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Protecting Canadian renewables throughout the project lifecycle

Protect Canadian renewable energy projects throughout their lifecycle with tailored risk management and insurance solutions. Learn how to address coverage gaps, operational risks, and evolving challenges in wind, solar, and battery storage projects to ensure long-term resilience and success.

Expanding renewable energy infrastructure in Canada — including wind farms, solar projects, and battery energy storage systems — presents a significant opportunity to meet the rising demand for electricity generation. This growth can accelerate the country’s clean energy transition and contribute to a more sustainable economy, both of which are key national priorities.

According to the Canada Energy Regulator, wind power is expected to lead the charge over the next five years, comprising approximately 70% of the planned increases in renewable capacity. However, with these promising renewable energy projects also come a host of new exposures that require careful consideration and risk management.

As these projects progress from construction through commissioning to full operation, owners and operators, engineering, procurement, and construction (EPC) contractors, and other key stakeholders may face critical coverage gaps and ambiguities that can expose them to significant financial risk. Understanding these challenges, adopting best practices for risk management, and securing more robust coverage are all essential for project resilience and long-term success.

Key coverage challenges during construction and commissioning

One of the most pressing issues for Canadian renewable projects can arise during the transition from construction to operation. Construction insurers typically limit their exposure to operational risks once generating assets begin producing power. However, renewable projects often commission units in phases, with some turbines or solar arrays going live before the entire project reaches final completion. This phased commissioning creates a coverage overlap challenge: construction coverage may be contractually required to remain in place until a later milestone, such as final completion, while operational insurers may be reluctant to accept risk before substantial completion.

This misalignment can lead to coverage gaps when assets are most vulnerable, like during early operations when defects or installation errors are most likely to surface. Inconsistent contract language across multiple parties — including (EPC contractors, equipment suppliers, lenders, and off-takers — and varying jurisdictional practices further complicate the alignment of insurance coverage.

Consistent and flexible policy wording that accommodates phased commissioning and pre-handover operations can help close coverage gaps and reduce the potential for disputes.

Operational risks: Serial losses, obsolescence, and business interruption

Once operational, renewable projects face a distinct set of risks. Equipment failure leading to serial losses, or repeated claims arising from the same defect or cause, is a major concern. While manufacturers’ warranties may provide some protection, they often fall short covering consequential income losses and may be difficult to enforce promptly.

Another growing challenge is equipment obsolescence. As technology advances rapidly, many early-generation turbines and components are no longer manufactured. When damage occurs to such obsolete equipment, organizations must rely on secondary markets, spare inventories, or custom fabrication to source replacements. In these cases, securing coverage can be uncertain because insurers may be hesitant to pay more than the actual cash value, which can be very low for outdated assets.

Business interruption coverage also requires careful consideration. Renewable energy generation is inherently variable, influenced by seasonal and geographic factors. Organizations typically forecast revenue using historical meteorological and production data, but fluctuations in power prices — especially when selling to the grid rather than under fixed power purchase agreements — add complexity.

Emerging trends and industry evolution

The Canadian renewables sector must also contend with evolving risks driven by climate change and inflation. Severe weather events, including hailstorms, tornadoes, and floods, are increasing in frequency and severity, posing heightened threats to solar panels, wind turbines, and battery storage installations. Additionally, supply chain constraints and extended lead times for critical equipment like transformers remain significant operational risks.

Risk management and risk transfer strategies must evolve in tandem with these trends. For example, clear, affirmative policy language that anticipates unique loss scenarios and aligns with contractual requirements is essential to avoid coverage disputes.

Practical guidance for managing complex risks

To navigate this complexity and keep renewable projects on track and within budget, project owners should adopt a proactive and comprehensive risk management approach that includes the following key actions:

Inventory management: Maintain a robust stock of spare parts for critical components to reduce downtime and reliance on backlogged suppliers.
Contingency planning: Develop detailed plans identifying preferred suppliers, lead times, and alternative sourcing strategies for both current and obsolete equipment. Pre-established relationships and contractual agreements with manufacturers and fabricators can expedite and secure replacements.
Insurance alignment: Work closely with insurers to ensure construction and operational policies have consistent handover language and coverage terms that reflect project-specific contractual milestones.
Technical risk mitigation: Invest in systems and technology that can mitigate physical damage risks, including effective lightning protection, battery management and thermal mitigation systems, and hail-resistant solar panel designs, to name a few.
Revenue forecasting: Provide insurers with granular, monthly revenue data to better reflect seasonal variations and avoid indemnity shortfalls.
Regulatory compliance: Adhere to national and local building codes and standards to minimize exposure to regulatory risks.

What can Canadian renewables do to close the coverage gap?

The insurance landscape for Canadian renewables is complex and evolving. By understanding exposures during construction and commissioning, addressing operational risks such as serial losses and obsolescence, and implementing robust risk management practices, project owners can better safeguard their renewable project throughout its lifecycle.

Transparent communication, consistent contract language, and tailored insurance solutions that reflect the realities of renewable energy assets are key to bridging the gap between risk and resilience in this dynamic sector — as is a proactive mindset.

Marsh Risk’s innovative renewable energy property policy wording is designed to reduce coverage gaps and enhance protection for your renewable project. The policy wording is tailored specifically for renewable energy projects like wind, solar, battery storage, and hydro, combining broad coverage features from specialized and domestic insurers. It includes important lender protections, flexible construction and pre-operational income coverage, and a wide range of extensions to address the unique risks of renewable assets. Designed for adaptability, it supports evolving technologies and provides clear terms to meet project and contractual needs.

To learn more about how to better meet contractual requirements and protect your renewable project, contact a Marsh Risk representative.

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Article

Protecting Canadian renewables throughout the project lifecycle

Key coverage challenges during construction and commissioning

Operational risks: Serial losses, obsolescence, and business interruption

Emerging trends and industry evolution

Practical guidance for managing complex risks

What can Canadian renewables do to close the coverage gap?

Our people

Jonathan Butts

Richard Sharp

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Protecting Canadian renewables throughout the project lifecycle

Key coverage challenges during construction and commissioning

Operational risks: Serial losses, obsolescence, and business interruption

Emerging trends and industry evolution

Practical guidance for managing complex risks

What can Canadian renewables do to close the coverage gap?

Our people

Jonathan Butts

Richard Sharp

Contact us

Related insights

Energy in the room: Insights from Marsh Risk’s North American Energy Industry Conference

Evolving Cyber Risks in Energy Amid Transition

Embracing volatility in the energy and power sector: Four key opportunities

A changing landscape for independent power producers