By Gemma Claase ,
Growth Leader Renewables, Energy & Power Practice
With over 50 hydrogen projects1 planned and 6 of those looking to be the largest in the world, Australia is setting its sights on becoming a major global hydrogen player by 2030, especially with further announcements of new hydrogen consortiums such as the Gladstone Green H2 consortium receiving funding for a feasibility study.2
Hydrogen represents a storable and transportable energy source, one in which investments will continue to grow in the years to come. The use of hydrogen as an energy source, however, can create multiple exposures. These should be carefully considered — and can be effectively managed with the support of hydrogen-specific risk and insurance specialists right from the start.
Hydrogen is the most abundant element on the planet. As such, it represents a huge opportunity on the road to low- and no-carbon energy solutions.
Like all energy projects, those involving hydrogen can be complex, often involving multiple project participants and contracts. These projects carry a number of risks that can threaten their viability.
From contractor selection and engineering to procurement and construction to commission and operation, and whether working with hydrocarbons, hydrogen, carbon dioxide (often co-produced in “blue hydrogen” projects), or other technologies and processes, project owners must consider a variety of potential hazards. These include:
Beyond these risks, project owners must also be mindful of risks that often arise during various stages of any energy project, including business interruption, third-party liability, political risk and terrorism, and technology risks.
For some project participants, these risks may be well understood. For example, industrial gas companies that already manage large pipeline networks understand the risks inherent to distributing liquid and highly pressurized gaseous hydrogen.
Other, newer players, however, may not have the same familiarity with the critical exposures that are common to hydrogen ventures.
Owners and other stakeholders whose projects are still in the early stages have an opportunity to systematically address key risks from the beginning. They can do this with the help of project risk management specialists, energy transition technical risk engineers, and insurance advocates.
These advisors can help companies adopt industry best practices to reduce project and operational risks and avoid potentially costly surprises.
Risk and insurance advocates can also prove invaluable in securing insurance coverage. These advisors can introduce discipline and proven processes that can enable smarter decisions about the coverage you need and how much to purchase. And they can ultimately help ensure that risk profiles and insurance programs are acceptable to all stakeholders.
Risk and insurance advocates can market your program to underwriters globally, highlighting salient features of your risk management program, including the proactive steps you’re taking to limit losses. This can position you to secure more favorable pricing, terms, and conditions.
Specialist hydrogen risk engineering input right from the start can be crucial to the insurance process. Working together, engineers and placement specialists can help stakeholders anticipate how insurers will react to certain decisions made during the design stage. During the pre-FEED stage, for example, engineers can review a project’s initial plot plans, offering guidance on how to adjust the design to reduce the overall cost of risk during a facility’s lifetime. This can greatly improve the insurability of a project and drive greater insurer competition.
As hydrogen becomes an increasingly integrated part of the energy ecosystem, managing risks for project participants will be crucial. Having the right advice and guidance, from specialist risk and insurance advisors, can be the difference between project success and failure.
1 Source: Marsh Project Tracker, April 2019 to present
2 Source: Gladstone green H2 consortium secure ARENA funding - Energy News Bulletin
This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage.