'Wind power can help to drive growth of insurance in Brazil'
By Leonardo Semenovitch, Crawford & Company
Brazil’s sights are set on 48% of its power generation requirements coming from renewable energy by 2029, presenting a host of opportunities for the re/insurance industry
Wind power has seen a sharp rise in Brazil’s renewable energy sector. The growth rate of renewable energy sources has been exponential, to the extent that just in the past decade, the country’s installed capacity for wind and solar energy experienced an astonishing 2,562% increase.
To put it into perspective, wind energy now represents the third-largest source of electricity in Brazil, with more than 750 wind farms in operation and more than 10,000 active wind turbines, according to the country’s energy regulatory agency, Aneel. This is enough power to meet the energy needs of more than 20 million people, close to 10% of the country’s total population.
From a regional standpoint, Brazil is the largest electricity market in Latin America and the seventh-largest in electricity generation capacity worldwide. This results in 66% of Brazil’s electricity generation coming largely from hydropower.
The question is: is hydroelectric power sustainable? Many of the country’s major reservoirs have reached less than 20% capacity, distressing both the energy and agriculture sectors. This has ultimately led the national power grid to revert to the burning of fossil fuels, transferring the cost on to consumers. The generation has increased to the point that last year, thermal power produced 13.2% of the nation’s electricity, the highest in Brazil’s history.
Diversified energy mix
Given the ongoing water crisis, coupled with other environmental impacts of deforestation and loss of ecosystems and biodiversity, Brazil has set its sights on a more diversified energy mix. With a clear push for renewable sources targeted to 48% of Brazil’s energy matrix by 2029, wind energy is positioned to play a central role in the growth of renewable energy capacity and generation.
The rise of wind power will generate substantial foreign and local investments into the Brazilian electricity sector, which is projected to reach $94bn by 2029. As Brazil moves forward with ambitious plans to modernise the country’s energy sector, the rise of wind power and its capital-intensive needs is also driving the growth of other industries, such as insurance.
Organisations that can meet the complex needs surrounding claims in renewable energy with diverse expertise will pave the way for success in growing Brazil’s renewable energy infrastructure
Brazil’s expansion plans include deregulation, applying an auction-based system and implementing power purchasing agreements between the private and public sector. However, questions of potential risk and liability are brought to the forefront, leading to a demand for robust risk management solutions.
As the country seeks to establish energy security for its people with upgraded generation capacity, transmission and efficient distribution through an interconnected power grid, there is opportunity for companies that have specialised knowledge, skills, and infrastructure, as these organisations are well positioned to help navigate the potential risk and liability in Brazil’s renewable energy sector.
The hurdles of risk assessment and management, as more wind farms continue to emerge, are associated with transport, crane operation and soil analysis, among other factors.
However, one of the main risks for wind farm owners is in the sourcing of the turbines, since most major manufacturers are European-based companies that design turbines for Europe’s seasonal weather and regional wind patterns. This has led to many equipment malfunctions in Brazilian wind farms and, in turn, a rise in claims related to fire, machinery breakdown and on-site installation.
Companies like Crawford & Company with multinational experience across all the major industrial sectors can leverage their global network of specialised knowledge, skills and infrastructure to tackle such claims.
As an example, Crawford & Co takes a uniquely collaborative approach involving all parties including insurers, reinsurers, lawyers, environmentalists, forensics and regulators, which better positions them to help companies move into the Brazilian renewable energy space.
Organisations that can meet the complex needs surrounding claims in renewable energy with diverse expertise will pave the way for success in growing Brazil’s renewable energy infrastructure.
With Brazil’s sights set on 48% of its power coming from renewable energy by 2029, there are lots of opportunities emerging.
Brazil is just starting to expand in wind power, so we are only seeing the beginning of challenges the country will face in risk assessment, management and renewable energy claims. It is an exciting step forward in Brazil’s energy infrastructure.
Leonardo Semenovitch is country manager for Brazil at Crawford & Company