Investing in Renewable Energy
For the past century, the world has run almost exclusively on fossil fuels. But the increasing desire for cheaper, cleaner alternatives has resulted in exponential growth in the production and use of renewable energy sources. According to Bloomberg New Energy Finance (BNEF), 70% of the new power capacity built between now and 2030 is expected to be in the renewable energy sector, accounting for more than $2 trillion in total investment. Of these additional investments, 75% are expected to be devoted to wind and solar. But as the stakes increase, so will the risks and the need for risk management. As a result, by 2020, insurance spending in the six largest renewable energy markets—Australia, China, France, Germany, the United Kingdom and the United States—is expected to increase by as much as 300%, according to a study by BNEF and Swiss Re. Depending on the scenario, insurance premium volumes in these markets could increase from $850 million today to anywhere between $1.5 billion and $2.8 billion by the end of the decade. This insurance increase is expected to encourage investment and introduce financial stability into a sector that, due to the unpredictability of nature, is frequently susceptible to production disruptions.