5-MW wind farms. We cover this liability commitment, thus assuming the financial risk involved. This is the first insurance of its kind worldwide. It provides relief for both manufacturer and investors and promotes the growth market for this new technology.
Solar cell warranty takes the strain off manufacturers’ balance sheets
Solar cell manufacturers, too, generally give a 20- to 25-year performance guarantee – considerably beyond what is required of them by law, setting up a corresponding provision against loss or damage claims in the balance sheet. However, Munich Re’s experience and calculations show that it is more economical to insure against such eventualities. Munich Re offers performance warranty covers that take the strain off the solar cell manufacturer’s balance sheet.
For example, Munich Re and industrial insurance broker Filhet-Allard have devised a new cover for solar technology manufacturer Solairedirect, which will meet existing guarantees even over a period of up to 25 years. Munich Re insures reductions in the output of photovoltaic modules below defined significant levels. This is an insurance first in the French market, which makes it much easier to obtain funding for major solar energy projects and gives all stakeholders greater planning certainty.
Promoting geothermal energy – Exploration risk insurance
Geothermal heat can now also be exploited thanks to modern technology: the extracted water at temperatures of more than 100°C can be used in commercial applications such as district heating systems, steam for industrial processes and electricity generation. However, the exploration risk is still a major investment hurdle, since it is possible that, despite painstaking and costly preparatory work, insufficient quantities of hot water will be found to make a geothermal power plant economically viable. Munich Re believes geothermal energy could one day make up a large share of the renewable energy mix. In 2003, Munich Re became the first insurer to develop a policy covering the costs of unsuccessful geothermal drilling projects.
