Sustainable energy: rising costs worth the price
12 November 2008
Residents in the Dutch city of Heerlen are enjoying the benefits of world’s first geothermal power station, which uses water heated naturally deep beneath the earth’s surface.
The plant was opened last month and uses water collected from mine shafts 800 metres beneath the town.
The power plant will heat the 350 homes that are close enough to the shafts to take advantage of the resource.
Specialist renewable energy insurers say the project is another example of the expanding range of green energy projects that need insurance capacity.
Roger Earnshaw, Senior Underwriter at Ascot Renewco, the specialist renewable energy operation within Lloyd’s underwriting group Ascot, says the project is an interesting new development.
“Geothermal power generation is well known to us and we are normally comfortable with its insurance, subject to satisfactory terms and conditions,” he says, adding that they’d normally avoid damage underground but may consider restricted coverage on receiving a satisfactory structural survey.
“We’d ascertain the extent to which the technology was prototypical,” he says. “An independent risk engineering consultant’s report would be most useful.
We might also seek the counsel of a non-insurance related geothermal expert – as we have done with our consultants from the renewable energy industry and academia.
This would give us insight into any unusual features that we may not have come across before. Terms and conditions could then be applied that would potentially enable us to proceed.”
Rising costs
New projects around the world will be subject to a rise in premiums by up to 10% over the next two years, says specialist renewable energy project underwriting agency GCube, which sources its underwriting capacity from the Lloyd’s market.
In a press release, Fraser McLachlan, Chief Executive Officer of GCube, states the case: "As a direct result of ongoing financial market instability, the liquidity difficulties experienced by the industry, and substantial losses arising from Hurricane Ike in the US, renewable insurance premiums will almost certainly rise.
"A soft market has forced renewable insurance premiums down to a level that is unsustainable in the long term, particularly since providers are being asked to take on greater levels of project risk.
And while this will undoubtedly place increased pressure on renewable energy directors in the short term, it's important to recognise that this anticipated shift will enable providers to continue to develop their range of policies on offer, in the face of a rapidly maturing market."
Last updated on 12 Nov 2008
