Canada’s renewable energy market has experienced significant growth over the past decade, with solar, wind, biogas, battery energy storage systems (BESS), renewable natural gas (RNG), hydrogen, and other projects continuing to transform the sector. On a global scale, renewable power capacity is expected to double between now and 2030, according to the International Energy Association (IEA).
And the opportunities are vast: from solar, wind, and hydrogen, to biofuel, battery energy storage systems, and hybrid power generation and storage. But with opportunity comes risk. Whether you’re developing, operating, financing, or investing in renewable energy projects, your business faces distinct industry challenges.
Risks facing renewable energy businesses
Extreme weather
As renewable energy facilities and systems expand in size and complexity, they’re increasingly vulnerable to extreme weather events. Solar facilities can face damage from hail, wildfire, and heavy snow loads, while wind farms may be exposed to lightning strikes, icing, severe storms, and extreme wind conditions. Hydroelectric facilities can face flooding, erosion, sedimentation, and changing water levels.
The increasing frequency and severity of wildfires and flooding can also impact transmission and distribution infrastructure, creating operational and financial challenges.
Detailed climate risk assessments, catastrophe modelling, resilient construction practices, and ongoing maintenance programs can help mitigate potential losses.
Technology and operational failures
Human error, equipment malfunction, manufacturing defects, installation issues, and regular wear-and-tear can all result in technology or operational failures that lead to business interruption and revenue loss.
As renewable energy technologies continue to evolve, businesses may also encounter challenges associated with newer technologies that have limited operating histories. If workers aren’t properly trained on new equipment or processes, operational errors can occur.
Predictive maintenance programs, robust monitoring systems, regular inspections, and strong OEM support arrangements can help identify potential issues before they escalate into significant losses.
Supply chain risks
Renewable energy infrastructure relies heavily on specialized equipment sourced from global manufacturers. Many critical components have long replacement lead times and may be sourced from overseas suppliers.
When a critical component fails, project owners may face extended downtime while replacement equipment is manufactured and delivered.
To protect operations, evaluate critical spare parts inventories, diversify suppliers where possible, establish long-term service agreements, and develop contingency plans for key equipment failures.
Battery Energy Storage System (BESS) risks
Battery energy storage systems play an increasingly important role in renewable energy infrastructure by storing energy generated from solar and wind facilities and releasing it when needed. However, these systems present unique risks.
One of the most significant exposures is thermal runaway, which can lead to fires, toxic gas releases, environmental contamination, and business interruption.
Risk mitigation measures such as battery management systems, gas detection technology, thermal monitoring, fire protection systems, emergency response planning, and coordination with local fire services can help reduce the severity of potential incidents.
Cyber risks
With a heavy reliance on operational technology (OT), sensors, communication networks, and digital control systems, renewable energy installations are increasingly vulnerable to cyberattacks and data breaches.
The energy sector is emerging as Canada’s highest-cost industry for data breaches, according to IBM’s Cost of a Data Breach report. Critical infrastructure organizations are attractive targets because successful attacks can disrupt operations and create significant financial consequences.
Cybersecurity measures such as regular audits, penetration testing, network segmentation, employee training, and incident response planning can help protect assets and uncover vulnerabilities. In the event of an attack, cyber insurance can help businesses recover more quickly.
Environmental risks
While renewable energy projects contribute to sustainability goals, construction and operations can create environmental exposures, including contamination, habitat disruption, and improper handling of hazardous materials. These incidents can result in cleanup costs, regulatory investigations, and liability claims.
Comprehensive environmental management programs and regular compliance monitoring can help reduce these exposures.
Construction and commissioning risks
The construction phase is often one of the highest-risk periods for a renewable energy project. Before assets generate revenue, projects remain exposed to contractor errors, transportation damage, severe weather, testing failures, and schedule delays.
Organizations can reduce these risks by engaging experienced engineering, procurement, and construction (EPC) contractors, implementing strong quality control procedures, and conducting independent engineering reviews throughout the project lifecycle.
Legal and regulatory risks
Renewable energy operators can be held liable for third-party bodily injury or property damage resulting from their operations. Examples include falls on uneven ground, electrical shock from exposed equipment, or injuries sustained on active work sites.
In addition, projects may face regulatory challenges related to permitting, environmental compliance, stakeholder consultation requirements, and Indigenous engagement obligations. Failing to meet these requirements can result in legal disputes, project delays, or work stoppages.
Integrating permits, audits, and regulatory reviews into the overall project timeline can help businesses avoid costly disruptions.
Renewable energy risk management
Renewable energy organizations should incorporate risk management throughout the project lifecycle. Key priorities include climate resilience, preventive maintenance, cybersecurity, supply chain planning, emergency preparedness, and compliance monitoring. For emerging technologies such as hydrogen, renewable natural gas, and BESS, organizations should also evaluate technology maturity, engineering controls, and access to specialized expertise before deployment.
Protect your business with renewable energy insurance
In the unforeseen event of financial loss or damage to your renewable energy project or infrastructure, it’s essential to get back to business as quickly as possible.
Renewable energy project insurance provides a suite of coverages that can help protect developers, owners, operators, contractors, and investors against liabilities, physical damage, business interruption, mechanical breakdown, cyber threats, environmental exposures, and other risks during the construction and operational phases of alternative energy projects.
To better understand renewable energy facility risks and how to protect your business, visit our Renewable Energy Insurance page today.