Rapid Expansion Foretold in Hydrogen Technology Industry
Hydrogen Economy: A New Frontier for Insurance Challenges
The burgeoning hydrogen economy presents a unique set of challenges and risks for the insurance industry. As more countries adopt hydrogen strategies and the number of planned projects exceeds 1,500 globally, insurers are gearing up to meet the demands of this emerging market.
Key Challenges
- Unique Risks of Hydrogen: Hydrogen, being highly flammable and prone to leaks, poses significant risks compared to traditional energy sources. Its small molecules make it difficult to detect and contain, increasing the potential for accidents 1, 2.
- Infrastructure and Safety Measures: The development of hydrogen infrastructure necessitates stringent safety measures to manage inherent risks. Policymakers must address costs to scale up infrastructure competitively with other energy sources 3, 4.
- Risk Management and Expertise: Insurers need to develop specialized expertise and best practices to cover the complex risks associated with hydrogen production, transportation, and storage 3, 5.
Key Risks
- Fire and Explosion Risks: Hydrogen storage and high-temperature combustion can lead to leaks and explosions in energy production facilities 1, 5.
- Hydrogen Embrittlement: This can cause structural weakening in materials like steel and alloys, affecting pipelines and equipment in transportation applications 1, 5.
- Serial Loss Risks: Common faults could lead to simultaneous equipment failures across multiple projects, necessitating comprehensive risk management strategies 1.
- Marine and Transportation Risks: Shipping and transportation of hydrogen involve risks of machinery breakdown, gas leaks, and accidents during port operations 1, 5.
- Liability and Business Interruption Risks: Insurers must provide coverage for third-party liability and business interruption due to accidents or system failures 1, 5.
In response to these challenges, the insurance industry is expected to grow significantly, with the market for hydrogen project coverage projected to reach over $3 billion in premiums by 2030 2, 3.
For instance, Renault is exploring hydrogen storage systems for hydrogen light commercial vehicles in collaboration with Faurecia. Similarly, HYVIA has demonstrated a hydrogen refuelling station for fleet managers and distribution/delivery businesses. Preventing incidents and limiting the extent of property damage, business interruption, and third-party liability is crucial in hydrogen projects.
Moreover, the hydrogen's integration into the commercial delivery van sector could become a significant trend. However, sectors like construction, roads maintenance, or engineering can also be range-killers for battery power, suggesting that hydrogen fuel cell vehicles may find more suitable applications in these sectors due to their higher energy density.
In conclusion, the hydrogen economy presents both opportunities and challenges for the insurance industry. As the market grows, insurers will need to adapt and develop specialized expertise to meet the unique risks associated with hydrogen production, transportation, and storage.
- Insurers, in the growing hydrogen economy, need to innovate their technology and processes to address unique risks, such as fire and explosion, hydrogen embrittlement, serial loss, marine and transportation risks, and liability and business interruption, when covering hydrogen projects.
- To capitalize on opportunities brought by the hydrogen economy, insurance companies may focus on motor insurance events related to hydrogen fuel cell vehicles, adapting and enhancing their services to cater to sectors with high energy demand and low battery efficiency, like construction, roads maintenance, or engineering.
