Insurance broker Marsh has launched a ‘first-of-its kind’ insurance facility targeted at green and blue hydrogen producers —and specifically for the earliest phases of project development — that it says will help the industry overcome a significant barrier to project realisation.
The insurance and re-insurance facility, backed by insurers Liberty Mutual Insurance Group and AIG, will provide up to $300m cover per risk for the construction and start up phases of hydrogen projects globally.
It will be suitable for customers of any size, from small operators to multinationals, Marsh said. Customers will be able to choose coverage for the construction or start-up phase, or a combined risks policy for the first year of operations.
There will also be an option for the policy to insure against construction and operational phase property damage risks, as well as covering marine cargo, business interruption, general third-party liability and contingent delay-in-start up insurance.
“As the global hydrogen industry, especially green hydrogen, scales up rapidly to meet demand, the facility will reduce the complexity of securing risk transfer options for operators of all sizes and boosts investor and lender confidence in achieving their ambitious project timeframes,” Andrew George, global head of energy and power at Marsh.
According to Marsh, hydrogen operators have found it “particularly challenging” to secure adequate insurance market provision for their schemes. Industry figures contacted by Recharge would not be drawn on whether this accurately reflects the sector’s experience, but the specific challenges of insuring H2 schemes, especially green hydrogen made with renewable energy, have been discussed for some time.
“[Green hydrogen] will require the development of new technology as well as the incorporation of existing energy production technology,” said Paul Lowrie and Franco D’Andrea, respectively partner and legal director of UK law firm Clyde&Co, in a joint blog post last year. “This blend presents significant design, construction and operational challenges. By extension it will present new challenges for insurers.”
Central to the problem is that green H2 incorporates elements of a renewables project, including using technology with variable power outputs, with elements of a fossil fuel project, such as the storage and transport of explosive substances.
According to Lowrie and D’Andrea, a specific problem for green hydrogen projects is that as electrolysers require consistent power input which may be out of their control, for example if the project is importing power from third party or if the wind stops blowing or both, wording an insurance policy for business interruption is extremely difficult.
Moreover, the evolution of hydrogen technology is happening faster than might otherwise be expected due to the climate emergency and, since the global energy crisis hit in 2022, security of supply concerns. Rapidly evolving technology is harder to insure because ‘state of the art’ is ever changing, the Clyde&Co lawyers added.
The launch of Marsh’s insurance facility was welcomed by the industry, including the Green Hydrogen Organisation (GH2), a Switzerland-based trade association.
“It is excellent that Marsh is offering insurance cover for green hydrogen facilities,” Jonas Moberg, chief executive of GH2 told Recharge. “Products like this complement GH2’s work on standards, financing, contracting and permitting processes which are vital to scaling up the green hydrogen sector and getting projects into production as soon as possible.”
GH2’s Green Hydrogen Standard, launched in May this year, is used by some green hydrogen projects to verify emissions and sustainability requirements.
The standard is essential for “developing bankable projects, including for insurance purposes”, Moberg says.