54 Insurance Hedging their bets Renewable energy plant is increasingly


being manufactured in developing countries, bringing new challenges for operators,


investors and insurers, writes Christopher Munro, senior reporter at Insurance Day


A


n increase in renewable energy


technology being manufactured in so-called developing economies is reducing the costs incurred by


operators and investors when funding projects. But insurers warn it may be some time before they are prepared to take on the risks associated with the new equipment. India, South Korea and China have


grown in prominence in the renewable energy technology market in recent years, especially in the solar and wind sectors, both on and off shore. China, in particular, has arguably become the largest solar manufacturer in the world, with most panels produced now being exported into the European market. Lower labour costs mean the technology is less expensive for both investors and operators. However, insurers


are sometimes reluctant to provide cover to new manufacturers or to projects


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Developers, insurers and lenders must be comfortable that technology has been rigorously tested, as insurers won’t be the test bed for R&D of cheaper technology


Insurers are often reluctant to


provide cover to new manufacturers


where new or unknown equipment is being used, as Tim Halperin-Smith, divisional director for renewable energy at Willis Global Markets International, explains: “Developers are increasingly looking to reduce project costs, and if cheaper alternatives are available these options will be explored. And the solar market seems to be following this trend. “Developers, insurers and lenders must be comfortable that this technology is suitable and has been rigorously tested and certifi ed, as


insurers will not be


the test bed for research and development of cheaper technology.” This is a sentiment shared by Jatin Sharma, head of off shore at renewable energy specialist GCube, who says although China’s domestic renewable energy industry is a major success story, foreign entrants have found it hard to gain a foothold. “Even international insurers who have made substantial inroads into the market have had mixed performance in their underwriting profi t,” he says. The concern for many developers and


insurers alike is the unknown element of the new technology and the risk of it failing to perform. The more established companies, such as Sharp in the solar market and Siemens and Vestas in the onshore and off shore wind sectors,


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