The UK government announced this week that it is giving the go-ahead to a building programme for a new generation of nuclear power stations, citing environmental reasons and the need for energy security in a turbulent world. In the UK, many current nuclear and coal-fired stations are due to close over the next few years and the government’s plans are certain to re-ignite the debate over how to fill the power void in the face of dwindling fossil-fuel resources.
There are a wealth of technologies either already available or being developed, but which offer most potential for global business? Business leaders are increasingly buying in to the climate change agenda, and making greater use of renewable and low-carbon energy sources. David Wright, Chief Executive of dedicated renewable energy insurer Ascot Renewco, has seen an increasing take up by business of these types of energy provision: “Businesses want to do their bit for the environment and there is growing shareholder and investor focus on what companies are doing to reduce their carbon footprint.”
A recent survey carried out by the World Conservation Union (IUCN) quizzed 1000 global stakeholders in the climate change debate, including global business leaders, about their attitudes to low carbon technologies. The survey revealed that when asked about their confidence in a technology to deliver, respondents rated solar hot water and passive solar, solar electric and off-shore wind farms the highest. Biofuels were at the bottom of the poll.
Investment in the development of low and zero-carbon technologies is increasing at a rapid rate. In fact, zero-carbon energy only accounts for about two percent of the world’s energy sources, yet accounts for around 18% of the world’s investment in power generation. A recent report from the global policy network REN21 estimated that global investment in renewable energy in 2007 would exceed $100 billion. David Wright says: “This provides a graphic illustration of the level of capital that is being committed to the sector.”
Fraser McLachlan, CEO of the new insurer of renewables GCube, which operates on both sides of the Atlantic, says:
“Most of the UK’s existing nuclear plants will be decommissioned over the next few years. The only plant that has been built recently has come in massively over time and way beyond budget and to build more will take a minimum of ten years. In the short term, over the next ten years, there will need to be a proper plan implemented for wind, hydro, bio and solar type products to fill the gap.”
McLachan argues that the use of renewable energy sources has become much more economically feasible, citing wind power as by far the most popular source of renewable energy and the most commercially viable, although other sources are catching up:
“Other renewables are fast declining in price and are starting to become viable. Biofuels are very popular in the US, and we will start to see more plants in the UK over the next few years being commissioned in order to refine both ethanol and bio diesel based products. Solar in certain countries looks promising, and the UK is by far leading the field in wave and tidal technology.”
It is clear that low and zero-carbon energy sources are the future, be it renewable energy sources or nuclear power. According to the Department for Business, Enterprise & Regulatory Reform, 4.5% of energy consumption in the UK in 2006 came from renewable energy sources. The Government has targeted 10% of the country’s energy coming from renewable sources by 2010 and 20% by 2020. However these targets are not going to be reached unless the technology is available. The sector is growing very quickly and the technology involved is very diverse and often highly experimental, as David Wright points out: “Many renewable energy sub-sectors involve technologies that are evolving and some are at the prototypical stage and the backdrop is thus one of constant change.”
Insurance will be critical in enabling technology to advance and Lloyd’s are at forefront, helping make renewable power viable and supporting scientific development. Comprehensive coverage for renewable energy production and testing can include a wide range of elements, including shipment, construction, third party liability and terrorism and war. Underwriters are now offering packages to cover all the phases of development and production.
It is through continued commitment to the advancement of low and zero-carbon technologies that we will see a genuine and significant reduction in the global carbon footprint. Insurers undoubtedly have a central role to play, while always being mindful of the challenges that accompany the undoubted opportunities in the sector.
