Good afternoon. Welcome to today's webinar, Current Supply Chain Issues Impacting Renewable Energy, hosted by Inland Marine Underwriters. I'm Eileen Monreale, Education Training Specialist at IMUA, and I want to thank you all for joining us today. A few technical tips before we begin. You can find your attendee control panel on your screen that it might minimize by default. At any point, you can right-click on the orange arrow to bring it back. Also, across the top, you'll see the view on the control panel, and if you drop down on the view, you can uncheck the auto-hide option. This way, it just stays open all the time. On that control panel, you can download a PDF of the presentation under handouts. There's also a question box in the control panel, and we will take your questions at the end of the presentation. Actually, our presenters will be happy to answer them. They look forward to them. And if you have a question that you would like to direct to a particular presenter, just state that in the question. To encourage your questions and participation, IMUA will email a $25 Amazon e-gift card for the most slash best engaged, a combo of those criteria. We want to keep it fun, and we do appreciate your being here. So that said, let's get started. Please be aware of the IMUA statement. Without further delay, I am honored to introduce today's presenters. Michael Perron, Mike, Senior Managing Director, leads the client advisory and placement for the Brown and Brown Risk Solutions, Global Energy and Climate Tech Practice. Mike previously served as the US power and utilities leader at another broker. For the past 20 years, Mike has been placing property insurance for large clients focusing on energy, chemical, petrochemical, pharmaceutical, and other engineered risks. Prior to his current brokerage work, Mike was a risk control engineer specializing in chemical and petrochemical risks, as well as two independent counseling firms, helping clients develop process safety management, PSM programs. Mike holds the Associate in Risk Management designation, the ARM, and has a chemical engineering degree from Villanova University and an MBA in finance from Rutgers. Frasier McLaughlin, G-Cube Underwriting Limited, is the CEO and founder of G-Cube Underwriting Limited. He is responsible for driving strategy and business development together with overseeing the international development of the company. With 40 years experience in the insurance market, Frasier has held senior level positions in various brokers and insurance companies. For most of his insurance career, Frasier has specialized in the renewable energy industry. Since the formation of G-Cube in 2007, Frasier has driven the global expansion of the business, which now has offices in London, Amsterdam, New York, Newport Beach, Madrid, and Sydney, some very nice spots. He has overseen the growth of the business to be in excess of $140 million, and he steered G-Cube to its acquisition by Tokyo Marine HCC in 2020. Frasier hosts and chairs numerous events specifically focused on the renewable energy space and is a returning and highly rated IMUI presenter, as his experience as a pioneer in the development of offshore wind in the UK and Europe, having arranged the insurance for the world's first commercial offshore wind farm. Suffice to say, Michael and Frasier are well credentialed, and we are honoured to have them with us today. Michael and Frasier, the floor is all yours. Thank you very much, Eileen, and let me just get this going here. If I can. There we go. Sorry, Michael, you're going to do the... Sure, I'll start. I'm sorry, I'm going the wrong way. Okay, this is just an agenda of some of the topics we'll be talking about today. Frasier is going to walk through the first few topics, starting with the impact of COVID, geopolitical pressures, greenflation, the political landscape, and opportunities and challenges. Then we'll switch over to me to talk about supply chain issues specific to different renewable technologies, solar, wind, and batteries, and then the challenges associated with rare earth elements. Back to Frasier to talk about insurance concerns, and we'll both talk about impacts for risk managers and solutions before doing a Q&A. So, Frasier, you want to start? Yep, thank you very much. So, I think COVID is something which really is still here. We just attended the Aegis conference a couple of weeks ago in San Diego, and actually three people I was with down there are actually in luck with COVID, so it doesn't seem to be going away anytime soon. And there's been a huge impact in terms of how that's impacted manufacturing. So, the shutting of manufacturing hubs in various parts of the world, really because of a reducing workforce or the workforce not able to get to their manufacturing facilities. We've also seen less and less crew available for vessels, and that's been especially prevalent in the offshore wind space where there's a massive shortage of crew and vessels in that arena. We've seen a lot of downscaling on onshore construction sites, and in addition to that, a lot of the workforce that was in the renewable energy space have gravitated into other industries where they are actually paying quite a lot more for either skilled or unskilled labour, which is having an impact on the workplace environment. And then to compound all of that, you can see the picture there on the right-hand side is actually the port of Long Beach with all those vessels queuing up because they don't have the longshoremen available to actually offload them. And you can see the freight costs and how they've escalated. They've actually come back a little bit now, but the freight costs to move things around the world have gone up exponentially since the beginning of COVID in sort of early 2020. The other issue that we're all seeing, and it's not even related to renewable energy, is procurement. So whereas before, for wind turbines especially, we could probably procure blades within about three months, we're now looking at at least 12 months. And moreover, the issue with blade replacement in renewables and in wind power is that, on average, it was costing us between $300,000 and $400,000 to actually replace a blade. Now, it's far in excess of $1 million for the replacement of one blade. And we've actually received bills for up to $3 million for a replacement of blades where we've had to move, because of those shipping costs that I mentioned before, we've had to move stuff down to Australia and things like that. One of our biggest issues is main or medium voltage transformers. We actually paid a very large loss only this year where it was almost impossible to get a replacement transformer, and it took us well over 18 months to do it. And unfortunately, our client maxed out on their business interruption coverage, which was only for 12 months, which is really something that people should be paying a lot more attention to in terms of indemnity periods and things like that. Secondary electrical items, especially those coming out of Asia and the Far East, are still difficult to get hold of. And we've seen a lot of people either hoarding solar panels or stockpiling solar panels in order to make sure that they've actually got a decent supply. But in terms of procurement, I think one of the biggest challenges the U.S. faces right now, and if you look on the right-hand side of this slide, is which countries are actually manufacturing solar panels. There's only one manufacturer at the moment in the top 10 who are based in the U.S. Pretty much everywhere else is China or Asia, with the exception of one manufacturer, which is Canadian Solar, but they are predominantly selling to a very, very closed market. So, procurement from these countries is becoming difficult, and with the freight costs that I showed you in the earlier slide, it really is impacting not only cost, but also the time that it is taking to get replacements into countries like the United States. It goes without saying that the unprecedented nature of the sort of Russian-Ukrainian war has had a major, major issue or major impact on the price of oil. It really has caused people to focus on the subject of energy security, and that's good and bad for the renewable energy industry. In one hand, people are looking at renewables and saying maybe we should be less reliant on imports of oil and gas and things like that, and so we want to build more renewables, especially with the Inflation Reduction Act in the U.S., but on the other hand, people at the same time are actually ramping up their oil and gas production and to a certain extent some nuclear production as well, and I think Michael will touch on that as we get into the presentation. All of that comes with sanctions wrapped around it, the supply chain issues that I spoke before, and obviously commodity prices, which is what I'm going to get into next. Hopefully this slide's going to change for me. There we go. Energy prices for last year, 22 compared to 23, are up by 13 percent year on year. We've seen a lot of our clients and a lot of our customers where they don't have fixed price PPAs almost quadruple the amount of income that they've actually making from the production of electricity off of renewables. The result of all of that is that people are exhausting their business interruption limits. They're exhausting some of their physical damage limits as well because of the procurement issues that I mentioned before, and there seems to be a much greater degree of under-insurance in the market, mainly because of these increased energy prices as a result, principally, of the Ukraine-Russian conflict. And if we just look at gas prices in the U.S., certainly last year, you know, gas prices really went up not only in the United States, but globally, and that drove up the costs of transportation, logistics. It drove up the cost of actually producing commodities. Projects in places like California really felt a lot more pain when it came to transit costs and procurement costs and things like that. They are starting to look finally come down, but they have got a long, long way to go to get back to where gas prices were pre-COVID. And as I said, a lot of workers have actually been sort of lured away from renewables to get back into the oil and gas business because the prices that they are able to pay in the market and the oil and gas companies are able to pay workers are actually outdoing the prices that are being earned or the wages that are being earned in the renewable energy space. Another buzzword that is around right now is that greenflation word. So you can see that graph on there is basically the cost of lithium, which is a major component in a lot of the new or newer battery technologies. But it's not only lithium, we've seen the cost of copper increase at the same rate, nickel and cobalt. And remember as well that a lot of these materials come from Asia, a lot of them come from China and places like that. So the cost of shipping these materials has gone up substantially. There are only a few producers that are around for this stuff. And so it's very, very difficult to get hold of it. And with the advent of more and more electric cars, more and more battery storage systems coming onto the market, that's actually pushing these costs exponentially higher compared to where they actually were in pre-COVID. And that's obviously having an impact on many people's insurance policies. And this slide kind of just demonstrates the way these different commodities are pricing. You see there the cost of lithium going up quite substantially. Nickel sort of came down a little bit and then it went back up again. So they really are commodity prices are very, very much all over the place. And the problem with that is that it is very, very difficult for people to build any sensible financial models. So when they are looking at building a solar project or something like that, or a battery storage project, it's becoming increasingly harder for people to try and estimate what their overall project costs are going to be. And obviously, that has an absolute knock on on the insurance space in the insurance industry. So very, very challenging times in terms of trying to properly assess what the costs of raw materials are actually going to be. And then if we break that down into where the technology actually is, you can see that, you know, towards from 2020 to 2022, the costs of a lot of this stuff went up. Battery storage, wind turbines, solar panels, pretty much everything actually went up. And so the other the other compounding factor that we now have is that some of the larger wind turbine manufacturers like Siemens Gamesa are suffering some very large technical challenges up to a point where they've stopped supplying some of their technology until they can actually fix it. And that's put a much greater strain and a much greater demand on other manufacturers. So many manufacturers, even in getting the raw materials, have got order books, which are backed up for three years, in some cases, four years. And it's not just the wind turbine manufacturers. It's also the steel manufacturers and people like that that are building the towers, the composite manufacturers that are building the blades. There are very, very long supply chain issues across the spectrum and across the industry. And then just to compound the issue, we've got the US sort of political landscape. The Inflation Reduction Act was a multi-billion dollar investment, if you like, to actually try and encourage the spending for renewable energy in the United States. And I think it got off to a very, very good start. But it's only been a small contributor to where we are now. The problem that I think I've always been asked throughout my lifetime in this industry is, well, you know, what happens when the tax credits go away? Or what happens when governments stop actually trying to fund some of this stuff? And I think that the main driver that we're really starting to see is that all the time that money was cheap and interest rates were low, people were taking advantage of tax credits and the things like the Inflation Investment Act or Reduction Act, and they were still building because money was cheap and it was pretty easy. Now that interest rates have started to go up, we're actually seeing people, because of all the problems that we spoke about earlier, actually are either shelved projects or they're scaling projects back. Although some of them, they're just saying economically it really doesn't make a lot of sense. So we've started to see that probably more significantly in the offshore space where costs are substantially higher to actually build, but it's now having an impact on the onshore space as well. In addition, in the offshore space, we've got an act in the US which says that any offshore vessels must be crewed by US citizens, the vessels must be built in the US, and I think as far as I'm aware at the moment, there are probably only two flagged US offshore wind vessels that are either in production or have been built, and yet there is a massive pipeline or massive potential pipeline on the east coast of the US to actually build more and more offshore wind projects. So again, it comes back to a supply and demand issue, and we actually had a claim here in Europe a little while ago where a vessel offshore lost its rudder and it ended up colliding with a monopile for an offshore wind farm. It was a pretty simple loss in theory, but when the project went back to the monopile manufacturer in China and said, can you make me a new monopile, the answer was of course absolutely, but it's going to cost you four times as much as it cost you the first time round for the monopile. In addition to that, if we're lucky, we should be able to deliver it to you by 2028. We then, or they then, went out and looked for another vessel that could actually do the work, and they couldn't find another vessel that was available until 2030 because everything was booked up and there really wasn't the space or the infrastructure available and the vessels available to actually come and replace a monopile. So obviously a very, very large claim, especially when you're looking at offshore, but it gives you a sort of real-life example of how a lot of this stuff is being impacted in the offshore industry and also in the onshore industry as well. It's a big, big problem, and especially the skills, and as I said earlier, with crew and things like that, it's been a huge issue. So, I mean, what are the opportunities and challenges? I think everybody's overarching ambition is to have energy independence and energy security, especially following the war, or the ongoing war in Ukraine. Most people, I think, do want to decarbonise. I think there's a genuine thrust to actually allow that to happen across the energy sector, and I've said this once, and I'll say it again. I don't think that, from a renewable energy perspective, which is all I do, I don't think we're quite there yet. The world's energy crisis, if you want to call it a crisis, is not necessarily going to be settled by renewable energy overnight, but what I do think is that renewables is really going to have a bigger impact in the overall energy mix, or should have a bigger impact in the overall energy mix. But there does need to be a much greater degree of capital flowing into a lot of these ventures, and there needs to be more skill set coming back into the space if we're really, really going to make this work. So, it's a bit of a chicken and egg situation in terms of the dash of skilled labour, and who's really prepared to pay for the labour and the materials that go into a lot of these projects, because labour and materials are becoming more and more and more of an impact on the cost of these projects and the supply chain pressures, and the result of that is that we've seen diminished returns for renewables as margins have been squeezed and squeezed. So, only recently, you know, when companies like Shell and BP came out with press statements, whereas pre-COVID, they had huge, huge renewable energy plans, and with the cost of oil and with the price of gas, a lot of those very nice plans have potentially been shelved in response to saying, look, we can make more money from oil and gas than we can out of renewables. So, it's ever more important that if we really are, you know, going to get to this net zero by 2050, which is really what the ambition of the planet is, I think we're going to have to continue to see incentives for green energy, more incentives for tax credits and things like that put into the sector so that it can continue to prosper and it can continue to survive. So, I think with that said, I'm going to hand over to Michael now and let him do his little part. Thanks, Fraser. So, I'm going to go through some of the specific supply chain issues associated with different technologies, not all the technologies, but to give a flavor for, because I think that many people, including myself, initially thought that this was just dedicated to solar panels, and it's much worse, much more than that. So, one thing I wanted to point out, being that we're focused on renewable energy here, but when we talk about supply chain, for many manufacturing clients, supply chain is about customers and suppliers, and while the sites are operating, if you lose a customer supplier, you can't operate anymore. For renewables, they don't use any fuel, so the supply chain challenges are really about replacing damaged equipment and building the sites to start with in the first place. Various renewable technologies require different materials impacted by the supply chain, including some metals and rare earth elements. The geopolitical risks are a big issue, as Fraser alluded to, and the Inflation Reduction Act, it's got significant incentives to bring manufacturing back from overseas to the U.S., but there's significant challenges with it as well. The Inflation Reduction Act is, in part, it's to push renewable energy, but it's also about forcing companies to do things out of the U.S. instead of sourcing from globally in order to take the credits that are offered, and that's, in some cases, very, very hard, and I'll touch on some of the reasons for that. So, this presentation mainly will show some of the challenges we face in the energy transition and the solutions. We'll touch on some ideas, but those solutions are going to take time. Okay, we've got a poll for you. What percentage of global polysilicon ingot and wafer production currently comes from China? So, click this, and we'll give you 30 seconds to vote. Okay, and this came in and the poll suggested that 75% was the top answer. That was a, that was probably the right answer. It should have been more than 90% instead of less than 90%, my apologies. So the, the actual answer is, is more than 75, more than 75%, not quite 100%. And I, I can't get to the next slide, Eileen. Okay, here's the information about it. Currently, China's share of global polysilicon, ingot, and wafer production will soon reach almost 95 percent. Today, China province accounts for 40 percent of global polysilicon manufacturing, and one of every seven panels manufactured worldwide is in a single facility. The Wall Street Journal suggests that China controls 80 percent of the solar supply chain. So this presentation is not just about China, but it shows how much dominance that China has in the supply chain. And to go against that, the U.S. has restricted bringing in solar panels from Southeast Asia, or they did over time. It's currently on pause because of unfair labor practices. There are also some tariffs associated with and threatened tariffs for solar panels. So there's a lot of challenges associated with the biggest supplier of solar panels worldwide coming to the U.S. And this is being addressed. There are solar panels, as Frazier mentioned, made by First Solar in the U.S., Toledo Solar in the U.S. as well, Q-Cells is building a solar manufacturing facility, Meigenberger Technology just announced that they're going to be doing – building their own solar panels here in the U.S. as well. But these installations for building these panels is going to take some time. And we're going to be, for now and for the next few years, we're still going to be heavily reliant on Asia. Some other issues besides solar panels that are supply chain issues associated with solar, one is transformer replacement. Frazier touched on that as well. It used to be you could replace a transformer maybe a year, 18 months. Sometimes we're hearing three or five years for transformers, and a lot of them do come from overseas. So there's costs associated with – increased costs for transporting them. The replacement panels need to fit the racking system. This is less maybe of a problem than it used to be, but in some cases we've seen where panels were damaged where the racking system also needed to be replaced. And then this really surprised me when I was doing my research. Silver. Silver comprises 6 percent of the cost of a solar panel. So how much of all the world's solar goes into solar – of silver goes into solar panels? 10 percent currently of the world's silver is used for solar panels today. But that's going to increase to over 50 percent of the world's reserve by 2050. And touching base on the solar panels again, trying to get replacement panels, say you have a facility that loses a hail loss or something, so you need to replace your panels. This has happened. And U.S. manufacturers are in high demand, so they may not be able to supply replacements quickly for you. Or if they do, it's going to cost you, to Fraser's point earlier, significantly more than it costs you when you put them in in the first place because of demand issues. And then there's also the challenges securing panels from China from tariffs, labor issues, et cetera. Here's another slide that just shows China's dominance in the space for polysilicon, for wafers, for cells, and for modules. And you can see in each case they have 80 percent or more of the supply of these materials which are really important for the energy transition. Getting into wind, turbines are 40 to 50 percent steel used for tower structure and mechanical proponents. They also use a lot of copper and aluminum. All of these things are costing more today than they did a couple of years ago, two to three times what they were in recent years, impacting profitability for the OEMs. Fraser mentioned Siemens Gamesa. Also GE and Vestas are all facing these problems. And it also – the reason for their profitability in some cases is because they had promised to deliver wind turbines at a certain price, and with the price of their raw materials that go into those projects going up by so significantly, their costs have jumped that much and they would have to install at a large loss to be able to do that. Also wind requires certain rare earth metals, neodymium and praseodymium – I'm butchering those names. They're needed as high power magnets in both wind turbines and in EVs. And McKinsey is estimating that these materials are going to face a 50 to 60 percent shortage in 2030. Recycling is going to be an increasingly important role, not only for these materials but for many of the materials I talk about. But it's expected for these materials at least to be only 10 percent of the total demand needed. So I want to move over to lithium ion batteries used for both electric vehicles and for battery energy storage systems. The two top technologies are lithium iron phosphate, known as LFP, and nickel manganese cobalt known as NMC. The lithium ion phosphate has a lower energy density, which means it has a less chance of a thermal runaway or fire problem, so we've seen some of those events. And it's capable of more recharge cycles. So those are the advantages. And some of the car manufacturers and battery storage systems are going more to using – they had been LFP, they went to NMC, and some places have gone back to LFP, in part because of supply chain, and I'll get to that. Nickel magnesium cobalt has a higher energy density yield. That's why it was used. You can get more power out of it. If you have it in an EV, it can go further. But supply chain issues are more of a concern, and it is a lighter weight, which is a benefit as well. And then also being researched is solid state batteries, more for lots of different uses, but one reason is that it has a lower flammability exposure to it. There is a limited voltage and unstable solid electrolyte interface formation and poor cycling performance and strength, but that low flammability is something that's really intriguing, and there have been some new developments on solid state that are encouraging. Now I'm going to talk a little bit about some of the other battery technologies out there that are being used to either supplement or replace the lithium ion technology. Lead acid technology has been around for a long time. It has high power. It's inexpensive. It's safe and reliable. But it has a very low specific energy, and it doesn't perform well in cold temperatures. It also has a short calendar and life cycle to impeding their use, and that's why we move towards lithium ion. But there are other technologies being installed today, like iron air, form energies, reversible rusting type technology that is being installed in some cases. Lithium ion is a really intriguing and interesting technology where lithium is being replaced by sodium as the cathode in the battery. That's a lower cost. Sodium is widely available as opposed to lithium. There's plenty of lithium available. I want to make that point. It's just a matter of getting the lithium, and I'll talk a little bit more of that in the next couple of slides. But sodium has much better safety characteristics. You don't have the threat of thermal runaway with similar power delivery characteristics, but it does have a lower energy density than lithium ion. And there's flow batteries, nickel metal hydride batteries, and other technologies as well. And this slide is just showing some of the work that's being done in the space on solid state and sodium ion batteries and which countries and companies are interested in researching these. And you can see a lot of familiar names in the battery space that are on this slide. So this is a space to watch. This is not an exhaustive slide. This is just a representation of interest in novel battery technologies. Okay, as I was alluding to before, mining raw materials. There are limited locations currently mining limited supplies of key materials. So some of the key raw materials, they include lithium, and lithium we have plenty of supply, not enough mines, but there's environmental challenges and labor challenges with getting lithium as well. Other materials, nickel, highly concentrated in Indonesia. There are challenges with hexavalent chromium issues. If anybody saw the movie, Erin Brockovich, that was the chemical that got into the water in that movie. And then there are labor issues. This is further discussed in this book by Henry Sanderson named Volt Rush, which goes over all these technologies. Cobalt, most of the cobalt we get from comes from the Congo. And the Congo is, there are political issues in the Congo as well as labor and environmental concerns, youth labor being used. Copper, we use copper for a lot of things, but a lot of it comes from Africa and South America. And it's really important to all energy projects, not just renewables, you know, traditional power transmission distribution. Copper is an important material. Phosphate, that goes into the lithium iron phosphate batteries. There are large sedimentary deposits in Africa, China, the Middle East, and the US, and then other places in the world as well. Manganese is a little more challenging, 80% from South Africa, but also China, Australia, India, Ukraine, Brazil, and Gabon. And phosphorus, there's plenty of supply, but it's competing, batteries are competing against fertilizer for the use of that phosphorus. So there's a demand requirement on phosphorus as well. Graphite, 70% of the graphite comes from China, and it's 50% of the material that's needed in lithium ion batteries. The processing for all these materials is dominated by one country, and I think you can guess which one. China is the world's largest producer of rare earths and holds almost 37% of the global reserves. And this is an indicative slide here of a comparative slide. The left side of the slide talks about how much of the rare earth elements we need versus when we're using conventional power, how much we need for fossil fuels. And you can see that the minerals we need are tiny in comparison to what we need in fossil fuels. That's a good thing. You know, we won't have to burn all these fossil fuels if we're able to convert over to renewable energy. But on the other side of the slide is just a little bit of a counterpoint that there's some challenges with supply chain, because these materials you need, even though you need much smaller magnitude of them, they're challenging to mine, environmental energy and labor challenges. A lot of waste material is developed from mining as the earth contains very small concentrations of these things. I'm talking about less than 1% of lithium, cobalt, nickel, et cetera, in what they're mining. And then they have all this waste material that they have to get rid of. The fossil fuels are required to power the equipment used to mine the renewables projects. Some people think that mining, the use of that energy is going to overwhelm the savings we'll get from using the renewable energy. And then you have to deal with recycling and disposal of blades and solar panels as well. There's an interesting paper filed on the right side of this that I put at the bottom here that was just put out this month. There's another slide showing some of the rapid rise of clean energy and how it's underpinned the growth of mineral demand. You can see from 2017 to 2022 that lithium is used for renewable energy has almost doubled. And some of the other materials, nickel, cobalt, neodymium, they've all gone up significantly as well. And that's only going to continue as we convert more and more to renewable energy. This is – I really like this slide. It shows – many of these slides are from the International Energy Agency, IEA. And I've got the link below to it. This shows where we're extracting these materials from. So you can see the cobalt is dominated by the Congo, whereas graphite and rare earths, it's China. That's on the extraction part. And the nickel comes mainly from Indonesia, copper from a few different countries. But the processing side, where all this stuff is processed, China dominates almost all of them, as shown in the slide. And this is something that the Inflation Reduction Act is targeting to try and change, but it's going to be challenging and it's going to take time. This just is indicative of where China gets their raw materials from, from all these materials, and it ties into what I was talking about before for the different countries. Okay. Another poll for everybody. Which country dominates supply chain alu, which is a key fuel for small modular nuclear reactors? I didn't talk about SMRs, but that's another area that we expect is going to grow, because it's clean energy. So I'll give 30 seconds for people to answer that question. Okay, interesting. The two top answers were Russia and China and then the Ukraine. I think those are three good answers. I was surprised, I would have guessed China myself, but it's Russia. And it's a real strong dominance on Russia for this material, and it's a really important material. And it's gotten, TerraPower, for example, has really been talking about this problem. And the U.S. realizes that we're very, very reliant on Russia for this concentrated uranium that's going to be used in the SMRs. And we rely almost exclusively on Russia for this material. So we're trying, as the U.S. is trying, to develop other ways to get this uranium processing materials to support our industry in case Russia chooses to turn off the spigot. But it's going to take time. It's not like it's the easiest thing to go out and say, I want to build a uranium processing plant here. The NRC has something to say with that, as do local regulators. There's a lot of political challenges on getting something like this built. So it's just indicative, I wanted to show this because it's indicative of the overall challenges and supply chain that is present for renewables and for nuclear as well. Fraser, back to you. Thank you, Mike. I need to put my camera back on for you. There we go. So yeah, how does all that bake into sort of insurance and insurance concerns and things like that? I think I've mentioned in some of my previous presentations that in sort of 22 and now in 23, we have seen a massive amount of hail and convective storm losses impacting the solar industry not only in the U.S., but now we're starting to see it here in Europe as well. We've seen more recently in the U.S. and in Europe significant wildfire issues and things like that, which are causing a lot of damage to quite a number of projects. The issues that we have with that are many, but principally, you know, when we come to have to replace a lot of these panels, many times, as we've alluded to in this presentation, the lead times to get panels are relatively or very long. The other problem that we're starting to see is that as this technology progresses at such a rate, when we go and try and replace a particular panel for a particular site, we'll find that that panel is no longer being manufactured, and therefore, we have to either replace the racking that the panel is attached to and or modify that racking, which actually expedites or exacerbates the quantum of the claim. So I think insurers and insureds really need to be more collaborative with each other in terms of, you know, what are the values that we're insuring here, and more importantly, are we actually insuring the correct value? Because the last thing that you want to happen when a claim happens is to be, you know, to be underinsured. There is still a big pipeline for projects, but is there really going to be adequate capacity for many of these projects if some of these losses start to happen? So in the last 18 to 24 months, we have certainly seen a contraction in the insurance marketplace for things like severe convective storm, for wildfire coverage, and things like that. And I think with the wildfires that we've seen here in Europe, we're now going to start to see some pretty significant sublimates for wildfire or more international risks, as we're already seeing some pretty significant sublimates for things like severe convective storm and for hail and stuff like that. And the last consideration, I think I alluded to at the beginning of the presentation, is business interruption. Many of these projects, because of the price of energy now pretty much going through the roof, are very, very undervalued when it comes to business interruption and things like that. So there really does need to be a lot more focus on how you're calculating your business interruption, what values that you're actually putting on that, and really how sustainable are some of the coverage limitations that insurers are now having to impose on these renewable energy projects, because I don't think there's going to be enough capacity out there to pay for some of these losses if the losses keep occurring at the rate that they actually are. I'll just try and move to my next slide. So how does that transpose over to the issues for risk managers? Well, at the moment, as Mike said, there's certainly an over-reliance on Asia and some third world countries for raw materials and supply and things like that. We've got single markets in the case of China. Again, as Mike alluded to, single manufacturers that are producing a lot of this stuff. I think one of the key drivers in all of this is certainly going to be inflation and also interest rates. As I said at the beginning of my part of this presentation, we've seen the cost of blades increase exponentially irrespective of where in the world that they're actually coming from. We've seen the lead time on transformers. I was 18 months plus, and Michael said it could be up to three, four years in some instances for some of the larger transformers, which I wouldn't necessarily disagree with. We're in a position at the moment where because of these lead times, because of the impact of the increase in the price of energy, most indemnity periods or most business interruption policies are definitely too short. We are seeing people burn through their BI limits in not 12 months but three to four months in some instances. That in itself is having an impact on insurance costs. I think a lot of these projects which were conceived maybe three or four years ago in the planning stage and where people have actually built in an insurance cost into their models based on what they knew at the time, that is no longer coming true because insurance companies and insurers are having to put either sublimates on for things like hail or they're having to charge a significant amount of more premium in order to buy certain perils like wildfire and hail and convective storm and things like that. As I spoke about, there is certainly a labour shortage in renewables right now, both on and offshore, as people and crews have gravitated back to the more lucrative oil and gas business. We're seeing technology issues. We released a report recently called Vertical Limits where the wind turbine manufacturers have been really, really going at a pace to try and outdo each other with these very large multi-megawatt wind turbines. We're now seeing wind turbines up to about 18 megawatts for a single unit. It's the Chinese that have driven quite a lot of that but the European manufacturers have also driven quite a lot of that as they've tried to compete with each other for these multi-megawatt technologies and these multi-megawatt platforms. The result of that is a lot of the technology becomes obsolete before it really has got a chance to be out there and be in the field for its predicted lifetime. We've seen that not only in the wind space but also probably even more prominently in the solar space where it's almost impossible if you build a project today and part of that project gets destroyed or damaged for a reason and you're going to go back and try and replace solar panels in, say, three years' time. It's a strong likelihood that you won't be able to replace the panels in three years' time with the panels that you were purchasing today. There's a lot of obsolete technology in the industry and I think I said earlier that even if the panels can be replaced, sometimes it's the way you fix those panels to the racking and to the mounting systems that's going to cause you more issues. Just to re-emphasise the fact that there are coverage issues compared to probably three years ago, maybe even two years ago, where there are more restrictions actually being put on policies with regards to hail and sublimates and things like that where it is becoming more and more difficult. So maybe this was a bit of a doomy and gloomy presentation but it really is the facts in terms of what we are actually dealing with today and where we are. Okay, thanks, Fraser. Just adding to your comments, the restrictions, you can understand why insurers are putting on restrictions, right? And I'm a broker but Fraser noted that insurers are sometimes paying 100% of the business interruption associated with a year in three or four months. So there are being new clauses that are put on to offset that. The key for risk managers is to understand, and for brokers and for clients, is to understand how those restrictions are. That 12-month period of indemnity that's common in renewables, it's now common in most conventional power policies too and we already suggested that that's probably not enough. It's not easy to get additional coverage but at least being able to tell the people within your company about what those limitations are so you're aware of them up front. We don't want to have a surprise post-loss about how your coverage responds. Financing and interest rates are a really important issue and it isn't specific to supply chain but it does tie into it because supply chain adds to the cost of a loss. Sometimes costs to replace the panels are more expensive or the cost to recycle the panels are more expensive than planned. All these things add up to the overall loss which is going to impact how much a limit the banks and tax equity are going to require and it's also going to push the insurers are going to be less comfortable with putting up big limits for projects that are in harm's way. Some of the things that risk managers can do, transformer contingency plans, trying to get ways to beg, borrow, steal to get another transformer where needed and do so in advance. See if there's a place where you can get spare transformers. Maybe there's a sharing type philosophy for a transformer that's available that fits your installation as well. If possible, securing an agreement for replacement modules in advance. Basically, making an agreement of, hey, if we need more panels, this is the price that we're going to need and have the OEM agree to that up front as part of their deal. I don't know if that's something that's – how possible it is, but it's something that I thought might be useful. A pre-agreed plan and cost to recycle solar panels. So, I think that some of the cases where there was a hail loss, the cost to recycle the panels was higher than what some of the insurers expected. But if we can – if the client can go in in advance and identify how much they need in advance and identify how much they've agreed to have the cost to recycle the solar panels, it makes the insurer a little more comfortable if they know that. The last two points are really important. We've had a number in the US of – not a number, but maybe eight big hail losses that I know of since 2016 affecting PV solar projects, and not many of them stowed properly. When I say stow, you put them in at an angle so that the hail deflects off of the panel instead of hits it on at a perpendicular angle. And then to use the most resilient modules available, and that's going to change over time. The hail loss has surprised a number of us in terms of how much damage was done. One of my colleagues says that the cows don't care if there's hail, because they were used to it. We didn't know there was as much hail in Texas and some of the other places as there is. There was a big hail event that impacted a solar project earlier this summer in Nebraska, for example. On wind, as a broker, I want to have the policy wording reflect the cost to replace a single wind turbine generator in an inflationary environment. And the example I would give is say that a client has $10 million of – a $10 million schedule with each wind turbine worth of $1 million. And if you're going to replace a single turbine, well, it's probably going to cost you more than $1 million to replace it, because you still have to bring in cranes and you still have to bring in labor to do that. So it's – normally the policies have something called an escalation clause, which gives you some – a little bit of a cushion to support getting that additional cost. But in an inflationary environment, that's probably not enough. So it's just something to be aware of and something to talk with your insurers about, to Fraser's point. Similarly, on indemnity period, whether or not that period is sufficient for your needs and how you can reduce your exposure to losses that could take longer than that indemnity period. On battery storage, when you're talking with your insurers and with others, differentiate the technology you're using versus others. LFP batteries are much, much less likely to have a thermal runaway than NMC. And if we do get to sodium ion, that's a significant – I mean, that almost reduces the exposure away completely. But if you do have any type of lithium ion batteries, you want to show that you're putting spacing between them. So if you have an event, and we have seen these events recently, where a battery is impacted, it's limited to one battery bank, and it doesn't impact the other batteries, which is – will reduce the overall exposure to you and to your insurers, and they'll look for – it'll be viewed much more favorably. Emergency planning, contingency planning associated with the batteries. And then a very separate issue, but recycling batteries is a completely different issue, but it's going to become more and more important. And Jen-Marie put out, I thought, was an excellent document on all the exposures and how the recycling batteries should be managed. Back to you, Fraser. Thank you, Michael. So, what are the solutions to all of this? Well, we've spoken about all of these topics as we've gone through this presentation today, but certainly, we do need a more nimble workforce. We need to attract people back into the industry again, especially on the construction side, the engineering side, and things like that. The supply chain, again, we've touched on this issue, where it seems to be one or two countries dominate the supply chain and hold everybody else to ransom. So, there needs to be more local content and more local sourcing of equipment to avoid these very, very long lead times and also the increased costs of shipping and sea freight and things like that. As Michael just spoke about, leveraging relationships, get yourself set up so that you do know that you're going to have to at one point, you know, replace some solar panels. So, think ahead of time in terms of, you know, what is your opportunity to negotiate at the point of sale so that you can come back in a year or two years and actually leverage your position with a manufacturer so that you can secure a new supply of either blades for your wind farm or panels for your solar project. Transformers, again, as Mike said, bed, borrow, or steal, we had a very significant claim as I mentioned at the beginning this year where the only spare transformer that was around actually belonged to a competitor of our client who'd had the transformer failure. So, we went to that particular company and we asked to lease their spare transformer, which they gladly offered for us to do at a very significant cost on the understanding that if they had a failure, we would then pay their business interruption claim. So, we had to come up with a very creative insurance policy that not only put our insured into a position whereby they were actually okay, but also indemnified their own competitor for any potential downtime should one of their transformers have actually failed because there was no more replacement and there wasn't going to be another replacement for well over two years. Rerouting shipments to minimize disruption, sometimes that can be more expensive if you're coming through things like the Suez Canal, the Panama Canal, and things like that. There's a cost associated with that, but in order to reduce your business interruption downtime, nine times out of ten, it's usually actually worth paying for. And then again, adding contingency into your actual planning process itself, using third party project monitoring companies during construction so that you know when the delay actually happened. You know whose fault it was that the delay happened so that you can monitor your delay startup claim or indeed your business interruption claim more carefully. All of these things are going to help you be more efficient and be more cost effective when the claim actually happens. Let me just add. Thank you, Fraser. Add to your point on the nimble workforce and the workforce overall. It's not just the workforce for people at the sites, it's the contractors, it's the electricians, it's the it's getting enough people that are getting them trained at a time when a lot of the people who know how to do these things are near retirement age. So we need an investment at all levels from insurance, from brokers, from banks, from contractors, from developer sponsors, into people and to to to develop a workforce. But the good news is that renewable energy is exciting and it's growing. So there's a lot of interest for people to get into this space. That's part of why I got into it. And it's the I think that there is a with the commitment to training these people, it's going to make the industry better overall. OK, with that, we'll go to questions. Eileen. Excellent. Super. Thank you both for really fabulous content. It's a very interesting, fast changing topic that's important to us all. We want to protect the environment and professionally. Our insurance world is certainly at the forefront here. So we have several questions, one from Donald Jocelyn. Does a co-insurance requirement typically apply to renewable energy coverage, direct damage? I mean, we can both answer that one because you're a broker, I'm an underwriter, so we can we can come at that one from both sides. Go ahead. Does it typically apply? We would like to apply it more often than we get away with. I think the the issue that we find is that sometimes a lot of the lenders agreements and things constrain us for what we're able to do. If we are able to put some kind of co-insurance clause on to a policy, then we will. But more often than not, I think what we're looking for is is transparency from our clients. You know, and it it worries us when a client comes to us now and hasn't changed their business interruption values for, you know, two or three years. Now, maybe they've got a fixed price purchase agreement and they don't need to, but they should certainly be looking at their physical damage exposures. If they haven't got a fixed price PPA and they're coming to us and saying we still need to buy the same amount of business interruption cover, we will certainly question that. And it's in those instances where we we would put, you know, some kind of, you know, co-insurance clause in or a similar clause, which would basically say that, you know, we're going to pay not all of this claim, but a proportion of it if you actually if you actually have a loss. So to me, it's about it's about working with the customers, but working with the broker is about working with the customer, you know, to come up with something that's not going to surprise anybody when the loss actually happens. So I agree, Fraser, that we don't see it that commonly. There are other restrictions and I'll touch on them briefly. But the first thing I wanted to mention is that a lot of these renewable energy projects are new. So we know how much it costs to build that project because we just built it. So there's a good information about how much it costs to build it. And not only that, but say we have a project that's four or five years old and it's a 10 megawatt solar project. We can get an idea from other developers or from that client, if they're a developer, how much does it cost to build a 10 megawatt project now? So I think that that part of it has helped to prevent co-insurance from being on. But there are other restrictions like co-insurance that are more akin to an occurrence limited liability endorsement, which limit coverage to it's not a penalty like a co-insurance would be, but it may limit coverage to the values that's reported not only for the site, but sometimes for individual pieces of machinery. Thank you both. We have a question from Taylor Lovett. Have you seen use of LTO lithium titanate oxide batteries in BESS systems? We've been told there's no thermal runaway risk. That's a new one on me. Yeah. Yeah, maybe some of the manufacturers may tell you that. You know, we we we have got a client of ours who I won't mention the name, but the gentleman that owns the company also owns Twitter and he was very, very adamant that it was absolutely impossible for their batteries to have any form of thermal runaway. And as a result, they were refusing to put any kind of fire suppression in their in their battery systems. And they had a very large battery fire in Australia. So I would say the answer is in our experience is no, is that you are going to get thermal runaway. There is some hope on on solid state, which I don't know if this technology is like solid state, but the idea of solid state is that it's impervious to runaway. Whether or not that actually happens, we'll see. Excellent. We have a question from Brenda Myung. Is the dominance of manufacturing capabilities in Asia due to cheaper labor? Apologies if this was already addressed. Partly, partly it's it's due to it's due to cheaper labor, but a lot of it is driven by the the raw materials and the sourcing of the raw material. So I wouldn't say it's just one particular thing that's driving. I wouldn't say it's the dominance of Asia in the market is solely down to the cost of the cost of labor, but it's certainly a contributing factor. I don't know what you think, Mike. Yeah, I agree. I'm going to add to that. So China really invested in renewables, I don't know, 10 years ago, and they developed the whole industry. So they can do it a lot cheaper because they've spent so much time and they have much knowledge. When they were doing it, there were there were people that said that they were dumping panels on the rest of the market, which they may or may not have been. They were doing they were selling things below their cost. But at the end of the day, they now can make things cheaper than everybody else and they dominate the space. So I think that has a lot to do with it. I think the labor is definitely one part of it. It's definitely a contributing factor. But if it was labor alone, then we would then India and other countries would be be able to catch up with China. Excellent. So we have a question from Steve Roblicki. He asks, are the costs associated with parts slash maintenance, et cetera, for solar less than wind? So is that less than wind? Yes and no. So it's with wind energy, we see about 80 percent of our claims happen from, let's call it internal events. So things like mechanical breakdown, blade failures, things like that. The converse is true with solar, where we are seeing 80 percent of our claims happen from external perils. So the two are sort of diametrically opposed with each other, which from an insurance perspective is actually quite a nice balance because one one offsets the other. So the downside is that whilst we probably have a much bigger attrition rate on our wind energy book, where we will pay for a blade or a gearbox and that, you know, the value that can be anything from, you know, say four hundred thousand up to around about two million. What we tend to see on the solar side of the business is that they get impacted a lot more by external events. So the the quantum of the damage is actually much better. So so much better, much bigger. So on a whilst the individual solar panel might be, you know, a lot cheaper than an individual gearbox, the number of panels that tend to get damaged is substantially more. And therefore, the quantum of your claim tends to be substantially more on the solar side compared to on the wind side. Yeah, I agree, Frasier. I think when you look at a wind farm, you're looking at loss of a turbine from a lightning strike. Usually it's only going to be one turbine, right? Or something like that is your worst case event. Whereas from, you know, a hailstorm hitting hitting a solar farm can be what we had. One of the big events in 2019 was seventy five, eighty million dollars. And there were others that were much more than ten million dollars as well. We have a question from Alexandra Gagnon. Frasier, for the one million and three million dollar blade replacements, were those onshore or offshore? Those particular ones were onshore. The three million dollar replacement happened in Australia. So much of the cost associated with that claim was increased transportation costs and things like that. We haven't yet seen that many blade failures offshore. There's been probably two so far, but we are anticipating that as the offshore technology gets to an age, we're going to start to see a lot more of those of those types of losses in the offshore space. What's what's interesting about that is. Most of the vessels are out there for offshore right now are all tied up for many, many years, actually building new projects. So the opportunity to actually get a vessel to come in and replace a blade. None of the vessel owners or operators are even remotely interested in doing that sort of work because they can make a lot more money. Keeping their vessels stationed on building new projects. So I think as an industry, we are going to have an issue in the future because we're going to see blades getting hit by lightning just like they do onshore. We're going to see blades failing just like we see happening onshore. But there's not going to be the supply chain of the infrastructure there to be able to actually change out these blades when they do fail. And I think that's going to turn into a pretty significant problem in the longer term. Just add a couple of things to that, Fraser, and I agree 100 percent, obviously. But when you're talking about when the U.S. offshore and you touched on this before with the Jones Act, you have to use U.S. flagships and U.S. labor. That's going to be another supply chain challenge. You only have the two ships that are that are being built right now. So it's it's even more of a stringent issue in the U.S. for offshore and onshore. And this could be on offshore, too. But sometimes when you lose a blade, the OEM will come back to us and then to the insurers and say, well, you only lost one blade, but we really need for balancing purposes to replace three. So that means that the loss is three times as much as the actual damage, and that can be a tricky claim as well. We have a thank you. We have a question from Donald Joslin again. It sounds like the typical wind mill costs around five million dollars to build. So how long does it take for the value of the electricity it produces to exceed its cost? That's a good one. It used to be around about a backup. The lifetime of these projects, depending on who you want to listen to or talk to, is supposed to be 25 to 30 years. The debt on these projects pre-Covid, before they before that came along and before the Ukrainian war, was anything between 12 and 14 years before you actually started to throw some sort of decent profit. That's caveated with the fact that that depends on how much debt you're actually taking. You know, if you're putting 80 percent equity in and it's 20 percent debt, then those return periods can change quite substantially. What we're seeing now, with the increase of power pricing and for those projects which are not tied to a fixed PPA, is actually about five years where people are starting to see a return period. So significantly shorter now because of the price of power due to the war and also the energy supply price. And then there's also the government incentives that help, too, as well, right? And it looks like we have our final question from another question from Brenda Myung. Our question is, do we have data on how much energy is being produced and utilized by renewable fuels on a global scale? And how much weight do you give to the news that talks about how a town or country in Europe is able to run on renewable energy for X number of days? I can't answer the question. Maybe Mike can. So what percentage of power is from renewables globally? I don't know. It's a complete guess. I'd say maybe 20 percent, something like that, probably a little bit less. And yeah, we do see situations where certain countries are able to run off of renewables for periods of time. Can be a day, can be a few days where that's all they're reliant on. It's a little bit of a misnomer because quite often, you know, they don't necessarily shut down every gas facility and every nuclear facility. If there is there's the ability to be able to produce the demand or from renewables, it's still those facilities have to carry on, carry on producing. But yeah, theoretically, we see it quite a lot in Denmark, where there's a very big amount of amount of wind power. We've seen it in other other parts of the world as well. So it's feasible that you can get power being produced for days at a time solely from a renewable energy in certain countries. So I phoned a friend, somebody texting on me and they told me and they reminded me that there's an annual BP energy report that provides renewable versus traditional power that shows how much is done. And I do know that if you look at renewable energy in the U.S. and it's growing, but most of our renewable power in the U.S. still is from hydro, not from solar and wind. I think in the U.S. we are now generating more renewable energy than coal, which is which is a nice changeover. And there's this is a controversial topic that you've touched on regarding can renewables really replace fossil fuels, but the bigger issue is baseload generation. That's part of why people want to put nuclear in because nuclear is clean and it's available, whereas wind and solar only run when the wind is blowing and the sun is shining. So it's intermittent. You can bring in batteries for that. But what the people who promote electrification of everything suggest is if you overbuild, if you put in more solar in a megawatt basis, more wind than you need in terms of supplying on a daily basis, then you can utilize that excess power that would have otherwise been curtailed to to put into storage. And then you can utilize that in periods of time when when it's not sunny or windy. So it's it's not an easy answer, but the reality is we're going to have more and more renewable energy continuing to go at some point. It's going to be harder to get to the last mile or whatever it is. But there are people who believe that we can do that. Excellent. Well, that brings us to our time. So I will end by saying thank you so much and moving this slide over to me. There we go. Thank you both. It was fantastic. Really appreciate your sharing your expertise, which is which is vast. Thank you also to our attendees for your questions, which are smart questions. Thank you for your commitment to your professional development. It helps the industry tremendously. You'll all receive a an email in about two hours with a certificate of attendance of this webinar, a link to the video recording of this webinar and a one minute survey. Just let us know, you know, some feedback on it's always important to us. So Fraser and Mike, are you ready to announce the big winner of the twenty five dollar Amazon gift card? I'm going to I'm going to pass the buck and that might might be that. Can I pass it back to you, Eileen? Sure. Well, we'll say Brenda for her last question, because it was a very thoughtful question that engaged a lot of good points. So. So, Brenda, my own congratulations. I'll be on the lookout for your gift card. That ends the webinar. Thank you again to everyone. Have a great rest of the day. Thank you. Thank you. Thank you, Fraser. Thank you, Eileen. Thanks, Mike.

supply chain challenges

renewable energy sector

COVID impacts

geopolitical factors

greenflation

solar technologies

wind technologies

battery technologies

material sourcing difficulties

China dominance

innovative battery technologies

insurance concerns