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Insurance helps guard against feedstock supply chain failures

Savills and R K Harrison have developed a new UK-based insurance product to support developers and operators of bioenergy plants by providing insurance against lost income arising from previously uninsurable failures within the feedstock supply chain.

According to research commissioned by the Department for Energy and Climate Change, by 2020 this supply chain will have grown to include 23 million tonnes of biomass feedstock. 

 If a feedstock supply chain fails, a plant has to seek alternative inputs to remain operational, potentially on the spot market, depending on timing, which can compromise its capacity to service debt or generate profits. Despite these potentially costly financial implications, traditional business interruption insurance, which covers loss of income as a result of physical damage, does not cover many of the risks a biomass supply chain faces.
 
“Working with developers, funders and users it is very clear that, in many cases, the perception of feedstock supply chain risk has been holding back expansion and, more concerning for the industry as whole, the development of new biomass plants,” said Ashley Lilley, associate director of Savills Agribusiness consultancy.
 
The insurance is designed to indemnify the operator for any reduction in turnover as a result of an interruption or failure in the supply chain. This means it is not reliant on an event or damage as a trigger to the reduction and can include such risks as a supplier’s insolvency or inability to provide sufficient feedstock, political risks or extreme weather events, which are all excluded under traditional insurance.
 

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Bioenergy  •  Policy, investment and markets

 

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