Risks associated with electricity poles and wires are making them uninsurable, threatening the transition to renewable energy, a specialist lawyer has warned.

While cover is available for generation assets, reinsurers have no appetite for the transmission infrastructure required to connect them to the grid, according to Clayton Utz partner Sophy Woodward.

The insurance specialist cites a premium of $20 million being quoted for $20 million of cover for poles and wires, and says this is a particularly Australian problem, exacerbated by bushfires.

If operators must self-insure, commercial entities will not invest in renewables, and if they negotiate with governments to underwrite the risks, consumers will pay the price, Ms Woodward adds.  

Insurers will underwrite poles and wires while plant is being constructed, “but when you move into the operational phase, most reinsurance treaties will have an exclusion for these assets”.

Ms Woodward dates reinsurers’ withdrawal back to Victoria’s 2009 Black Saturday bushfires.

A royal commission on the deadly blazes found electricity distribution networks were a “notorious” cause of bushfires in regional areas. Class actions against electricity companies led to payments of almost $700 million.

Ms Woodward believes the insurance and electricity industries and governments need to collaborate on risk-sharing models.

For example, parametric insurance could be an option, with cover triggered by a bushfire declaration.

Although the products are not widely used in Australia, they are suited to extreme weather events and can be deployed rapidly once triggered, she says.

There are few players here, making the cover relatively expensive, but the cost would fall as competitors enter the market.

Alternatively, a government entity could act as an insurer of last resort, such as with the terrorism and cyclone reinsurance pools.

There were 82 renewable generation projects at the financial commitment stage or under construction as of last May, according to the Clean Energy Council.

Ms Woodward says projects such as wind farms and solar parks are often far from major population centres and require construction of infrastructure to connect to the grid.

There is already corporate nervousness about investing in the sector, and she says there needs to be more awareness of insurance issues affecting transmission assets.  

If these issues cannot be addressed, the transition to clean energy will slow.