Swiss Re: Hydrogen a Promising Energy Source, But Risks Need to Be Better Understood

Jeff Dunsavage, Senior Research Analyst, Triple-I (09/28/2022)

Efforts to de-carbonize the global economy will depend, at least in part, on scaling up the use of hydrogen as a fuel source. Clean and abundant – hydrogen is the most common element in the universe – it’s an attractive alternative to fossil fuels. It doesn’t emit carbon dioxide and can be produced using renewable energy.

However, as a recent Swiss Re study points out, hydrogen has unique features that make it hard to de-risk.

“Specifically, hydrogen has unique properties that cause permeation and embrittlement, resulting in leakages that can trigger fires and explosions,” the report says. “The severity of damage caused by accidents largely depends on the type of materials used to store and transport hydrogen.”

Hydrogen has not yet been used as a fuel at scale. Current investment plans focus more on production facilities and less on transmission, storage, and distribution. More attention to risk factors that may hinder large-scale use of hydrogen is needed for a hydrogen economy to be insurable, Swiss Re says.

Safety standards for the use of gas pipelines for large-scale hydrogen transport are a “work-in-progress,” Swiss Re says. Maintaining the purity of hydrogen in underground storage facilities is also a concern, given its propensity to react with microbes in rocks.

“Data will need to be generated in feasibility projects that will be crucial to successful scale-up,” Swiss Re says. “In the short-term, insurance covers for the hydrogen economy will mainly relate to the production and supply sides. Standard engineering policies should cover the risks inherent in the construction phase of hydrogen production facilities.”

In the medium to long term, business interruption coverage may gain importance as hydrogen becomes more embedded in the global economy.

Expansion of the hydrogen economy will give rise to new risk pools in liability and associated demand for, among others, general third-party and product liability, employer’s liability, professional liability and environmental liability coverage.