Renewable Exposures: the environmental impact of solar and wind power

Authored by AXA XL’s Mark Creager and Avneesh Nayal

The push for more environmentally thoughtful energy is heating up as climate change awareness increases, yet even implementing renewable energy sources has environmental exposures. What to know to reduce losses.

As global warming takes a firm grip on the planet, measures designed to reduce climate change are gaining traction among governments, businesses and consumers. A recent Gallup poll found that Americans are firmly behind the push to introduce government tax credits designed to offset consumer adoption of renewable sources of energy. A solid 89% of Americans are in favor of tax credits for installing clean energy systems such as solar power in their homes.

Since the Paris Climate Accord was established in 2015, 200 countries have signed on to develop their own strategies for doing what they can to keep global warming increases below 2 degrees Celsius – preferably below 1.5 degrees. For the US, the focus is to cut carbon emissions and reduce the use of fossil fuels by increasing the use of renewable energy sources – natural sources that are easily replenished, such as wind, water, solar and geothermal.

For organizations, investing in renewable energy sources is an investment in future energy independence that helps offset the environmental impact of conducting business. Yet even renewable energy sources come with risks to the environment. Whether during manufacturing, construction and operation, or at the end of equipment life, renewable energy projects have the potential to impact the environment. Although they provide obvious environmental benefits, renewable energy projects can impact land, water and biota if risks are not addressed.

The case for renewables

The rationales for the use of renewable energy are myriad. Aside from reducing the impact on the environment, the use of renewable sources gives users enhanced energy security, reduced air pollution, improvements in public health, and smarter reuse of distressed land. When companies and individuals use renewable energy, they can often more easily recover from any disruptions to the power grid or local infrastructure.

This could be why the US Energy Information Administration (EIA) forecast in 2019 that renewable energy sources such as solar and wind would be the fastest growing source of US electricity generation for the next two years. Indeed, by March 2022, the EIA announced that wind power has now become the second-largest source of electricity generation in the US. Of the renewable energy sources, solar is growing in popularity, with a 39.8% increase in use from January 2021 to January 2022.

Our research estimates that worldwide in 2020, on-shore and off-shore wind projects represented 43% of renewable energy investments, while solar projects represented 39%. Renewable energy sources currently provide less than 25% of the world’s electricity generation, but these mature renewable technologies are expected to grow in use and popularity.

New exposures

New alternative energy options are continuously under development. (Learn more about new energy innovations: These energy innovations could transform how we mitigate climate change, and save money in the process.) New risks, however, often surface with new developments.

Even the construction of renewable energy sources can pose some significant risks. Everything from the location and construction to operating and maintaining wind and solar facilities comes with exposures that need to be addressed prior to construction.

Wind risks: Interestingly, wind turbines are often erected on distressed land. In the US, the Environmental Protection Agency’s Re-Powering America's Land initiative encourages organizations to use current or formerly contaminated sites as locations for wind or solar farms. The use of brownfield sites over other land is intended to further reduce the impact on the environment by reutilizing land that is already distressed and unsuitable for other uses.

Yet with brownfields come plenty of environmental concerns that must be evaluated. Soil and groundwater/stormwater runoff could still be contaminated, requiring active treatment. The presence of heavy metals, petroleum, pesticides or semi-volatile organic compounds could mean plenty of future exposures as well as ongoing maintenance.

Wildlife, too, can be impacted. Bird and bat mortality is known to have increases around turbines, most notably during migration. Other concerns include: noise and visual nuisance; bodily injury concerns stemming from blade shadow flicker; oil-filled transformer/substation equipment fuels being released accidentally into the environment; and public opposition.

Solar risks: Similar risks can impact solar farms, which have been commonly located on closed landfill and mining sites. Likewise, the large tracts of land required for a solar farm can pose potential impacts on flora and fauna, particularly if placed in or near natural features or diverse habitats. Construction could introduce non-native, invasive plant species, which could damage sensitive ecosystems.

Other impacts include: aesthetic concerns, which have arisen in the form of Natural Resource Damage claims; water consumption used for cooling generators or cleaning collectors/concentrators; release of salt solutions, used to transfer heat, into the groundwater; and stormwater runoff.

Mitigation

The use of wind or solar energy is not a risk-free option. Like any other energy supply, they need to be maintained. They produce their own byproducts and hazards, which can have a negative impact on the surrounding environment.

An environmental impact assessment can help your organization identify any pre-construction concerns and give you the data necessary to ensure any environmental issues will be managed and mitigated in an efficient and timely manner. Site assessments, collaboration with stakeholders, strong contracts and indemnification language, and a sound risk transfer program that includes pollution and professional liability insurance can assist in risk identification and mitigation.

Comprehensively implementing such controls is vital to successful long-term development and operation of renewable energy projects. Minimizing exposures before construction begins can help ensure your organization’s objectives of profitable power generation, energy independence and environmental responsibility.