QBE’s Roy Royer on helping in the hunt for cheap, clean and renewable energy.
Whatever the negatives of the current financial uncertainty, it is just possible that it will bring unexpected benefits in terms of environmental issues. With the cost of living rising dramatically on the back of energy and food costs, it is becoming increasingly clear that the hunt for alternative fuel sources does not just make environmental sense, it also makes economic sense.
The need to pursue projects which provide cheap, clean and renewable energy is particularly important in the UK. North Sea oil is running out, leaving us ever more vulnerable to the vagaries of energy-driven international politics. Plus, we lag behind almost every one of our European Union counterparts in tackling the issue.
Equally important, due to our current dependency on landfill, we have a massive unsolved waste problem.
Under a 1999 EU directive, the UK must cut biodegradable waste going to landfill from 18.1m tonnes in 2003/04 to 13.7m in 2010, 9.2m in 2013 and just 6.3m in 2020. Local authorities that fail to meet these targets will face heavy EU fines, so further stretching personal finances.
For instance, estimates for Merseyside indicate that unless an alternative can be found in the next decade, council tax bills will have to double simply to meet the cost of disposing of household waste – and domestic waste accounts for only 8% of the country’s refuse.
Against this background, it hardly takes a rocket scientist to work out that technologies which can process the country’s endlessly renewable – and self-renewing – waste and convert it into clean energy must be a massive potential win-win for the UK.
Indeed, the idea of using waste to produce energy is hardly new. The Victorians and the Edwardians did it. The problem, however, is that as they simply burnt the rubbish, the resulting air pollution left the concept with a negative image.
But times change. Technology is under development – and in some cases has been implemented – that can process waste into cheap, clean energy.
“It hardly takes a rocket scientist to work out that
technologies which can convert the countrys endless waste into clean energy must be a potential win-win.
So why, if the concept makes such sense, is the UK not awash with initiatives to build Energy from Waste (EfW) conversion plants?
The number one problem is funding. Plants can cost between £20m and £150m and, while the technology involved is understood and not brand new, the plants still present a risky investment from the banking sector’s perspective, mainly because the processes involved have never been demonstrated on the scale now required.
The result is that any potential solution to the UK’s energy and waste management problem is stuck on the starting blocks.
In these days of convergence between insurance and capital markets, insurers potentially have a huge role to play as a deal enabler – in this case by offering a policy which would provide cover in respect of the ability of the Energy from Waste plants to meet their targets for operational standards and output.
On the one hand and simply put, EfW plants offer the UK a potential solution to the twin problems of cheap, clean energy and waste management. On the other hand, the insurance sector potentially holds the key to overcoming current funding bottlenecks.
While the gap between theory and reality can be a large one, if the insurance industry can grasp the potential of such situations it is not just the UK economy that stands to benefit.
For too long the perception of insurance as a “grudge buy” has meant the role of the insurance sector as an industry which oils the wheels of commerce, facilitates economic development and enables society to embrace new opportunities has been under-recognised.
Opportunities such as this offer a chance to demonstrate just how wrong that perception is – that in real life, nine times out of ten insurance is part of the solution, not the problem.
Roy Royer is senior underwriter, asset protection, QBE