Wind and solar companies are increasingly seeking professional insurance to mitigate weather-related risks, such as insufficient sunlight, excessive winds, or storms damaging their infrastructure.
Despite the push for renewable energy to reduce reliance on fossil fuels and combat climate change, businesses are turning to parametric insurance. This type of insurance provides quick payouts when specific adverse weather conditions occur. Extreme weather is placing additional stress on industries globally, as highlighted by reports from Bloomberg.
There’s some skepticism regarding whether this parametric insurance will effectively reduce the risks for solar and wind energy companies. Many of these companies rely on non-market support through subsidies and assistance when technology falters or projects fall through. In the latest phase of energy deregulation in the U.S., the viability of solar and wind technologies will be rigorously tested. The question remains—can they hold their own against more reliable energy sources like natural gas, nuclear, and coal?
Former President Joe Biden promoted wind and solar power as key tools in the fight against climate change, backing them with significant tax credits and federal funding. Yet, these technologies also face vulnerabilities, such as severe weather that can damage wind turbines or roofs of solar installations.
This issue extends beyond U.S. borders. Countries like England and India are experiencing cloudy, windless days that undermine their green energy goals, according to Bloomberg.
AXA XL, a French insurance company, is gaining traction with its parametric insurance offerings for wind farm developers, which can help when companies struggle to produce energy at expected levels.
Kailash Vaswani, CFO of Indian green energy firm Reney Energy Global Plc, commented that the performance of wind energy has been declining for years, and it seems unlikely insurers would step in unless the situation becomes severely adverse. He pointed out that, in this case, the odds favor the insurers.
There have been notable drops in stock prices for companies like Orsted, a major Danish wind energy firm, reinforcing the hesitance of insurance companies in backing wind energy ventures.
Some voices in the debate express strong doubts about the feasibility of what they call ‘green energy.’ Mark Morano, an author, labeled the situation a “clown show,” questioning the compatibility of heavily subsidized green technologies with practical energy solutions. He raised concerns over the inherent risks and the added costs associated with insuring these large-scale projects.
In contrast to Biden’s focus on clean energy, former President Donald Trump emphasized traditional energy sources and criticized the costs associated with renewable energy production. He has made statements suggesting that nations relying on wind and solar have faced rising energy costs.
While Biden continues to promote climate initiatives, Trump has declared a national energy emergency and signed orders aimed at unleashing America’s energy potential, placing a greater emphasis on coal, gas, and nuclear power amidst warnings of a national energy crisis.
Secretary of Energy Chris Wright has indicated that reliable, affordable energy plays a crucial role in daily life, reflecting a balance that may not always favor renewable sources.
