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Nordic Hydropower: Balancing Tradition with Expanding Risks and Opportunities

Balancing Tradition with Expanding Risks and Opportunities.

05/03/2026 · 4 minute read

Improve your risk strategy amid industry transformation

Hydropower technology is traditionally well-established, with limited innovation in recent years. However, the landscape is on the brink of transformation thanks to advancements in sensors and equipment, which are enabling medium and small hydropower plants to participate actively in the balancing market. Meanwhile, larger hydropower facilities are evolving by integrating Battery Energy Storage Systems (BESS), and we’re witnessing a surge in new pumped hydropower construction projects. This combination of BESS integration and expanded market access is reshaping how hydropower assets generate revenue. As a result, there’s a growing need to rethink Business Interruption insurance, creating tailored solutions that align with these new revenue models and better support clients in this dynamic environment.

At the same time, the Nordic climate presents unique challenges that must be carefully considered. Critical components such as generators and turbines are often manufactured in countries like Germany or Italy, where equipment may not be designed for harsh Arctic conditions. There have been cases where such components were selected and installed in Nordic hydropower plants despite their unsuitability. This highlights the vital importance of rigorous specification controls to ensure that only components capable of withstanding the Nordic environment are chosen. Failure to do so can lead to operational losses and trigger safety measures that may reduce insurance payouts. If this becomes a systematic issue, it could negatively impact insurance terms, conditions, and rates, as insurability decreses.

Underestimated risks in hydropower projects

While hydropower remains a key contributor to new renewable energy capacity, it carries significant risks that are often underestimated by decision-makers. These risks include complex contractual relationships, intricate engineering tasks, partial takeovers, tunnel boring, mechanical work in remote locations, reliance on standardized insurance from contractors, and the influence of challenging climatic conditions. Effectively managing these risks is critical, as failure to do so can leave projects exposed without adequate insurance coverage when damage occurs.

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Delving deeper into these risks, contractual risk distribution is a crucial factor. Decision-makers should seek agreements that reflect a balanced approach to risk-sharing. Fixed-price contracts, for example, can place significant responsibility on contractors, especially when ground conditions deviate from expectations. Partial takeover risks are often overlooked during planning and construction but become apparent once the building is completed and handed over, at which point the contractor’s insurance coverage may no longer apply.

Tunnel construction is another area requiring particular vigilance. Variations in tunnel length, profile, geology, and construction methods can significantly impact risk exposure. Tunnel collapses can result in substantial costs and threaten the project’s profitability before any power generation begins. Additionally, climatic conditions such as seasonal variations, landslide potential, and flood risks must be carefully assessed using historical site data and incorporated safety measures.

To address these challenges, broader insurance coverage with improved terms and conditions can be achieved through owner-controlled project insurance. This approach allows project owners to tailor coverage, control terms, and manage payments, providing greater protection than the more standardized and limited insurance typically offered by contractors.

Finally, delayed startup (DSU) insurance is a high-priority concern for decision-makers. Large loans often finance hydropower projects, and even minor physical damage can cause disproportionate delays. Long lead times for components can further exacerbate these delays, increasing financial risk and underscoring the need for comprehensive project interruption coverage.

How we help you navigate these challenges: 

At Marsh, we continuously develop insurance solutions tailored to the unique risks of hydropower projects, securing the best terms at competitive prices. By leveraging both the Nordics and European markets, we ensure our clients have access to the most advantageous coverage. With deep sector expertise and practical experience, we support clients through every stage of the risk lifecycle. Secure your hydropower investment with Marsh’s expert advisory and insurance solutions. Contact us today to discuss how we can help you manage risk effectively.

Don’t miss our Nordic Power and Renewables 2026 Conference 

We look forward to exploring these themes further at the Nordic Conference on Power & Renewables 2026, taking place 27–29 May, where we will continue the conversation on how to insure, finance, and future-proof the Nordic energy transition.

 

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Nordic Power & Renewables Conference 2026

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Our people

Tom Erik Bergseng

Tom Erik Bergseng

Assistant Vice President, Power & Renewable Energy Nordics

  • Norway

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