Most people’s understanding of electricity or gas begins and ends with the power outlets in their homes – few will have any contact with the industrial facilities that generate them. Traditionally, energy production in advanced economies has involved importing oil and gas, but renewable energy is bringing power closer to home.

Given the global issues surrounding energy security, this shift has obvious advantages, but the transition is not without its teething problems. While the general public is, at least in theory, largely supportive of the transition to cleaner energy, affected communities are realising what this means in practice.

The future landscape for renewable energy is expansive: solar and wind generation requires at least 10 times as much land per unit of power produced than coal or gas plants, while modern wind turbines are around the height of a 35-storey building.

Renewable power plants and transmission lines must be located dependent on resource availability rather than the most convenient locations for people and infrastructure. Therefore, they are likely to be built in areas unaccustomed to industrial development, creating the potential for opposition. This is especially true when residents impacted by new plants are not financially benefitting from them and/or the power will be transmitted elsewhere.

There is usually more than one source of opposition to a project, and these tend to derive from community, socio-political and market concerns. Multiple stakeholders can unite to oppose a project, even when their oppositions differ. The most popular oppositions involve public safety or health concerns, fear that land values will fall and the potential damage to wildlife and habitats.

Organised opposition groups can use a variety of means to stop renewable energy projects – lawsuits, political campaigns, lobbying other levels of government and direct political protest. Entering litigation is extremely costly, especially as developers have already paid for materials for asset production and/or the lease on the land and are yet to see any return on investment.

Challenges to renewable development can be high-profile, enduring and effective; in the US, between 2008 and 2021, 53 utility-scale wind, solar and geothermal energy projects were blocked or delayed across 28 states. In Norway, environmental activists, including Greta Thunberg, have been protesting against wind turbines built upon indigenous land, blocking entrances to the energy ministry in February and forcing the energy minister to cancel his trip to the UK in March, while fishermen in France have been protesting against a USD2.9 billion wind farm built off Brittany’s coast since 2020.

Protecting future profit

The monetary value of a renewable plant is not recognised until it is operational – much of the project’s value lies in its benefit to society by producing and supplying clean energy sources and limiting damage to the surrounding environment.

Projects like wind and solar farms should be recognised for their positive impact. Insurance should not merely be based on the physical value of the project; cover should allow developers and/or lenders to recuperate any costs endured in losing or halting their energy production. This is particularly true when the construction or operation of a project has been interrupted due to permit cancellation. While the permit can be resurrected by appeal or by obtaining a new, corrected permit, a renewable project can become insolvent in the interim as production, and therefore revenue, has stopped.

Gallagher provides bespoke policies tailored to renewable projects at all stages of development. Unlike standard policies, our cover focuses on loss of profit rather than the market value or gross development value of the project.

By providing insurance to cover known or unknown challenges to a permit, Gallagher can cover costs and debt services to ensure clients are protected in a period where ongoing disputes and disruptions have halted production. In addition, policies can be extended to cover additional heads of loss, including legal and relocation costs, but only in an unknown scenario.

The extension of this cover means renewable projects can be relocated if they are successfully challenged and have to vacate their current site, and the accumulation of various legal costs will not drastically impact the client. In covering any additional heads of loss, renewable projects can avoid demolition or redundancy.

There are a number of other insurances that can protect developers planning renewables projects, such as restrictive covenant insurance if there are restrictions on the use of the land. Access policies can assist where the land does not abut the highway or where there is ambiguous mapping at land registry. These are fairly common problems when dealing with ex-agricultural land and other issues such as unregistered land can be easily protected by insurance.

Legal indemnities insurance plays a critical role in supporting the growth and development of renewable energy. By efficiently mitigating the risks and ensuring clients are protected thoroughly through different stages of development or operation, this cover can increase investor confidence and encourage a smoother transition to cleaner energy production.