Insurance for energy and utility companies
The sector where the first guarantee is lodged years before the project generates a single kilowatt, and where the insured asset then sits out in the open for the next twenty-five years.
What it is
An energy project passes through three insurance lives that overlap badly: the developer's, processing permits and lodging guarantees with no asset yet; the construction phase, where the risk is erection and testing; and operation, which lasts decades and where physical damage matters less than the months of lost generation while the repair is carried out.
The second particularity is that here the financial guarantee arrives before the insurance. To apply for grid access and connection, €40 per kilowatt installed must be lodged before the application is filed, and that deposit may be arranged through surety insurance. It is money committed at the stage when the project earns nothing, and how it is arranged decides whether it consumes the developer's bank lines.
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At a glance
- Grid access guarantee
- €40/kW
- May be arranged through
- Bank or surety
- Environmental exemption
- €300,000
- Broker registered with the DGSFP
- J0140
An energy project passes through three insurance lives, and the commonest mistake is treating them as one: the developer's, processing permits and lodging guarantees with no asset yet; the construction phase; and operation, which lasts decades.
The first guarantee comes before the first kilowatt
Article 23 of Royal Decree 1183/2020 conditions the access and connection application on first lodging a guarantee of €40 per kilowatt installed. A 50 MW project means two million euros committed before there is anything to generate.
How that deposit is arranged is not an administrative footnote. The Regulation of the General Deposit Office admits a bank guarantee, surety insurance or government debt securities. The bank guarantee consumes borrowing capacity exactly when it is needed to finance construction; surety insurance does not. The detail is in the credit and surety page.
What costs money is not the part, it is the months
In operation the physical damage is usually the small part. A transformer or a gearbox has lead times measured in months, and during those months the plant exports nothing. That is why the parameter that decides whether the programme works is not the sum insured but the indemnity period of the business interruption cover, which has to be sized against the manufacturer's real lead times rather than a standard figure.
What the Electricity Sector Act does not say
Worth stating plainly, because the opposite circulates: Act 24/2013 does not require insurance. The obligations come from elsewhere — the financial guarantee under Act 26/2007 where the activity falls within its Annex III, the civil liability insurance Act 34/1998 requires in hydrocarbons before work starts — and, above all, from the financing agreements, which tend to be considerably more demanding than the statute.
Why through a broker
As a broker registered with the Spanish Directorate-General for Insurance and Pension Funds under reference J0140, New Brokers works on the client's mandate, not on behalf of any insurer.
In energy the work is about synchronising three calendars that nobody synchronises on their own: the permits and their guarantees, the construction and its acceptance, and the financing with its cover requirements. The classic gap appears right at the seam between the construction policy and the operational one, and it is closed before commissioning.
What this sector is exposed to
Grid access and connection guarantee
The deposit per kilowatt installed that conditions the whole procedure, required when the project earns nothing yet and without which the process does not start.
Construction and erection of the asset
The build phase, with its own regime: erection, testing and the subsequent maintenance period, distinct from the operational policy that follows.
Machinery breakdown and critical components
Transformers, gearboxes, inverters and blades: long-lead items whose replacement cost is smaller than the cost of the months spent not generating.
Lost production and revenue
The extended outage, where the loss is measured in energy not exported rather than in the value of the damaged equipment.
Environmental damage and restoration
Spills and harm to soil and habitats, with a financial guarantee duty for Annex III activities and with restoration in kind rather than payment of value.
Natural hazards and weather
Extreme wind, hail, flood and lightning on assets that are dispersed and exposed, with accumulated exposure within a single geographic area.
Cyber attack on industrial control systems
Compromise of plant operation and remote control, which halts generation without the physical damage the property policy needs in order to respond.
Contractors working side by side on site
Maintenance, module cleaning and major corrective works bring outside firms onto the same site, with the prevention coordination that entails.
What the law requires of you
The obligations that, in this sector, trigger the purchase of a specific cover.
| Rule | What it requires |
|---|---|
| Royal Decree 1183/2020, on access and connection to electricity grids, art. 23 — View the legislation | It requires the applicant, before requesting access and connection for a generation facility, to lodge a financial guarantee equal to €40 per kilowatt installed, with the General Deposit Office where the facility falls under central government. Facilities that need no access permits and self-consumption with surplus up to 100 kW installed are exempt. |
| Royal Decree 937/2020, Regulation of the General Deposit Office — View the legislation | It governs guarantees constituted through a bank guarantee, surety insurance or government debt securities, with rules on constitution, cancellation and enforcement. For those constituted through surety insurance it expressly provides a ten-year limit on duration, in line with the Insurance Contract Act. |
| Act 34/1998, on the hydrocarbons sector, arts. 9 and 25 — View the legislation | Article 9 requires civil liability insurance to be arranged before work starts on the exploration, investigation, production or storage of hydrocarbons. Article 25 adds that the royal decree granting the concession sets the civil liability insurance the holder must take out and the financial provision for decommissioning. |
| Act 26/2007, on environmental liability — View the legislation | It requires operators of the activities in its Annex III —which includes installations subject to integrated environmental permits and waste management— to hold a financial guarantee, with the exemptions in article 28 below €300,000 of potential damage. Remedy is in kind: restore the resource, not pay its value. |
| Royal Decree 840/2015, on major-accident hazards involving dangerous substances — View the legislation | It transposes the Seveso directive: establishments above the dangerous-substance thresholds must have a prevention policy, a safety report and emergency plans. It reaches refining, storage and gas facilities above those thresholds. |
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The guarantee arrives before the revenue
A developer needs to lodge the access guarantee for several projects at once, at a stage when none of them generates anything yet.
What it means
It is €40 per kilowatt installed for each application. Arranging it through a bank guarantee consumes borrowing capacity exactly when it is needed to finance construction; through surety insurance, it does not. It is a capital-structure decision more than an insurance one, and it is taken before the application is filed.
Transformer failure, eight-month lead time
A critical component fails whose manufacturing and delivery time is measured in months, not weeks.
What it means
Replacing the equipment is the small part. What matters is the indemnity period of the business interruption cover: if it was bought assuming a repair of weeks, the policy stops paying while the plant is still down. That period is sized against the manufacturer's real lead times.
Outage from an IT incident, no physical damage
An attack compromises the control system and the plant stops operating, with no equipment having suffered physical damage.
What it means
The property policy and its attached business interruption cover normally require prior physical damage in order to respond. Without it, they are not triggered. Interruption of IT origin lives in the cyber contract, and it is worth checking that the two do not leave a gap between them.
The covers that structure your programme
Credit and surety
The first line a project needs: the grid access guarantee can be arranged through surety, which leaves the developer's bank lines untouched.
Property damage and business interruption
It covers the asset out in the open and, above all, the months of lost generation, which usually weigh more than the damaged part.
Environmental liability
The line that answers for restoring the natural resource and the one that instruments the Annex III financial guarantee.
Construction and decennial
The build phase has its own contractors' all risks and erection policy, which ends where the operational one begins.
General, employer's and product liability
It answers for third-party damage and workplace accidents on a site where maintenance contractors work alongside each other.
Cyber risk
An attack on industrial control systems halts generation without physical damage, which is precisely what the property policy requires to respond.
Frequently asked questions
What insurance does an energy company need?
It depends on the stage. In development, surety for the access and processing guarantees. In construction, contractors' all risks and erection. In operation, the core is property damage with business interruption, general and employer's liability, environmental liability where the activity falls within Annex III of Act 26/2007, and cyber risk for the control systems. The scope of each is governed by the specific terms of each policy.
How much is the guarantee to apply for grid access and connection?
Article 23 of Royal Decree 1183/2020 sets it at €40 per kilowatt installed, and it must be lodged before filing the access and connection application, with the General Deposit Office where the facility falls under central government. Facilities that need no access permits and self-consumption with surplus up to 100 kW installed are exempt.
Can that guarantee be covered by insurance instead of a bank guarantee?
Yes. The Regulation of the General Deposit Office, approved by Royal Decree 937/2020, governs guarantees constituted through a bank guarantee, surety insurance or government debt securities. The practical difference is that surety insurance does not consume bank lines, which matters when the developer needs that capacity to finance construction. For surety-based guarantees the regulation expressly provides a ten-year limit on duration.
Does the Electricity Sector Act require insurance?
No. Act 24/2013 does not require the parties in the electricity sector to take out insurance. The insurance obligations come from elsewhere: the environmental financial guarantee under Act 26/2007 where the activity falls within its Annex III, the civil liability insurance Act 34/1998 requires in hydrocarbons, the grid access guarantees, and above all whatever the financing and O&M contracts demand.
What does a project finance agreement require?
Usually more than the law does. It tends to set minimum limits, indemnity periods for business interruption, designation of the lender as beneficiary or mortgagee, non-cancellation clauses with notice periods and a ban on altering cover without consent. Reviewing those conditions before signing the financing agreement avoids discovering afterwards that the policy in place does not meet what was agreed.
What documentation do you need to prepare a proposal?
The technology and installed capacity, the location and natural-hazard exposure of each site, the stage each project is at, replacement values and lead times for critical components, the O&M contract and its guarantees, the financing requirements, and the history of claims and unavailability.
This information is for guidance only and is not binding. Covers, limits and exclusions are governed in all cases by the specific terms of each policy. New Brokers Correduría de Seguros, S.L., registered with the DGSFP under reference J0140.