The insurance industry may help direct the course of clean energy’s future
Renewable energy is becoming more prominent throughout the world. Developing countries are turning to clean energy for the sake of economic growth, while larger countries are looking to use renewable power to cut down on the emissions that they produce through the consumption of fossil-fuels. Renewable energy is poised to become the most important business sector in the world as fossil-fuels begin to fall from favor, and the insurance industry may play a major role in the future success of several fields of clean energy.
Clean power is often considered an emerging insurance issue, though few outside of the insurance industry are aware of what that even means. New energy projects are being launched at a rapid pace and these projects are having a revolutionary impact on the way energy is produced and consumed for many countries around the world. The issue is that these projects are notoriously expensive, either because of their use of costly materials or the financially risky nature of renewable energy in general. Clean power is still in a state of relative infancy, which means that it is impossible to determine whether or not projects will see completion once they are started. This represents a significant financial risk for any party investing in renewable power and many are turning the insurance industry in order to mitigate the potential impact of this risk.
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Insurance can protect against disasters, both financial and otherwise
Insurance companies typically provide coverage for clean energy projects, insuring the technologies and materials that these projects make use of. Coverage often protects project from damage caused by natural disasters and other events, but there are some insurance policies that are meant to serve as a financial windfall for high risk projects. In some parts of the world, projects that receive government support through feed-in tariffs are protected by such policies. If the project proves unfruitful, these policies often provide the project’s managing organization and the government supporting the project with compensation.
Beyond providing protection for risky projects, insurance can be a powerful sales tool when it comes to investors. Some governments are reducing the support they provide to renewable energy projects, which is forcing these projects to seek the support they need from the private sector. Insurance is often seen by investors as a safety net. Projects with adequate insurance protection often receive more attention from investors because they seem more secure than those with lackluster insurance coverage.