Insurance for new renewable energy projects is becoming an increasingly essential component in this sector, however, the low quality of such investments causes insurers to be wary, said Dan Ungureanu, Business Development Leader and M&A Practice Leader CEE & CIS at RENOMIA Gallagher, at the 9th edition of the Energy Strategy Summit, an event organized by Energynomics.
“Project insurance is a component that is becoming more and more important because we already see some increasingly demanding requirements from financiers who want to secure their investments and assets that appear as a result of this money pumping”, said Ungureanu.
Seen as a way to stimulate investments in renewable energies, the mechanism of contracts for difference (CfD) produces a phenomenon of “negative bidding” that generates a big problem in the long term. Some projects may be non-bankable because all developers want to reduce costs and want to have as much market share as possible, which creates pressure on the entire supply chain resulting in the absence of innovation and lower product quality.
“We are looking at offshore projects in the region where there were big problems with transmission cables that were of questionable quality. Such phenomena lead to a reluctance of international insurers to take on these risks”, added Ungureanu.
At the same time, early technologies such as modular nuclear reactors (SMRs) or hydrogen are for the time being viewed with caution by insurers. Companies and insurers must also consider the technological and commercial risk components, as many projects have been delayed due to the difficult supply of materials and equipment.
“Insurers don’t really like unproven technology, anything experimental or prototype that doesn’t have proven long-term results. However, there are always some solutions. Financiers and developers should keep a constant balance between the risks and the solutions at hand. Another element that I saw is that the insurance area is left on the last plan; as a result, many times companies cannot attract funds because they do not have the solutions to satisfy the financier”, said Ungureanu.
Energy Strategy Summit 2023 was organised by Energynomics with the support of ABB, ASTRASUN Solar, BCR, CEZ Romania, Eaton Electric, Electrica Furnizare, Electro Service RB, Elektra Renewable Support, EnergoBit, Enevo Group, E.ON, Finder, Huawei, MET România Energy, OMV Petrom, OX2 România, Phoenix Contact, Photomate, ProCredit Bank, REI Grup, Renomia Gallagher, Romgaz, Schneider Electric, Signify, Transelectrica, Taw Energy, Volt, WIKA, Wiren, Alexandrion Group, Aqua Carpatica, Klarmedia and Mobexpert.