PCS: Ukraine could be industry-defining event for renewables sector

The continuing war in Ukraine now has the potential to become an industry-defining event for the global renewables (re)insurance sector, according to PCS.

The latest paper from PCS says that, in addition to the estimated industry-wide insured losses from windfarms reaching at least US$800 million in aggregate, solar energy insured losses could begin to arise, as well. 

Although it is still difficult to assign an industry-wide insured loss estimate, the role of solar energy in Ukraine’s renewables sector and the extent of reported damage suggests profound implications for (re)insurers of renewables, it suggested:

“By 2020, renewable energy rose from 5% of the country’s mix in 2018 to 12.4%. That’s significant progress, particularly for a country identified as one of the world’s top ten renewables producers in 2019 and one five fastest developing in 2020. As of the end of 2020, solar dominated Ukraine’s renewable energy mix with a 78% share, followed by wind at 20%, according to some loose PCS research and calculations.”

It added that the region in Ukraine where the conflict is centered is also where most of the country’s renewable energy capabilities are located. In fact, 66% of Ukraine’s renewables are located in: Odesa, Zaporizhzhia, Mykolaiv, Kherson, and Dniepro. Further, 60% of solar power capability is in conflict ‘hotspots,’ amounting to 3,770 MW of installed capacity.

Thirty-eight of 42 windfarms are located in the region stretching from Odesa to Luhansk. As a result, PCS added, the risks of loss in the renewable energy sector have been pronounced, and already, it appears that kinetic activity has led to potential industry-wide insured loss activity.

However, despite the potential for significant losses, PCS said it does not have an estimated industry-wide insured loss estimate yet for the solar sector in Ukraine:

“While there is a sense that the potential for physical damage and business interruption insured losses could be high, based on client conversations, any estimates would likely not be proportional to solar’s share of Ukraine’s energy mix relative to PCS’s estimated $800 million in industry-wide insured losses from windfarms.”

“A range of variables could impact a difference in industry-wide insured losses between wind and solar, including the cost of equipment, availability of equipment and qualified talent, andrevenues and productivity of each facility.”

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