Across the globe, countries are undergoing significant energy transitions in the drive to reduce carbon emissions and slow down climate change. 

Whilst it is clear that the new US administration is taking a different approach towards Net Zero policies than its predecessors, in other parts of the globe, investment in clean energy is increasing. 

In Europe, for example, clean energy sources provided a record 47% of European electricity last year, powering ahead of fossil fuels, with solar power achieving record growth to give Europe 11% of its electricity. Similarly, in Africa, several countries have expanded their renewable energy portfolios in 2024, including Nigeria, where the Government has launched new off-grid solar initiatives to increase rural electrification and Angola where regulatory frameworks have been streamlined to encourage international investment in renewables. 

Managing risks in renewable energy projects

As the shift towards renewable energy projects continues, the insurance and reinsurance sectors can help manage any financial loss to ensure that investors, energy generators and developers can proceed with projects more confidently. 

Risks that energy projects may face include weather variability, supply chain disruptions, cybersecurity threats, equipment failure, and natural disasters. Coupled with this, in many developing countries, there also needs to be large infrastructure upgrades to support renewable energy projects, including new transmission lines to transport electricity from wind and solar farms to major cities, grid stabilisation systems and energy storage facilities such as battery storage for solar farms. 

This, therefore, requires huge amounts of investment, which will need to be supported by the (re)insurance sectors whether it be protecting against accidents during project development or covering long-term risks such as mechanical failures. 

South Africa’s green hydrogen push

The Trump administration’s withdrawal from the coal-to-clean Just Energy Transition Partnership (JTEP) has caused significant uncertainty. However, it is positive to see that the EU is expected to launch its first Clean Trade and Investment Partnership (CTIP) with South Africa, which focuses on investments in clean 
technologies such as hydrogen.

In South Africa, the Government is pushing for green hydrogen production as part of the JTEP. Key developments include Sasol’s Boegoebaai Green Hydrogen Project in the Northern Cape involving R200 billion of investment, the Hydrogen Valley Development (covering Limpopo, Gauteng, and KwaZulu-Natal) and Hydrogen Export Agreements with the EU, Japan and Germany. 

Major costs will include specialised equipment such as electrolyser plants to split water into hydrogen, and storage and transport facilities, including hydrogen tanks, pipelines and ports. Coupled with this, there are significant supply chain and logistical risks. These include maritime transport challenges as hydrogen is flammable and must be handled carefully, as well as port infrastructure risks as upgrades will be needed to store and export hydrogen safely. 

The focus on hydrogen provides opportunities across a wide variety of insurance and reinsurance sectors, to ensure that the risks around hydrogen production and transport are minimised. For example, construction insurance will be able to cover the costs of overruns, delays and damages during project development, whilst marine cargo insurance will cover risks during hydrogen shipping and environmental liability insurance can cover the clean-up costs from hydrogen leaks. 

Government support is key

In order for the (re)insurance sector to effectively mitigate these risks, the industry will also require support from government. Most notably, stable and consistent renewable energy policies including clear commitments on net-zero targets and energy roadmaps will create predictability, maximising certainty and making it easier for insurers to price risks accurately. For example, in South Africa, consistent Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Auctions will provide insurers and reinsurers with predictable business opportunities. 

Governments can also co-insure high-risk projects when there are high upfront costs, demonstrated by South Africa’s Infrastructure Fund in 2024, which launched a R100 billion blended finance scheme to make insurance more accessible for developers. 

Given the changing geopolitical landscape, it is now more vital than ever that the South African Government steps up to assist the (re)insurance sector in managing the risks associated with renewable energy projects, so they can progress in a safe and sustainable way.

This article first appeared in the April 2025 edition of the FA News