Renewable energy sources – those derived from natural sources or processes that are constantly replenished – currently make up about 16% of Canada’s total primary energy supply.
The primary sources of renewable energy in Canada are hydro and solid biomass (e.g. wood/waste). In 2018, Canada was the third largest producer of hydroelectricity in the world, getting 60% of the country’s electricity generation from moving water. Today, the fastest growing sources of electricity in Canada are wind and solar energy, both of which have been on steady growth trajectories for the last 10 years, according to Natural Resources Canada.
With light at the end of the COVID-19 tunnel, many countries – Canada included – are considering how, as a result of the pandemic, they can accelerate their decarbonization programs, reduce their reliance on traditional power sources and petroleum, and expand their renewable energy generation.
“Chaotic is probably the word that comes to mind,” said Joanne Silberberg (pictured), Canadian renewable energy leader with Marsh JLT Specialty, when referring to the dramatic acceleration in energy transition that has occurred in Canada over the past 12 months. “It’s quite incredible how quickly it has happened […] and I think, to be honest, it’s the result of a perfect storm.”
Canada has committed to the Paris Climate Agreement and is working to achieve net-zero carbon emissions by the year 2050. In December 2020, Canada released a strengthened climate plan entitled ‘A Healthy Environment and a Healthy Economy’ which builds on the 2016 Pan-Canadian Framework on Clean Growth and Climate Change, and contains 64 strengthened and new federal policies, programs and investments to cut pollution and build a stronger, cleaner, more resilient and inclusive economy.
And it’s not just political entities that are focused on environmental, social and governance (ESG) issues. In the past year, there’s been a huge corporate commitment to achieving net-zero emissions, prioritizing green investment, and attracting corporate power purchase agreements.
That political and corporate focus on climate change has certainly triggered a surge of interest in renewable energy sources in Canada, but there are other factors behind the sector’s “phenomenal growth,” according to Silberberg. She said: “The cost of energy from renewable sources like wind and solar is now cheaper than any other source. The business case no longer relies on subsidies and carbon taxes to be effective; it’s actually the most cost-effective source in its own right. That’s definitely expediting uptake.
“We’ve also seen the technology [underpinning the renewable energy sector] advance very rapidly. We’re now seeing large power generation being contributed by renewables through advancements in battery storage, the size or turbines, and so on. And finally, there’s a lot of pressure from society - consumers and employees wanting to work for companies that are focused on sustainability and reducing greenhouse gas emissions.”
While the renewable energy market is experiencing exciting growth, there are also some significant challenges for the sector to overcome. In February 2021, Willis Towers Watson released the ‘Renewable Energy Market Review for 2020’ in which it identified “several new realities” that the sector must contend with, including: geopolitical risk, conflicts and international tensions; a hardening insurance market; considerable cyber security threat; and increased weather volatility.
“Firstly, there is the reality of change in the renewable energy industry itself,” wrote Robin Somerville, business development director for Willis Towers Watson Natural Resources. “As the threat of climate change makes itself more apparent with every passing year, the exponential growth of the renewable energy industry has attracted the attention of a range of different stakeholders, from traditional energy players to national governments, from new start-ups to climate change protestors. Indeed, it is now generally accepted that renewables are likely to make up the largest share of total global energy supply by 2050. But, increasingly, renewable energy industry growth is bringing with it new risks and issues which need to be faced.
“[Then], there is the reality of change in the global (re)insurance markets. The long period of soft market conditions, characterized by an excess of (re)insurance capital and an emphasis on meeting premium income targets, has finally come to an end. Instead, faced with deteriorating loss ratios and increasing costs, the renewable energy insurance market seems to have come to a tipping point; we are now seeing a real determination across the marketplace to arrest the overall slide in rating levels. What’s more, individual insurers are insisting on their own terms and conditions, making the broker’s job of marrying different underwriting philosophies together increasingly challenging.”
The insurance industry is “lagging a little behind the pace” when it comes to supporting the renewable energy sector, according to Silberberg, especially regarding smaller scale projects or those using innovative technology outside of wind or solar power. But there’s a chance to catch up, and with Canada’s strong renewable energy supply, there are opportunities for insurers and brokers in Canada to exceed the services provided in other markets.
